The dollar rebounded today but gold still continued to make gains! Gold rose to $1,149.45/oz today.

Gold provides a tremendous advantage for investors who are looking to store their wealth by providing great returns while interest rates sit near zero. Holding cash when inflation erodes its value is no way to preserve wealth. Treasuries and money markets area providing trivial returns that will barely, if at all, keep up with the pace of inflation.

Tom Pawlicki, an analyst at MF global, stated gold’s climb continues because of factors already in place:

Support will come from potential that the dollar resumes its long-term downtrend, potential reserve diversification, the likelihood that U.S. rates remain low, and from investor demand for commodities.

Interest rates will most likely remain low, according to Federal Reserve Bank of St. Louis President James Bullard, who stated on Wednesday of this week that the Fed likely won’t raise rates until 2012!

As more evidence surfaces, like the report from the Special Inspector General of TARP released yesterday, it becomes clear that the bailout was little more than a reverse Robin Hood, using government money to line the pockets of Wall Street and bankers that will most certainly result in a loss for tax payers.

Neil Barofsky, the Special Inspector General, had already stated that he was conducting 65 investigations into possible fraud. This report examines the Fed’s AIG fiasco, in which Geithner, “failed to properly assess the impact of its decisions; and generally engaged in negotiation strategies that were doomed to fail.”

“There is no question that the effect of FRBNY’s decisions — indeed, the very design of the federal assistance to AIG — was that tens of billions of dollars of Government money was funneled inexorably and directly to AIG’s counterparties,” like Goldman Sachs.

By the way, have you heard that the chief executive of Goldman Sachs told reporters that his bank not only serves a social purpose, but that Wall Street is actually “doing God’s work”? It’s sadly true that someone with so much responsibility could be under such egregious delusions. Millions of Americans have lost trust in Wall Street and our own government. Yet we are still trusting them with our money, hoping that they will make prudent financial decisions. You can read the entire report from the inspector. It may add more anger and frustration on the pile, but when you are finally fed up, realize that there are other options. Buy gold and diversify with precious metals. You work too hard to give all your money away to these wizards.

I absolutely LOVE GOLD

One blogger recently reported on a friend’s breakfast meeting with John Paulson, the multi-billionaire (or multi-bullionaire, as you will soon learn) hedge fund manager. They talked about the Fed’s massive money injection and the coming inflation. And where is John Paulson, #33 on the Forbes 400 list of wealthy Americans, reportedly putting all of his $4.3 billion? If you guessed gold – you’re right!

Paulson believes that Bernanke’s stimulus efforts were the only way to avert another Great Depression…but it won’t be without consequences! The US Monetary Base was increased by around 120%, so more than twice the amount of money is in circulation than there was a little over a year ago. And while we are on the lookout for inflation signs, which have been popping up gradually the last couple months, a cup of coffee is still about the price it was a year ago and hasn’t increase 120%. Why is that?

Because, as anyone trying to buy a house right now, or anyone who’s credit cards have been cutoff without warning and little cause can tell you, the bank’s aren’t lending the money yet. They are sitting on it, watching the news like hawks. So the number of times a dollar is used, “the velocity of money” as its called by economists, has actually decreased, due to the credit crisis restricting people’s funds, lowered consumer confidence, and high unemployment (no paycheck means no shopping sprees). But the velocity of money will increase, it can’t stagnate forever, and that is when we are set to experience double digit inflation.

Paulson cited the Fed’s policies in the ‘70s. They increased the money supply by about 13%, and then within one to two years inflation was up 12%. The massive money printing we have experienced will bring on inflation; it’s just a matter of time for the numbers to catch up with each other. So, if you invested in a 12 months CD over at ING Direct, you would give you about a 1.75% return at the time of this blog post. If in the course of the following year12% inflation kicked in, you would actually lose 10.25% of your money!

I know, I know, a CD is supposed to be a conservative investment to store and protect your wealth. Where can you put your money if all you are trying to do is protect it? Reportedly, Paulson has invested 100% of his worth into a gold option of his own firm’s hedge fund. They offer an option that allows you to invest in the fund using physical gold. A dollar investment must first be converted to a gold investment and that value is invested in the fund which has a number of different asset classes including gold mining stocks. When leaving the fund, you receive gold instead of cash, based off of the day’s spot price of gold bullion. Paulson is predicting a run on gold once inflation kicks in and people try to find some safe hedge for their wealth. One interesting statistic he cites is that all the world’s investible assets total 200 trillion dollars, and gold only makes up 800 billion dollars worth. Simple supply and demand will tell you that we could see gold performing this well for quite a few years to come.