Texas proposal asks us how safe our gold is from the federal government

How much faith do you have in the US Dollar? Or the bigger question: how much faith do you have in our federal government to protect our own personal interests?

State politicians across the country are engaging in lively discussions on how best to protect their own citizens from the disintegrating dollar and the likelihood of a repeat of the 1933 gold confiscation as implemented by FDR. While states such as Minnesota, North Carolina, Idaho, South Carolina and Colorado are currently debating this precarious topic, Utah in 2011 already acted by declaring privately minted gold and silver coins as legal tender – something Arizona lawmakers may soon push through as well.

Texas, however, decided to take this fear up a notch by proposing a bill to create a Texas Bullion Depository that would allow the state and its citizens to store gold. Using the state’s power under the 10th Amendment, the state would push back on the federal government should there be another confiscation and protect its citizens further from the devaluation of the fiat currency we call Dollar. We all know that Texas will likely never stop seeking secession from the US, but if it does become successful one day, the state could easily abandon the Dollar and develop its own gold standard. Or, it could work the other way for Texas: just holding as much gold as they foresee could help them secede from the US as well.

But for the rest of the country, would this depository cause people to hoard gold? It may, but for those who are currently collecting precious metals, they are already ahead of the mad rush for protection and security. What troubles us more than a potential hoard is what may truly be going on “upstairs” when our country’s own states are scrambling in fear to develop quick laws to protect themselves from the White House itself.

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Correction Sparks Feverish Buying

Long-term gold and silver holders are feverishly taking full advantage of the recent drops in the metals market.

While the current 15.6% correction can be described as “major,” the pullback is not at all surprising – nor even out of the ordinary – when taking this past summer’s substantial spikes  in the market.  For gold and silver enthusiasts, this opportunity is not to be missed for either fortifying personal inventory or – for latecomers to the gold rush – dollar cost averaging.

What does this say about 2012?  Some analysts predict that Europe’s continued woes will push gold to $2,500.  As for silver, according to historical charts, one cannot rule out $60 in the coming year.

 

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Gold Will Hit $2,500 in 2012

It is nearly impossible today glance at any news media outlet without some kind of headline announcing the next European country to wobble at its knees.  At this point, Americans have become numbed by the constant influx of international economic instability, however, according to one investment expert, Europe’s instability could be for gold owners to gain, including a very bullish prediction for the metal to hit $2,500 in 2012.

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$5,000 Gold? Fund Manager’s Idea Has Its Critics

As Western currency maintains its decline and nations hint default, gold continues its inverse reaction.  With seemingly no end in the immediate future of the West, the burning question in many investors’ minds is: Where is gold headed?

In a recent interview with CNBC, Chief Executive of Hinde Capital Ben Davies boldly answers that question with a shocking figure of $5,000 USD per ounce.

While many others disagree with the $5,000 figure, few do not disagree that gold is nowhere near done with its continuous rising patterns and record-breaking streaks.

Recently, Goldman Sachs set the 12-month benchmark of gold at a comparatively seemingly low $1,860 per ounce, although the spot price of on Tuesday already came teasingly close to it at $1,778 per ounce.  Goldman based its projections on the combination of: the US Treasury’s 10 year yields, a weaker outlook in the US economy, gold’s low price in comparison to inflation-adjusted highs in the 1980s, and the continuous debt problems in the US and Europe.

Ashok Shah, CIO of London and Capital, also agrees that gold will rise in value, however, believes that any prediction of gold price, especially since many investors are starting to shy away from the USD.

To his point, Davies argues that the relationship between Asian exporters and Western debtors is causing China to shun the USD.  In response, the US and others apply monetary policies in an attempt to fix the ailing market, however, the policies focused too much on preventing the bond market from crashing, instead of fixing “the transmission mechanism between markets and the real economy [which] is broken.”  Thus, investors are “fleeing all fiat currencies into an asset that has no liabilities…  Gold is an inverse function of currency.”

Davies believes that these reasons and the timing of when holders start to exit dollar bonds will push the price of gold toward his prediction.

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US Debt Accord Could Slow Gold Rally, but Not for Long

Gold may experience a pullback in its record-breaking days after Congress makes their decision on the debt-ceiling; however, analysts advise that any pullback will be only temporary, with climbing prices to resume shortly thereafter.

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Gold is Headed Towards $2,300

It is no secret that gold has stolen the financial headlines for months now, as its worth flourished as the financial health of many nations plundered.

While many financial analysts cautiously label this movement as a bubble, Erste Group Bank AG analyst and Annual Gold Report author Ronald Stoeferle argues that not only will gold reach $2,300 USD per ounce, but the latest flurry of activity and interest in gold is actually just the beginning.

When asked about his confidence in the future of gold, Stoeferle attests two main solid drivers for the bullish market, far exceeding the gold’s last bullish movements experienced in the late 1980s:

  1. Fear. With the world holding negative or low interest rates, investors are constantly seeking safe havens from hyperinflation and financial Armageddon.  Gold’s inverse relation to bonds and almost no correlation with equity makes perfect sense from a portfolio perspective.  It has already lead high-profile hedge fund managers such as John Paulson to lean highly favorable towards gold.
  2. China and India. The feverish demand from these two nations far exceeds the Western world, and the reasons behind its steady increase should be noted.  Their affinity for gold is deeply rooted in their culture and society, leading its demand to be far more stable than a trend.

Bank Predicts $5,000 Gold

According to a new report issued by Standard Chartered Bank, the astronomical demand and consumption of gold by China and India compounded with the limited production of gold can “potentially drive the gold price to US $5,000/oz”.

Further, Standard Chartered additionally noted that with “just 1.8% of China’s foreign exchange reserves is in gold, and that if the country were to bring this proportion in line with the global average of 11%, it would have to buy 6,000 tonnes of gold, equivalent to more than two years of gold production.”

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Gold, Silver Surge on Higher Unemployment Claims

Gold and silver continue on its path towards record highs as the government released reports of increasing wholesale prices and the first increase in first-time unemployment claims in three weeks.

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Inflation Boosts Gold to Record, Silver Reaches 31-Year High

Gold and silver both received boosts as investors increased the demand for these metals to hedge against concerns of a faster growing inflation and the weakening dollar.

Bloomberg reports that although silver has already doubled in the last year, based on current demand, silver is likely to reach $50 an ounce in coming times.

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Gold Advances for Second Day on Demand for Inflation Hedge; Silver Jumps

In response to “higher raw-material costs and record-low interest rates,” gold rose for the second day straight and silver rose a staggering 3%.

Excerpt:

“U.S. wholesale costs gained 0.7 percent in March, led by surging energy, the government said. Compared with a year earlier, prices climbed 5.8 percent. Before today, gold gained 26 percent in the past year, reaching a record $1,478 an ounce on April 11.

“We are seeing increasing inflationary expectations, and investors are putting on hedges,’ said Matthew Zeman, a strategist at Kingsview Financial in Chicago. ‘Gold is catching a nice bid.'”

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