Obama's infrastructure plan 'will benefit gold investment'

Major investment bank Fairfax has claimed today (December 8th) that buying gold is a wise strategy after US president-elect Barack Obama announced a massive new infrastructure investment to boost the economy.

Mr. Obama confirmed over the weekend that he wants to create at least 2.5 million jobs as part of the biggest financial commitment since "the creation of the federal highway system in the 1950s".

However, some commentators are expecting such a huge flow of money into the economy to create an inflationary environment, which would benefit anyone investing in gold.

As John Meyer, an analyst at Fairfax, explained in an interview with Reuters: "We will see some deflation, but that will be short-lived and the inflationary impact of substantial fiscal stimulus ... will inevitably lead to inflation.

"Gold will be an important commodity in the protection of value."

Fairfax has recently revised its gold price forecast for 2009, pushing it up to $900 per oz on average, compared to the previous figure of $550 per oz.

Although some market observers have stated that the prospect of inflation is unlikely as the expected deflationary period is yet to take full hold, Mr. Meyer's views were corroborated recently by James Steel.

Mr. Steel, chief commodity analyst at HSBC, the world's largest bank by value, said: "It is possible that gold is benefiting from safe-haven buying, which could be offsetting the impact of rising deflationary pressures."

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