Gold prices set to rise as dollar will be 'crushed' by bailout

The chairman of the world's biggest currency hedge-fund firm has explained that the US government's rescue plan for the financial sector will have major consequences for the dollar.

The proposed $700 billion bailout would increase the country's debt ceiling to $11.315 trillion, representing a significant rise of 6.6 per cent.

Now John Taylor, chairman of the New York-based International Foreign Exchange Concepts, has claimed that the dollar will suffer intensely - which would be a boost for anyone investing in gold.

He said: "As we get to the other side of this, the dollar will get crushed."

Gold prices recorded their highest ever one-day increase last Wednesday, with speculation rife that this may have been caused by a rash of buying from central banks.

However, even if this is not the case, the plight of the dollar looks certain to keep gold rising in the longer term, even if the bailout is not approved and more banks go under.

As Alan Ruskin, head of international currency strategy for North America at RBS Greenwich Capital Markets, added: "The massive increase in the deficit is starting to make people rethink the shape of all sorts of things, including the dollar."

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