Every now and then, we ask you to re-read the introduction at the top of this page. This is another one of those instances. Please do so, remembering as you read it that we posted that introduction when we first posted our Gold pages - back in January 1996. We have not changed one word of it since then.
The U.S. Dollar has been integral to the functioning of the world's financial system since 1944. Gold sat in the caboose until 1971, when President Nixon unceremoniously decoupled the back of the train. Since then, the Dollar has reigned supreme. Now that does not mean that the Dollar has been "strong" throughout the period. In fact, on a cross currency basis, it has spent more time being weak. The great periods of Dollar strength have been 1981-85 and 1995 to date - with a sharp "blip" in late 1998 when the Fed lowered rates three times in six weeks.
Privateer Subscribers: Please take a look at this page. This is a new page and shows the performance of the world's major stock markets discounted for the movement of currency in question against the $US. If you're not a subscriber, suffice it to say that when measured in $US terms, world stock market performance is even worse than it is in nominal terms. And even in nominal terms, world stock markets (including U.S. stock markets) have had a shocking year.
So has debt paper of almost all descriptions, up to and including short term Treasury debt paper. Even SOVEREIGN debt paper in nations such as the Phillipines, now Argentina, and (if the rumours are correct) Brazil is starting to come under question. Shades of 1998. And corporate debt paper is melting down all over the world - notably in Japan and in the United States itself.
Finally, there is the carnage which has overtaken the world's currencies, with the exception of the U.S. Dollar and those currencies tied to the U.S. Dollar. Finding a "good" investment has been a very tough ask this year.
Consider this sequence of events:
Privateer Subscribers know the HUGE significance we place on this request for bankruptcy legislation by Greenspan and Summers. The supreme "irony" of the situation is that this request was made and acted upon at the same time as the $US was accelerating its upside trajectory. And even more "ironic", Gold, which had remained almost constant in $US terms for months, picked the past week to finally break below its $US 270 support level.
"Gold is a political metal. In the true meaning of the word, its price is governed."
One can argue forever about HOW this is done. What matters is WHY it is done. And the answer is simple - and stated in the introduction to this page and throughout this part of our website.
As the strain on the system worsens, the pressure on Gold increases. As the strain nears its breaking point, the $US price of Gold breaks. That is what happened this week. How long will it last and how low will it go? No way of knowing. Gold has support at present levels, at $US 260, and at the 1999 lows of $US 252-53. The strain will become intolerable when the Dollar breaks, and that hasn't happened yet, although the $US index was down on Oct. 24.
Right now, on the horizon of world investors and world financial officials alike, the "long-term" starts on November 7. That's just over a week from now.