Gold Breaks $1,000 in Early Trading

Some selling early last week got the bears excited that the imminent crash they’ve been expecting was finally at hand. But once again, the Cash for Clunker Stocks Rally rolled on. The S&P 500 needs less than 10 points to set another new high for 2009. 
I want to be clear that just because I’ve started calling this rally the Cash for Clunker Stocks Rally doesn’t mean I think all stocks are clunkers, or that I think the market is on the verge of a collapse. 
The Cash for Clunker Stocks Rally began when government stimulus efforts created a situation where Clunker Stocks like Bank of America (NYSE:BAC) and Citigroup (NYSE:C) could start to earn their way out of virtual insolvency. 
All you have to do is look at a chart for AIG (NYSE:AIG) to see the Cash for Clunker Stock effect. The rising tide may have started with the Clunkers, but its lifting quality stocks, too.
*****Another blockbuster acquisition was announced over the long weekend. Kraft (NYSE:KFT) offered $16.7 billion for the U.K.’s Cadbury. The flow of deals we’ve seen in the last two weeks tells us two important things. One, the credit markets are much improved. And two, companies believe valuations are attractive. 
Both are important factors for stocks prices. 
*****Gold prices busted out above $1,000 an ounce in early trading today. As of this writing its just under that mark. The primary driver for gold is the insistence of central banks around the world to keep rates low and stimulus programs intact. 
Of course, continued low interest rates are inflationary. And now that the global economy is growing again, the point where inflation picks up is closer. 
Right now, it’s just the unemployment rate that’s keeping inflation in check. But once we see any improvement there, price inflation won’t be far behind.
A rally to over $2,000 an ounce match the record highs set in the 1980s. 
Clearly, there’s a lot of upside for gold – and gold mining stocks. I’ve got a few high-quality gold miners in the Global Commodity Investing portfolio. One of them is up 25% in the last week and looks poised for at least another 25% move higher. Click here for details.

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