US Debt Fears are Driving Gold Higher
Like a bunch of unruly children, American politicians are playing chicken with the global economy. Gold is the only protection from their madness.
By Garry White, Daily Telegraph Monday 18th July 2011.
Gold breaks $1,600 / £1,000 per ounce.
The mooted US debt default possibility raised by two of the big three credit rating agencies was already in our minds when we see the article below in the business section of the Daily Telegraph

US debt fears are driving gold higher Like a bunch of unruly children, American politicians are playing chicken with the global economy. Gold is the only protection from their madness.
A survey of 27 traders, investors and analysts undertaken by Bloomberg on Friday showed that 89pc expected the price of bullion to rise by the end of the week.

Last week the precious metal ended nine consecutive days of price gains, flirting with $1,600 (£992) an ounce. This was its longest bull run since October 2006.
The rally was snuffed out after US Federal Reserve chairman Ben Bernanke clarified earlier comments he made in a testimony to a powerful committee on Capitol Hill. But it still looks like gold has further to run. Possibly much further.
Mr Bernanke said last week that the US central bank was prepared to take "additional action", including more government bond purchases – a process called quantitative easing which is often derided as "printing money". This was interpreted as a green flag for the third round of money printing – or QE3.
Even though Mr Bernanke clarified the comments and insisted that QE3 was not imminent, it is likely that another programme of bond purchases will start before the end of the year. Economic data – especially employment statistics – from the US are dire. But the most pressing concern for gold is the prospect of default.
President Barack Obama has yet to agree an increase on the debt ceiling and credit rating agencies have been warning that the country is edging closer to a rating downgrade. If the US fails to agree on raising the $14.3trillion debt ceiling by the August 2 deadline then another crisis beckons. Downgrades of the country's credit rating are likely and this will prompt a global stock market slump. The dollar will to plummet. Under these circumstance gold will go through the roof.

Most observers expect an agreement to be reached by the deadline. However, there is a certain degree of what some commentators have called "ideological stubbornness" entering the debate – with all parties having one eye on the 2012 presidential election. It almost seems unthinkable that an agreement can't be reached – but the unthinkable has happened before.
All of these fears mean the gold price looks set to head higher this week. A survey of 27 traders, investors and analysts undertaken by Bloomberg on Friday showed that 89pc expected the price of bullion to rise by the end of the week. One of the respondents thought gold would fall and two were neutral.
Gold is historically weak in the summer months but this trend has been broken this year. Next up we have the Indian buying season, which increases demand substantially. However, there is a possibility that high prices could lead to "demand destruction" – where buyers shy away because of the cost.
Of course there is downside risk, particularly in the short term. Should US politicians get their act together then it is likely that gold will ease. However, the destruction of the value of Western currencies continues – and gold is the only alternative.
Indeed, last week the World Gold Council (WGC) noted central banks had bought more gold in the first half of this year than they did in the whole of 2010. Mexico led the charge, buying over $4bn of gold in early May. Between March and June, the gold price rose 4.6pc – its 10th consecutive quarterly rise.
Independent analysis by Oxford Economics, commissioned by the WGC and released last week, found that gold performs relatively well compared to other assets in a high-inflation scenario as well as in a deflationary period.
"Due to its lack of correlation with other assets gold has a useful part to play in stabilising the value of a long-run portfolio even if a modest negative real annual return is assumed," the report said.
It went on to suggest that gold's share of an optimal portfolio is around 5pc in a base long-term economic scenario featuring 2.25pc growth and 2pc annual inflation.
This is a higher allocation than most investors have in their portfolio – but it is an insurance policy that could be good for your wealth if the US does not get its act together on the issue of its debt ceiling.

Credit Rating Agencies
Credit rating agencies, including the 'Big Three' have received criticism, negative attention and comments, over CDO failures, conflicts of interest, and more.

U.S. AAA Credit Rating Downgraded By Egan-Jones -- Moody's and S&P May Follow
Monday 18th July 2011 - Egan-Jones Ratings Agency – who called the 2008 financial collapse and lead Moody's and S&P in putting the U.S on Credit watch – Cut U.S Debt Rating From AAA status over the weekend.