Gold will be the largest beneficiary of lower interest rates
The lower interest rate will continue to devalue the U.S. dollar. That slide of interest rates is a harbinger of increased inflation. Gold moves in an opposite direction to the dollar and rises with inflation.
Secondly, the constant, continuing dollar slide punishes anyone who has continued to buy U.S. government debt. Central banks and a world of investors will place some of their assets away from dollars and into gold.
Thirdly, the rise of gold to $900 attracts the attention of investors to gold stocks both as an inflation hedge - and in the case of the AMP Portfolio selections - a value play for the production increases right at the time of near record gold prices.
"Gold prices received an early booster shot in the arm on the heels of the Fed's decision to prevent a complete meltdown in the Dow by slashing interest rates more than one week ahead of their expected date," said Jon Nadler, analyst with Kitco Bullion Dealers. Overnight losses "turned into a day of gains as the largest U.S. central bank accommodation in over 20 years fueled a return to long oil and gold positions and a logical selling wave in the U.S. dollar."
As gold closed, the dollar index was down 0.448 point to 76.378. Investors often buy gold and other precious metals as a hedge against dollar weakness.
The AMP Portfolio gold selections were part of the Canadian rally Tuesday - even though the U.S. market sold off.
Jack A. Bass is the editor of the market letter The Apprentice Millionaire Program , available at www.amprogram.com
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