Here is a table showing the annual performance of the spot future $US Gold price since 2001:
|
As you can see from the annual percentage gains listed, the Gold bull market actually got started in 2002. Now, here's a table showing the gain of the bull market since the start of 2002:
|
That's a compunded annual gain of almost exactly 18 percent per year since the start of 2002. Not quite the 20 percent per year "in perpetuity" that US stock market investors were blithely expecting in the late 1990s, but not far off either. For the record, the compounded annual gain for the Dow since it hit its 11723 high in January 2000 has been well under ONE PERCENT per year. And of course, to the great chagrin of foreign investors, the US Dollar index is down over 30 percent since the start of 2002. There are precious few $US denominated "assets" which would have compensated foreigners or even Americans for the dive in the purchasing power of the US Dollar over the past five years. Only the holding REAL economic goods (such as commodities and metals) and precious metals have done that.
And herein lies the key to understanding the past five years, and the year to come as we wait on the doorstep of 2007.
Here is an item which encapsulates the decline of the global financial system underpinned by the US Dollar as nothing else could. It has recently been reported that worldwide, the amount of CASH Euros in circulation now exceeds the amount of CASH US Dollars in circulation. This is quite astounding.
Please remember that the US Dollar has been the world's reserve currency since 1944. Please remember that to this day, the majority of all GLOBAL trade in raw materials and basic commodities is done in terms of US Dollars. For decades, and up to a very short time ago, the ultimate "getaway money" throughout the world was a ten or twenty or hundred Dollar bill to much of the "developing" and a lot of the "developed" world. And lastly, please remember that the Euro did not even EXIST as a CASH currency until the beginning of 2002.
If you could not already clearly see the mountain of evidence building up showing the accelerating decline of the US Dollar, this little snippet of information can leave no further doubt.
The foundation of the global financial system, the US Dollar is visibly crumbling. Worse, the US political establishment which controls the currency is just as visibly crumbling. The US economy has hit the wall, unable to sustain the drain of the political establishment's empire. It is an age-old situation in history, and it is happening NOW to the United States of America.
It is clear and obvious that the "policies" of the Bush Administration are in tatters. The still slow but ever accelerating move by the rest of the world out of US Dollars has been documented in the past few issues of The Privateer - notably in our late December issue (Number 568 - Published on December 24). The effect of all this has been muted by the Holiday Season but is now poised to spring back to the centre of events once the New Years celebrations are over and the world lurches back to full operation on January 3. January 2 will be a holiday in the US this year to mark the passing of ex President Gerald Ford.
For Gold, the major difference this year to the previous years in the bull market which started in 2002 is that for the first time, Gold's high price for the year was NOT set in December. This year, Gold reached its $US 721.50 2006 high way back on May 11. At its $US 638 level on December 29, Gold is still $US 83.50 below that level. To equal it from present levels will take an increase in the Gold price of just over 13 percent.
Given the financial situation in the US and the utter helplessness of both the US political establshment and the Bush Administration to address it, the pressure on the rest of the world to find a "substitute" for the US Dollar will steadily grow in 2007. Given the fact that all global currencies are paper fiat "moneys" redeemable in NOTHING, no readily available substitute is available. This is the situation, and more and more people, including people in "high" places, are realising it.
Gold remains what it has always been, the ultimate form of financial insurance for those who want to protect themselves. This function becomes critical when those who are the manipulators of the monetary system are clearly losing control of the situation. That is precisely what is happening as 2006 draws to a close.
The next "installment of Gold This Week will appear in its regular rotation on Janaury 5, 2007. In the meantime, we wish everyone reading these pages a very HAPPY NEW YEAR! We are greatly looking forward to 2007, hope you are too