February 2011 has been a month to remember for precious metals owners. Rising inflation and turmoil in North Africa and the Middle East has reverberated in news headlines around the globe, boosting demand for alternative assets. In fact, February is closing out with the largest monthly increase for gold prices since April 2010. Silver prices are hovering at a near-31-year high.

President Obama released his $3.7 trillion budget proposal this week for fiscal year 2012, with a plan that shows a clear shift in focus from economic stimulus to deficit reduction. However, even with painful cuts in discretionary spending and possible tax increases, continuing deficits are projected through at least 2021. This would add a staggering $7.2 trillion to the federal debt by that time.

China’s insatiable desire for gold is continuing, both on a government level and among individual citizens.

China’s national news agency reported Sunday that China’s gold output in 2010 was 340.88 tons, yet the country still had to import 209 tons in the first nine months of the year to meet its own internal demand.

The future of the dollar as a reserve currency has been in question recently as comments by policy makers globally have turned decidedly gloomy about the dollar’s prospects.
Foremost in the minds of analysts and government finance officials is the U.S.’s continuing policy of quantitative easing, which is flooding the market with more dollars, as well as the sizable (and swiftly growing) debt load of the U.S. government.