Soaring Gold Price...

GOLD'S record-breaking climb should continue for at least six months, corresponding to the planned duration of the Federal Reserve's monetary stimulus, according to a Reuters poll conducted on Thursday and Friday.

According to some analysts the gold price might rise out to between $1,400 and $1,500 an ounce on an interim basis, with most analysts surveyed expecting prices to peak during the first or second quarter of 2011.

The Federal Reserve (USA) on Wednesday announced a program to buy $600bn of government bonds in a new round of quantitative easing (QE). The Fed's QE package has reinforced the argument for holding gold, as it pushes the dollar firmly onto a downward path and raises the risk of inflation.

Quantitive Easing devaluates a country's currency, so gold...and almost all commodities will be beneficiaries as people start to switch from financial assets to commodities. This is a reverse reaction as the money printing of the USA continues.

South Africa currently do not really benefit from the rise in the gold price, mainly due to the strong rand, which reverse the gains of the high gold price. This is even more reason for the Reserve Bank to aggressively lower the country's interest rates in order to try and devaluate the currency. In theory, a lower interest rate would result in money flowing out of the country and the currency would become weaker. Lower interest rates could also have the effect of borrowing money becoming cheaper and the kickstart of investments in new businesses, which in there part create employment with a decrease in the unemployment rate.

South Africa will also gain from a weaker rand as we are major exporters of commodities such as gold and with prospects of the gold price to go even higher and for a longer period it just make sense to use this opportunity for an interest rate cut that could have the benefit of multi gains on a lot of different fronts...