Google's relentless rise since August 2004.

Google made market news as its stock surged on Nasdaq Monday through the $600-a-share mark for the first time, continuing a rally that has seen the web's top search company’s market value increase $25bn in the past month.

Google shares traded as high as $610.26 before falling back to close at $609.62, a gain of $15.57, or 2.6% for the day.

In August 2004, Google's IPO price was $85-a-share and it now has market value of $187bn – which is bigger than giants such as Wal-Mart, Coca-Cola, Hewlett-Packard and IBM.

Investors looked ahead to the start of earnings season and key economic data due later in the week, moving stocks only slightly amid holiday-slack trading on Monday.

On Wall Street Monday, trading was subdued on what was the Columbus Day holiday. Bond markets were closed.

The Dow Jones Industrial Average fell 22 points; the Standard & Poor's 500-stock index fell 5 points while the Nasdaq Composite Index rose 7, boosted by Google's rise.

Asia-Pacific markets rose Tuesday, with Japanese stocks gaining but in Hong Kong stocks moved within a tight range while benchmarks in Sydney and Seoul fell after hitting record intraday highs.

The Nikkei 225 Average rose 0.5% to 17,150.33; China's CSI 300 rose 0.40%; Australia's S&P/ASX 200 hit a record intraday high at 6,685.90 then retreated to 6,672.30, a gain of 0.3%; and South Korea's Kospi rose 0.09%. Key benchmarks  - Asia

Currencies

The euro is trading at $1.4035 and against sterling at £0.6905.

For live currency updates, check the right-hand column of the Finfacts home page.

A meeting of Eurozone finance ministers on Monday night expressed concern in particular about the undervaluation of the Chinese yuan.

Commodities

November crude-oil futures on the New York Mercantile Exchange fell 30 cents to $78.72 a barrel, on expectations that US oil supplies will rise because of production restart delays at US refineries that are closed for maintenance.

The spot price of gold in Sydney was $730.50 per fine ounce down $9.90 from Monday's closing price of $740.40 per fine ounce.

Gold spot price

In response to a column in Bloomberg last week, in which Michael R. Sesit, wrote that gold is a bad hedge and a questionable investment, Gold and Silver Investments Ireland Director, Mark O'Byrne comments:

Sesit arbitrarily picks out gold's speculative one day bubble high of price of $850 in 1980 as his arbitrary starting point (as most anti gold pieces do) and then extrapolates that therefore it is a bad investment. This is akin to saying that because the Nikkei was at 40,000 in 1989 and is only at 17,000 today and therefore the Nikkei is a bad investment today. Or that because land prices in Japan are some 70% less than they were in 1990 that therefore land or property in Japan is now a bad investment. Similarly, many said the same thing about the Dow Jones when it was trading at 1000 in 1982, because it had traded at 1000 in 1970. They were proved very wrong.

More importantly, gold was at $35 in 1971 and has outperformed the S&P 500 since then. This is important as 1971 is when Nixon ended the Gold Standard and our modern monetary system commenced. Up unitl then stocks were quoted in USD backed by gold. Now US denominated stocks are quoted in a fiat paoper currency backed by the promises of politicians and central bankers in Washington.

Successful investing is about focussing on the long term and 35 years is the investment lifetime prior to retirement of the average investor. Therefore using gold's intra day high price on January 21st 1980 as the price starting point in comparing gold to stocks is very disingenuous and misleading. Thus, Sesit conveniently and completely ignores the 1970's when gold vastly outperformed all asset classes. This is particularly ironic as the US is on the verge of a significant stagflationary recession akin to the 1970's or worse. 

Similarly, Sesit conveniently and arbitrarily uses the year 1988 for his straw man inflation argument. How very convenient to use one of the most benign period in terms of inflation that the US has experienced

It has been shown in numerous academic studies including by Ibbotson and Associates, respected experts on portfolio and asset allocation, in a June 2005 study, Portfolio Diversification with Gold, Silver and Platinum, how gold, and indeed precious metals, are the only one of the seven asset classes with a negative average correlation to the other asset classes. It is also worth noting that the authors showed that, excluding cash, precious metals are the only asset class with a positive correlation coefficient with inflation, which is further evidence that precious metals act as a hedge against inflation. Contrary to the Sesit's sweeping generalisations.

The author also fails to note that investments are cylical and have periods of outperformance and underperformance. And he fails to observe the fundamental tenet of investment theory which is to be properly diversified and not have all one's eggs in any one  basket whether that be gold, property, equities or Sesit's beloved TIPs.

TIPs might offer protection against inflation however they also have considerable risk in terms of currency risk and Treasury price risk. In a rising interest rate environment the value of the bond or Treasury will fall as happened in the 1970's. The Street examined this recently - "TIPs seemed to have worked well during the most recent period, but that has been relatively tranquil compared with 30 years ago when inflation last got really out of hand in the U.S. "TIPS were not around at a time when you had a wild bond market like the 1970s," Coxe says. During that period yields went to 17% from 7%, he explains. And because the value of a bond moves inversely with market yields, investors who were holding fixed-income securities during that period took it on the chin."

There is significant currency risk. When the USD trades below 2.00 to the EUR (as it has already done with GBP) and gold trades at over $2,000 per ounce in the next 10 years as they are very likely to do, this silly article will be seen for the one sided and misleading diatribe that it is.

It is irresponsible, unbalanced and dangerous journalism which creates fear and wariness of the gold market and perpetuates a lack of knowledge and indeed ignorance about the gold market.