Last week, we presented a table which showed Gold's gains in ten selected currencies for the week March 12 - 19. Here is that table updated to show Gold's gains against those same ten currencies in the two weeks March 12 - 26. Again, the gains are arranged in order of the magnitude of the upmoves:
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For charts of four of these - $US, $A, Euro, Yen - click here.
Last week (to March 19), the $US Gold price had the biggest percentage gain on the table. This week, the $US Gold price has "slipped" to fourth place on the table, due to the fact that the US Dollar as measured by the $US Index is up 0.74 points (88.54 to 89.28) or 0.84% on the week. Last week, we stated that the Gold rise against ALL currencies constitutes a strong signal for the start of the REAL Gold bull market. Take a look at the percentage gains a week later. The signal is unmistakeable.
That's the first step, confirming that Gold (and, of course, Silver) is going up in terms of ALL major currencies. The next step is to see how Gold is doing in terms of the world's two KEY currencies. These two key currencies are the US Dollar and the Euro. Both of these are, by their structure, RESERVE currencies.
The 2004 high for the $US Gold price is $US 426.80 (spot future closing basis) set on January 9, 2004. On March 26, spot future Gold closed at $US 422.20. This is $US 4.60 or 1.08% below the 2004 high.
The Euro was introduced in 1999 and the CASH Euro was introduced in 2002. The ALL TIME HIGH for the Euro Gold price is 350.11 set on May 23, 2002. On March 26, 2004, the Euro Gold price closed at 349.16. Thus, the present Euro Gold price is less than ONE Euro (0.95 Euro or 0.27%) below its all time high.
The US Dollar IS the world's reserve currency and has been so since 1944. The Euro is the European Union's reserve currency and is a legitimate challenger to the US Dollar for the role of the world's reserve currency. The US Dollar became a strictly fiat currency nearly 33 years ago when the last official tie between it and Gold was cut in August 1971. From that day to this, the world has existed on the basis of a strictly fiat standard.
The major difference between the structure of the Euro and of the US Dollar is one of only cosmetic importance. The European Central Bank which issues the Euro recognises Gold as an OFFICIAL reserve behind the Euro. The Federal Reserve which issues the US Dollar does NOT recognise Gold in that capacity.
However, BOTH reserve currencies are fundamentally flawed because NEITHER is officially REDEEMABLE in Gold. Unless and until one or both currencies becomes REDEEMABLE in Gold, there will be no constraints on the potential amount of the currency that the Central Bank in charge can issue - EXCEPT ONE. That ONE constraint is, and always has been, the acceptability of the currency both inside and outside the area in which it is issued as a viable medium of exchange.
We have said for a long time on these pages that Gold's REAL bull market will begin when it begins to rise against ALL currencies. It has been doing just that ever since its recent slide back below the $US 400 level. Prior to that slide, Gold's bull market has been largely measured in terms of its gains against the US Dollar. While it is true that Gold has gone up more against the $US than the $US has fallen on the currency markets since the $US Gold price started its rise from the mid $US 250s in early 2001, the fact remains that its impetus has been greatly enhanced by the FALL of the $US in the currency markets since January 2002.
That has now changed. Last week (March 15-19) Gold was up substantially against a US Dollar that fell slightly on the $US index. This week (March 22-26) Gold is up substantially against a $US that has RISEN slightly on the $US index. In fact, on Wednesday, March 24, the $US index closed (spot future basis) at a new 2004 high of 89.35.
THE signal that the REAL Gold bull market has begun in earnest, and that Gold is now going up against ALL currencies, thereby giving a GLOBAL signal of the increasing fragility of the present fiat money system, will be the setting of new 21st century highs for Gold in BOTH US Dollar and Euro terms.
We say "21st century" highs simply because the Euro did not exist back in 1980 when Gold was making its famous $US 850 highs against the US Dollar. Given that the world now exists on a two "reserve currency" basis and that the Euro became a currency "on the books" only in 1999 and a circulating CASH currency only at the beginning of 2002, it is Gold's highs since these events which matter.
Here, once again, are the highs since 1999 (spot future closing basis) for Gold in $US and Euro terms:
US Dollar - $US 426.80
Euro - Euro 350.11
Any Gold spot future close above $US 430 and Euro 355.00 will confirm that Gold is breaking loose in terms of ALL world currencies. If Gold were to repeat its performance of Friday, March 26 (up $US 5.30 and Euro 6.10) on Monday, March 29, it will happen immediately. It might take a little longer than that, but it WILL happen.
The other point to stress here is that a breakout of Gold in $US and Euro terms will greatly increase the likelihood that Gold will begin to accelerate upwards, again in terms of ALL world currencies. And that will, in turn, turn the attention of more and more investors all over the world to Gold as not only a viable alternative to any currency, but also an increasingly profitable one.
Silver, the poor man's Gold, has already paved the way, having risen substantially in terms of all world currencies for the best part of 2004. In $US terms, Silver has risen exactly $US 1.00 (or almost 15%) since March 2. And where Silver goes, Gold ALWAYS follows.
With Gold now "on the verge" against both the US Dollar and the Euro, we are poised on the brink of an upward surge in Gold. One can be absolutely sure that the financial "powers that be" know this, and equally sure that strenuous efforts will be made to prevent it. Consider Gold's steady rise over the last two weeks. Consider the BIG daily volumes on the futures markets this week (see above). Consider Gold's proximity to important highs in both $US and Euro terms. Consider the fact that when ANY investment breaks through to new significant highs, potential sellers turn into holders and potential buyers and new buyers join their ranks.
Consider all this, and add the disintegration of US foreign "policy" and the stupendous pile of unrepayable debt tottering on a foundation of nothing more than "good faith". The conclusion must be that the point at which it becomes impossible to stop Gold's advance is close. Watch for Gold to exceed its 2004 $US highs and its all time Euro highs. When (not if) that happens, Gold will REALLY start moving up.