David Goldman still likes gold…

David Goldman:

Gold popped up 1.5% while commodities lost about 2%, breaking a pattern of correlation in which gold traded like any other commodity. One session doesn’t make a trend, to be sure, but if the central banks are flooding the world with currency to support a massive bubble in government debt, the possibility of a portfolio shift out of currencies into gold has to be considered. And if this happens, gold (as I’ve said any number of times) has no natural ceiling. What will China do? The Chinese got burned on subprime and again on PIIGS debt. They stopped accumulating US Treasuries months ago, and have no reason to buy Bunds given the misery of the prospects for the Euro. Note from the table below that foreign official purchases of Treasuries have been negligible in recent months. Gold still represents a hedge against the unwinding of the biggest bubble of them all; even investors who are rushing into Treasuries as a safe harbor may buy gold as a hedge.

                 TOTAL                                    INTERNATIONAL
NET          FOREIGN                         AND
FOREIGN        OFFICIAL       OTHER         REGIONAL
MONTH        PURCHASES     INSTITUTIONS   FOREIGNERS    ORGANIZATIONS
-------   ---------------  ------------  ------------  ---------------2010-02            48,100         1,128        46,978               -6
2010-01            61,362           558        60,679              125
2009-12            69,944        24,322        45,715              -93
2009-11           117,880        31,184        86,638               58
2009-10            38,910        15,043        23,745              122
2009-09            44,685        18,966        25,120              599
2009-08            28,057        13,183        15,506             -632
2009-07            31,252        15,721        14,854              677
2009-06           100,499        22,498        77,604              397
2009-05           -22,576       -21,763          -368             -445
2009-04            41,969        17,125        24,864              -20
2009-03            55,241        29,026        26,675             -460
2009-02            21,735        -1,959        23,786              -92

[From Why I still like gold]