Over the past week, spot future Comex Gold has had its best weekly rise for five months, rising from $US 395.60 to $412.70. That's a rise of $US 17.10 or 4.32%.
But that's not all. Here is the movement of the Gold price in ten selected currencies this week, arranged in order of the magnitude of the upmove:.
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For charts of four of these - $US, $A, Euro, Yen - click here.
Gold had its smallest gain in Yen for the very simple reason that the Yen was the major currency which rose most against the $US over the past week. This, by the way, is a highly ominous development in light of a recent report in a Japanese newspaper which strongly suggests that the Japanese Ministry of Finance is seriously considering ending its Dollar support operations at the end of March. The end of March is also the end of Japan's financial year.
On the geo-political front, global US influence is visibly coming apart at the seams with astonishing rapidity. The latest and biggest catalyst so far has been the recent Spanish elections which occurred three days after the terrorist bombing in Madrid. The US mass media and, of course, Washington DC is braying about "appeasement". They should read a passage from the US Declaration of Independence:
"...that to secure these rights, governments are instituted among men, DERIVING THEIR JUST POWERS FROM THE CONSENT OF THE GOVERNED."
In mass peaceful demonstrations in February 2003, a month before Mr Bush's Iraq war, the Spanish people in their millions made it VERY clear to their government that they did NOT consent to Spain allying itself with the US in the attack on Iraq. They have made it clear on many occasions since that they do not approve of the continuation of this alliance.
Their government refused to either listen or act. Now, the Spanish people have done what all people in a free and "democratic" society are supposed to be able to do, they have WITHDRAWN their consent from their government. They have voted it out of office. The most significant aspect of the Spanish elections was that the vote of the ruling party fell very little. They were defeated on a much higher voter TURNOUT than has been the norm in Spanish elections. These "new" voters, or to be more precise, this increased number of Spaniards who decided that the issue was important enough to return to the ballot box, were those who turned the sitting government out of office.
With this vote, the "coalition of the willing" is falling apart. The stand of the Spanish electorate has been endorsed all over Europe and beyond Europe. The Polish Prime Minister is now telling his people that he was "deceived" by Washington. Washington itself is in a frenzy with President Bush frantically telephoning his "allies" to plead with them not to jump ship.
Ok, so the US is losing its geo-strategic hold, what has that to do with the Gold "price" or for that matter with financial matters in general? Nothing much, except for the fact that the US relies on its "allies" for a lot more than simply backing up their project to "democratise" the Middle East and stamp out terrorism without having to change any aspect of their own foreign policy. It relies on them to fund its trade and current account deficit. It relies on them to keep selling the US the consumer goods that the US consumes and calls "economic growth". It relies on them to keep buying Treasury debt so that the Treasury doesn't have to sell it "in house" or to the Fed and put pressure on US interest rates. And most important of all, it relies upon its "allies" to defend the status of the US Dollar as the world's reserve currency.
Dig far enough into the history of any nation which has relied on part or all of the rest of the world to sustain its dominant position by doing things which are not in their best interests, and you will find that the nation in question does not, at the root, rely on "good will". It relies on power, backed up in extremis by the use of aggression and force.
If a national government gains sole control over issuing what the nation uses as money, it can gain power - the ability to impose its will on the populace - in that nation. If a national government (Egypt, Assyria, Persia, Greece, Rome, Byzantium, Spain, France, Britain, the US) gains sole control over issuing what foreigners use as their money, it can increase its scope to gain power over those foreigners. If a nation gains sole control over issuing what the world uses as money, it can increase its power world wide.
From the end of WWII to the beginning of 2002 (with the introduction of the CASH Euro), the US had SOLE control over what the world used as money. The US government issued the world's reserve currency, the US Dollar. Between the end of WWII and August 1971, the US government was constrained in its issuance of Dollars by the fact that foreign governments could redeem them for physical Gold. Since August 1971, no one can redeem Dollars for anything except Dollars - the US government has had no constraints at all over its issuance of the money it controls.
The US Dollar "topped out" in the currency markets in January 2002 - as the Euro was being introduced as a CASH currency. Since then, there have been competing reserve currencies in the world. Examining the fiscal and monetary policies of the Americans and the Europeans, and the state of their "balance sheets", it is clear and has become clear to most people that the Euro is the more viable currency. But the Europeans do not have military bases in most global nations. And the Europeans do not have a stated policy of "pre-emptive action" to invade any nation whose policies or way of life they do not approve.
The US had and has the geo-strategic power. Europe does not. The US relies on the acquiescence, and the wealth, of the rest of the world to maintain their geo-strategic position. Having no ambitions in this direction, Europe does not. Now, the US "alliance" which maintains its position in the world is crumbling with historically astounding speed. This has profound implications for the US Dollar. And since the rest of the world (including Europe - the Euro is not REDEEMABLE in Gold) remains on a "fiat standard", it has profound implications for the entire global monetary system.
The sign that these implications were becoming too big to either ignore or suppress was always going to be Gold rising in terms of ALL fiat currencies, not just the reserve fiat currency, the US Dollar. Take a look at the table above. IT IS!
The history of the post WWII era of the US Dollar as the world's reserve currency has been tied up with the progressive end of the era of empire. The nations which lost WWII (Germany, Italy, Japan) lost both empire and any ambition to empire right there. The Chinese communists simply took over China. France, Belgium, and Holland pulled back to their national borders in the 1950s - early 1960s. Britain progressively lost her empire between 1947 with the independence of India and the early/mid 1960s. The USSR renounced empire at the end of the 1980s when the communists faced political implosion and chaos.
That leaves today the US, not the American PEOPLE, but the US government and the Bush Administration. Every empire in history has come to grief on the basis of overstretch. The US is far along that same road. The solution is simply to return to the policies of the Founding Fathers as exemplified in the Declaration of Independence, the Constitiution, and - most important in this context - President Washington's farewell address.
The longer the present policy is pursued, the more inevitable a financial collapse becomes. The longer it is pursued, the more clear the unviability of the US currency becomes, and the more attractive alternatives become. But as long as NO present world currency has any official tie to Gold, as long as there is no such thing as a currency REDEEMABLE in Gold, ALL world currencies are suspect. When this state of affairs dawns on enough people, Gold starts rising in terms of ALL currencies. It is dawning on them and Gold is rising in terms of ALL currencies. This is a STRONG signal of the start of Gold's REAL bull market.