NEW YORK (AP) - Gold prices edged lower in light post-holiday trading Friday as the dollar showed some strength against other major currencies.

Despite the slight dip, analysts were quick to note that the metal continues to show underlying strength as investors harbor fears of rising inflation.

George Gero, vice president at RBC Capital Markets Global Futures in New York, attributed Friday's decline in gold to some minor profit taking and short covering ahead of the weekend.

"Most people were more interested in book-squaring today, and not having positions be carried over for the weekend,'' he said.

Gold prices have been trending upward after dropping in mid-November due to heavy selling by hedge funds and other large investors.

Though still far from the $1,033.90 record high reached in March, gold managed to end the year up 5.4 percent.

"Looming on the horizon is a tremendous increase in money supply, which could in many countries weaken currency, so there has been underlying support for gold,'' Gero said.

Gold is often used as a hedge against inflation and a weak dollar, but it is uncertain how the U.S. currency will fare in 2009.

While inflation is a concern now that the Federal Reserve has sent U.S. interest rates about as low as they can go, central banks across Europe and Asia are also eyeing interest rate cuts.

This would further undermine their own currencies and potentially give the greenback a boost.

On Friday, the dollar rose against the euro and the British pound, but fell against the Japanese yen.

Gold for February delivery fell $4.80 to settle at $879.50 an ounce on the New York Mercantile Exchange.

Other precious metals prices advanced. March silver rose 19.5 cents to $11.49 an ounce, while March copper futures rose 5.1 cents to $1.4610 a pound.

On Wall Street, investors brushed off a weak report on manufacturing and sent stocks higher in light trading.

The Institute for Supply Management said Friday that its manufacturing activity index fell to the lowest level in 28 years in December - much worse than economists had expected.

But the reading did little to discourage investors, who have recently been looking past downbeat 2008 data and instead looking ahead for signs that the recession isn't worsening.

The Dow Jones industrial average rose 258 points to 9,034, its first close above 9,000 in two months.

Meanwhile, bond prices fell as investors bought up riskier assets.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.41 percent from 2.22 percent late Wednesday.

Energy prices rebounded on the Nymex, boosted by expectations that OPEC will carry out its largest production cut ever.

The Organization of the Petroleum Exporting Countries, which accounts for about 40 percent of global supply, has announced production cuts totaling more than 4 million barrels per day in the last few months.

Ongoing violence in Gaza also sent prices higher.

Light, sweet crude for February delivery rose $1.74 to settle at $46.34 a barrel.

One year ago Friday, crude prices surpassed $100 a barrel for the first time - beginning a climb that would peak at more than $147 a barrel by July.

Prices have since tumbled on fears of waning global demand amid a deepening recession.

In other Nymex trading, gasoline futures rose 3.15 cents to $1.0935 a gallon, while heating oil rose 3 cents to $1.472 a gallon.

Grain prices mostly rose on the Chicago Board of Trade, boosted in part by the climb in crude prices.

March wheat futures inched up 0.25 cent to $6.11 a bushel, while corn for March delivery rose 5.25 cents to $4.1225 a bushel.

March soybeans slipped 3 cents to $9.77 a bushel.

Robert A Mundell

As Robert A Mundell suggested in his paper The International Monetary System in the 21st Century, gold can be replace current international monetary system for this 21^st century. For him, the gold significance is very attractive. Back then also at 1960’s people were deliberating about the future of the international monetary system, gold figured importantly in the discussions.

In his work, his suggest that nowadays need to come back to history itself which the international monetary system was linked to gold-which today it is totally demolished. It will lead the system to be interdependence, the exchange rate will be fixed and also inflation can be stabilized. This is right as we can see current situation when the US has problem which called sub-prime issues and credit crunch has led each country follow to be in recession. What we can say that the prediction of the dollar crunch has been shown and occurred.

The ‘superpower’ will not make it happened as they will not doing monetary reform because it will demolished their power in control other country. He assured that whoever becomes the ‘superpower’ they will not agree with the monetary reform as it has shown in the history itself.

The Bretton Woods conference actually develops IMF and World Bank as it is beginning ‘the history of Dollar’.

Monetary reforms and back to gold as currency needed because it leads to protect from inflation. It also can combatant the case of deflation. Current monetary policy leads to hyper inflation. But he insists that there is no need to fix the gold price. This is because the gold itself is stability and have intrinsic value.

He also denominate that monetary reform should be implementing as he also stated that current monetary reform lead to many problems as it control by one ‘superpower’ which give disadvantages to the world of economy itself.

The establishment of the Federal Reserve which is vehicle to spread the dollar is a mistake because it is total lost for developing country.

Tun Dr Mahathir Mohammad

Previously, at the time or crisis 1997, Tun Dr Mahathir Mohammad had put stressed blame on the speculators which they have ability to manipulation paper money, an inherent weakness of the fiat money system. He also stressed to come back to gold which gold should be recognized to be real money and stable unit of account. The purported purpose of this move would be to reduce dependence on the United States dollar as a reserve currency, and to establish a non-debt-backed currency in accord with Islamic law against the charging of interest.

