Is Gold A Good Buy At $1,500 An Ounce?

Assuming you can afford it, is U.S. $1,500 an ounce for gold a good buy? It depends upon how you view the future of the U.S. dollar. Gold may be overpriced at this level or eventually an excellent investment at $3,000 an ounce or more.

The U.S. government is under enormous pressure to raise it's debt ceiling yet again because it is racking up massive deficits with no end in sight. Now Standard & Poor's, one of the world's most respected ratings agencies has warned the U.S. government it may lose its top credit rating if it doesn't get its finances in order.

But to get those finances in order will require slashing expenses including Medicare and Medicaid but especially slashing its military costs, which it is loath to do for the military industrial complex is a huge job provider and it has also bought and paid for politicians of both parties to keep the money flowing in.

In addition it would have to end its 3 wars, close many of its 1,000 global military bases and cut back its Homeland Security agency, which is mushrooming in size and also consolidate 16 spy agencies. It will also have to raise taxes sharply, for the interest cost on the $14.3 trillion deficit alone runs into the hundreds of billions of dollars each year and it too is rapidly growing.

To understand what is happening, it helps to put the price of gold in perspective. In January 1980, as a result of 1979's oil "shortage" and skyrocketing gas prices, the Soviet invasion of Afghanistan, Iran seizing U.S. hostages and of U.S. high inflation, gold hit a record U.S. $850 an ounce as investors fled to something they viewed as safer than the U.S. dollar. Subsequently, the U.S. economy strengthened, investor confidence returned and the price of gold dropped.

Right after the horrific events of 9/11, in 2001, gold reached $280 an ounce, up about $6. It's price kept fluctuating in the few hundred dollar an ounce range until the global financial meltdown in 2008, when its price jumped to over $800 and in 2009, to over $900 and while it keeps fluctuating, it has generally been rising since.

Today, there are well founded fears for the U.S. government's financial viability and that of the Euro Zone as well, while inflation jumps sharply in China and Japan struggles to recover from the disasters that engulfed it. And the U.S. dollar, long considered "good as gold" is now only as good as the confidence investors have in it. By their gold investments they are giving it a vote of no confidence.

Dick