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Islamic Dinar : 4.25 grams 22 K Gold

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Monday, March 24, 2008

What Happened With Gold Price Last week...?

Over the course of last week, something out of the ordinary happened with International Gold price. After reaching its peak of US$1,030/troy oz early last week, at the end of the long week end the gold price was at the lowest level which was US$910/troy oz or fluctuated by 12% within a week!

Of course we are wondering in our minds, questions relating to the decline of the gold price.

The first common question is what causes this to happen?

As per my article dated March 19, 2008 last week, that the Fed therapy was effective this time. Imagine that since September 2007, the Fed cut their interest heavily, from 5.25% to just 2.25%.

In their minds, this crisis is triggered by the failure of property credit, so the recovery indicator is the successful recovery of the property sector – how? One way is to provide the low interest rate.

There are other steps taken by the Fed to recover the market; some steps are controversial like its step to support JP Morgan in taking over Bear Stearns – the giant investment bank that is going facing bankruptcy – with a loan of US$30 billions.

The Fed steps is important for us to observe, because in America there is the opinion that the most power man after the president is the Fed Chairman, currently Ben Bernanke – they are the ones that have the authority ‘to print money from the atmosphere’.

Next questions that maybe also occurred in your mind, will this decline continue or will reverse?

Both could be happened. Similar with Stock Price – short term gold price also influenced by perceptions rather than real value, so if part of market agents are comfortable with economic recovery in United States – so share price will increase – temporarily people will sell their gold and buy stocks.

If it is perceived that US$ will become better, people will go back to deposit their money and also products that based on US$ - and reduce their gold portfolio. All affect to the decline of gold price.

But, there is a basic difference in Gold that stocks or bank notes doesn’t have, high intrinsic value – which has a stable purchasing power to purchase all the people need in all era.

Gold or Dinar is a representatives of a nation’s wealth. In the mean time bank notes value is not represent able, the increase of its value doesn’t mean the increase of prosperity.

Last Sunday I had the opportunity to read a interesting article from American News Office Associated Press that illustrate that American economy is just like falling into the ungrounded well (abyss)- because it is too deep. The writers gave the title of the article: How Deep Is Economic Abyss?; explored the small but interesting facts such as:
1. Up till end of 2007, 36% of the American population’s income spent for foods, energy and health. This percentage is the highest since 1960.
2. People are become rarely having meals in restaurant; in January 2008 54% of the restaurant have a declining turn over.
3. People seldom throw garbage - due to optimization of their consumption/use of their products!
4. Total value of the property debts exceeds total value of the property owner’s equity.

And there are still a lot of other indicators that indicates the economy will recover soon. It is not easy to raise the economy from the very deep well.

The last question that even more interesting - is it now the right time to buy Dinar?

The answer is really depends on our motivation in buying Dinar. If we buy Dinar merely because of the economic factors, e.g. the rise and fall of the price – so buying Dinar is as complicated as buying shares. Sometime we bought at the high price but the price was still increase- so we still get the profit; or the other way around, even we bought in the cheap price but the price still declines and continue to decline – so still experience a loss.

For those who buy Dinar with this kind of motivation, I apologize that I can advise any tips for you – how to get always the profit.

Another motivation that I always encourage Moslems to use Dinar is as the form of “To built economic strengthen (yukhsinun)”; so that property of the Moslems can not be destroy by the speculator like in the year of 1997/1998. And of course the most important thing is to bring back Moslems to the way of Prophet Muhammad SAW and his Disciples that has Guidance from Allah – that is for using the money as fair as possible in all period for social intercourse. We can not be fair in social intercourse if the instrument itself- which is bank notes - is not fair.
For the buyers with the second motivation, there is no wrong timing to transfer from the unfair bank notes to the fair “money” in al era. Wallahu A’lam.
Labels: Crisis, Housing, the Fed, bank notes.

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