Alex’s Notes: I was just chatting with a new client today about the potential here. We were commenting on the massive pile of paper investments circulating around the world to the tune of some $100Trillion.

He asked me, what do you think would happen if just 1% of that found its way into metal?

Its a staggering thought.

***

Gold attracts more flows amid recession
Wed Jan 28, 2009 9:29am GMT

By Frank Tang and Jennifer Ablan

NEW YORK (Reuters) – Gold, the traditional safe haven in times of economic turmoil, proved to be more a commodity that everyone loved to hate last year even amid the turbulence that engulfed world markets.

But as 2009 gets under way the yellow metal has found huge traction with money managers.

In the last eight sessions, gold has rallied as much as $100 (70 pounds) an ounce to hit a near four-month high of $915.30 on Monday — in spite of a rising dollar.

The furious rally in the bullion stems from expectations that the U.S. government will need to borrow about $2 trillion of debt this year to finance its rescue packages for the battered banking sector. Already, outstanding Treasury debt stood at $5.5 trillion at the end of September.

Against this backdrop, investors are largely shunning everything from U.S. Treasuries to stocks, which are down 10 percent and 7.5 percent so far this year, respectively, while pouring cash into gold.

“I think gold is rising because of fiscal deterioration and the prospect that the U.S. may be downgraded,” said Tom Sowanick, chief investment officer for $22 billion in assets at Clearbrook Financial LLC in Princeton, New Jersey.

Full article

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