Tun Dr Mahathir suggested to established Bilateral Payment Arrangement (BPA) and Multilateral Payment Arrangement (MPA) using Gold Dinar based system within country especially developing countries for example trading between Malaysia and Indonesia. The question arise on how and when gold dinar to be implemented in international trade? Tun Dr Mahathir also agrees that the implementation of gold dinar cannot be as immediately as it to be said. It needs to be step by step such as by pairs of countries then advancing to group of countries- to settle balance of payment.

Based on him the main objective of Gold Dinar proposal is to use surpluses to finance between the developing countries. Furthermore, with minimizing the use of developed countries currencies for settlement of the intra developing country trade, the developing country will help each other to grow and develop, buy and sell from each other. This will lead the flow of the trade itself come from the developing countries with the implementation of Bilateral Payment Arrangement (BPA) or Multilateral Payment Arrangement (MPA) using Gold Dinar. Furthermore, the dependency to foreign currency especially US Dollar will be demolished. Within this the future of developing country will be secured in stable condition and greater unity especially in Islamic Nations (OIC)

Implementation of Gold Dinar in International trade can lead to justice between import and export. They can help trading country especially in OIC country. It also helps the developing country to trade with develop country in fairness and justice value. There will be no fluctuation exchange rate involve. Currency denomination and currency settlement of trade should not be based on US Dollar instead but using the Gold Dinar.

All these problems arise because the world went off the Gold Standard. In the International Conference on Gold Dinar Economy 2007 Tun Dr Mahathir noted that in the case of paper people will have risk in losing their value and also purchasing power. He stressed back that only Gold Dinar really has a value in it.

Gold Price Malaysia (Ringgits)

Gold Price Malaysia (Ringgits)

Conversion : 1 troy ounce = 31.1034768 grams

Malaysian Ringgits per Gram Malaysian Ringgits per Kilo

Sources Chart: GoldPrice.org

Explanation

Historically gold was used to back currency; in an economic system known as the gold standard, a certain weight of gold was given the name of a unit of currency. Every day we can see the changes in price of Gold in the market. The above chart describe the price of Gold per Gram and per Kilo in Malaysian Ringgits.

The trend of the Gold Price all over the world basically in upward trend since the collapse of the Brenton Woods Agreement in 1971. Before the agreements it shows that the data of price of gold stable since before. It means that it is assured that gold have more stable and value rather than current monetary system which is 'fiat money'- based on the legal tender by the authority such in Malaysia manage by Bank Negara Malaysia (BNM). The system we can numerously say it is create out of nothing and involve seigniorage- the cost of production and profit to authority.

Come back to the price itself the gold shows it have more fluctuation-sometimes it upward trend and downward trend but stable in the matter of the value. Furthermore, it is acceptable by all people all over the world. Every day within 24hours the trend of gold price can be seen online such above. At 09.36 NY times it shows that the Gold Price increase on RM2.37 rather than yesterday.

If we compare to the stock exchange such in Kuala Lumpur Stock Exchange (KLSE), the Gold price cannot be predicted in since it the the most valuable in commodity market. we can say that any country that have largest gold holding have the most advantages. The bourses in the world currently on downward trend basically because the world too much dependency on the US which is on the problem of sub-prime crisis and dollar crash which shows the dollar in problem. But, when we measured about the dollar it give problem when one country have much dependent on US market. We can see here for the exchange of Malaysia currency opposed to US Dollar. To boost US market the dollar need to be strengthened then shows that Malaysian Ringgit weakened further- currently 1USD= RM3.6225.

The Gold Dinar
Malaysia has stated that it plans to start a gold dinar scheme as early as mid 2003. Malaysian Prime Minister Dr. Mahathir bin Mohamad has hosted conferences to explain and "Sell" the concept of the gold dinar. It is not intended that there should an actual gold dinar coin, or that it should be used in everyday transactions, the gold dinar would be an international unit of account for international settlements between national banks. If for example the balance of trade between Malaysia and Iran during one settlement period, probably three months, was such that Iran had made purchases of 100 million Malaysian Ringgits, and sales of 90 million Ryals, the difference in the value of these two amounts would be paid in gold dinars.

What is the Value of a Gold Dinar?
Although we have seen a claim that the first gold dinars was issued in 1992, we do not know of any such Malaysian coin, although we believe a private company may have issued their own unoffical version. From the reports of the Malaysian conferences, we deduce that the gold dinar would be one ounce of gold or its equivalent value.

The Islamic Dinar
Malaysia has suggested that its trading partners in the Islamic world should all use the gold dinar. This appears to be politically motivated, as one of its main aims appears to be to reduce the dependence of the Islamic world on the US dollar for international settlements. It may also be intended to attack the value of the dollar by means of Islamic nations and their people, selling dollars and switching into gold dinars. Malaysia has stated its hope that other non-muslim countries would also use the gold dinar, although this may have been to deflect any criticism of the scheme as a closed-shop muslims only, anti-western club.

