Gold Soars Because Dollar is Weakening and will Continue

Investment Strategy Note:
September is historically the best month for gold. In fact, the price of gold has risen in 16 of the 20 Septembers since 1989. I talked about this in a column in July, and the "September effect" for gold is in full force.

Investment Strategy Note:
Why does gold go higher in September? There are a number of factors: Jewelers usually restock gold in advance of the Christmas holidays, the post-monsoon wedding season in India is usually a big time to buy gold in that country, and China's run-up to the Chinese New Year also starts around this time.
Investment Strategy Note:
Investors expect gold to go higher in September, so they're less hesitant to buy the metal. That doesn't mean that gold MUST go higher in September, but psychology is an important part of the market, so the easiest path for gold is to the upside. The Dollar is weakening we all know this.

Why?

The U.S. Treasury is running its printing presses at warp speed. It's adding debt to the burden of every American man, woman and child at a frightening pace.

According to the Peter G. Peterson Foundation, "Our $56 trillion in unfunded obligations amount to $483,000 per household. That's 10 times the median household income — so it's as if everyone had a second or third mortgage on a house equal to 10 times their income but no house they can lay claim to."

The U.S. deficit for this year alone is $1.8 trillion. The Peterson Foundation points out that a deficit that large is adding debt at a clip of $3.4 million a minute, $200 million an hour or $5 billion a day.

All that debt has to be paid back eventually, and paid back with dollars. When you create more of something, you cheapen its value. In a nutshell, that's one reason why the U.S. dollar is breaking support and heading lower.

For more investment notes and news feeds see Investment Strategy Notes

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