The Malaysian Dinar
The Malaysian currency system uses the ringgit as its main denomination, and all its gold coins have been issued with values in ringgits. No Malaysian gold dinar coins have ever been issued.

The Effect on the Gold Price
If the entire Islamic world were to ditch the US dollar, and use gold as its main or only reserve currency, then this could have a major influence on the gold price, and a similar but opposite effect on the value of the US dollar. We have seen very bullish opinions about this, but we believe that a gold dinar scheme for interbank settlements would not necessarily create a huge and sudden demand for gold, but a switch by businesses and individuals out of dollars and into gold could have a greater effect over the long term.

No Gold Dinar Coins
We have been receiving a growing number of enquiries about the availability of gold dinars, and as you can gather from the above, it appears unlikely that any will be issued as gold coins. There is certainly no plan to issue a competitor to the Krugerrand and other one ounce bullion coins.

Privately Issued "Dinars"
One source quotes the following specifications for what appears to be an unofficial privately issued version of a "gold dinar"
We also show an image of one of these coins.
Please note we do not have any stock of these "coins", or any plans at present to deal in them. Specifications

Denomination	Diameter	Weight	Alloy	AGW Gms	AGW Ozs
Dinar	23	4.25	.9166	3.895833	0.1252

Real Gold Dinars
Many countries in the arab world have used dirhams or dinars as part of their currency systems as various times during the last two thousand years. The word dinar derives from the latin word denarius, which was actually a silver coin, and the origin of the "d" in the British "£.s.d" system, abbreviations for the latin words libra, solidus, and denarius.

Taken From: http://www.taxfreegold.co.uk

Gold Dinar and Fiat Money

Gold dinar is an alternative system to fiat money whereby the value of the currency is Gold value rather than paper note. The implementation and usage of Gold Dinar give more value added as opposed to the fiat money. Furthermore, in the usage of Gold as a currency and financial instrument it leads us to follow the way of Islamic society in the past. The usage of Fiat Money is actually first implemented by the west which is Non-Muslim community. They establish the usage of fiat money e.g. paper money to change the system of Gold Dinar. It is actually after the feel of Khilafah system in 1924. They gradually use the fiat money in everyday life.

The speculative issue in using fiat money is available. This is because the value of fiat money itself a ‘paper’. It leads to much speculative issue (Gharar). It is not correct manner because it makes the efficiency and effectiveness of trading will be drop, for example in the financial crisis in the 1997-1998. The crisis of the value of money happened because people try to speculate of it.

Besides that, there are many disadvantages of using fiat money:
1. It generates inflation
2. It makes countries become more indebted through the current system of borrowing in case of deficit.
3. Printing money easily by the central banks take away purchasing power of the money
4. It brings injustice in monetary transaction by dominant currencies/countries
5. Do not have intrinsic value

As opposed to the usage of the fiat money, I recommended to go back to the reality of usage of financial instruments which is Gold Dinar. Below are the advantages of using Gold Dinar as financial instrument.
1. It has intrinsic value
2. It leads to harmonization in currency system that people cannot make injustice for the usage of it
3. Inflation maybe happened in natural way
4. it can solve the problem of overproduction in printing money. Do not lead to discrimination
5. The value of Gold stable

Some Ulamaa’ are calling for abrogation of fiat money, because of the above mentioned reasons. The question arise here is will it working effectively to change from fiat money to Gold Dinar? Time will make sure it happens. Then, it is true the current fiat system generates more harm than good to the people. But how to change the financial system to make it reality in using Gold as transaction? Actually the role of changing the system by the leader, should not be sudden, as that may create more harm than the benefit, like say changing the currency suddenly. People that have money are bound to loose at least most part of their money if not all.

As for the suggestion before by the former Malaysia Prime Minister, Tun. Dr. Mahathir Mohammad, he suggests to go back in using Gold Dinar as a transaction. Many ways that he has suggest bringing unity in the Muslim leaders in one community.

The implementation that can be use to start direct of usage Gold Dinar is with the Muslim country itself in the issue of trading. For example, if Country A wants to buy or trade the commodity from Country B they can pay it with Gold Dinar and they get what they want from Country B. This also can lead the unity of the Muslim country and bring together into one Muslim world that should not be lead by the foreign country such as Europe.

As for that, America under their presiden George Bush condemned the action. They said that Gold Dinar is Useless. It is totally wrong because the usage of Gold Dinar give many advantages to Muslim World. Maybe the presiden have their own agenda.

To make Islam as a unity Muslim in the world, the secularism in using fiat money need to be change gradually. It is to make sure that the problem in using fiat money will not harmful to Muslim society. With using Gold Dinar it will bring us together (Islamic World) into one wonderful system and make many advantages of it. Recognition of Muslim world needed to be done to make it using Gold Dinar a reality. Basically it is not impossible. Only time will make it happen. A lot of study and implementation need to be done.