On November 2, the spot future Gold price jumped $US 14.80 to close at $US 808.50. This is the fifth highest close EVER for the spot future price, and the highest close since January 22, 1980. That was the day after spot future Gold hit its all time high of $US 878.00 (the spot - for immediate delivery - close on that day was the famous $US 850.00).
As you can see from this $US 5 x 5 Gold point and figure chart, we are getting into rather rarefied atmosphere here.
On August 16, just over eleven weeks ago, the spot future Gold price closed at $US 648.30. The next day, Friday August 17, the US Fed sprung a surprise rate cut, slashing 0.50 percent off its discount rate. Ever since then - see the long vertical line of "Xs" at the right of the chart, Gold has gone straight up on this chart with never a downturn.
Here's a quote from the August 17 "edition" of Gold This Week, written on the day after the Fed began its rate cuts:
"On Wednesday, August 15, in an interview with Bloomberg TV, the President of the St. Louis Federal Reserve, Mr William Poole, made the statement that only "a calamity" would justify the Fed cutting interest rates now. Mr Poole went on to say this: 'It's premature to say that this upset in the market is changing the course of the economy in any fundamental way.' He added that the Fed would have to see some real evidence before making a move on interest rates."
You can read a report on Mr Poole's remarks in this Reuters story.
Mr Poole was, of course, ridiculed for his statement. The fact is, however, that the spot future Gold price is now almost $US 160 (or almost 25 percent) higher than it was on the day that he made it. And of course the US Dollar has been plumbing new lows on its trade weighted index - the USDX - ever since it slipped below the 80.00 level way back on September 6. On November 2, the USDX closed at yet another all time low of 76.30. The US Dollar is down 6.6 percent on the USDX since Mr Poole made his statement back in mid August.
But fear not, this week Fed Chairman Bernanke has told the breathless world that the US BANKING SYSTEM is "healthy". That should reassure nervous US Dollar and US Dollar debt instrument holders around the world no end. We have more to say about Mr Bernanke's statement, and about the REAL state of the US banking system, in the Early November issue of The Privateer (Number 590 - published on November 4).
Indeed, so "healthy" is the US banking system that Mr Bernanke's Fed pumped $US 41 Billion in new "liquidity" into the system on November 1 in order to - as the Associated Press put it - "help companies get through a credit crunch." Which "companies"? The big money center New York BANKS!
The CEO of Merrill Lynch resigned earlier in the week just ended. Now, the particular star of the show is Citigroup - the world's largest bank - and its CEO. Reports from the Wall Street Journal state that Citigroup is to hold an "emergency" board meeting on Sunday (November 4) at which Mr Charles Prince, the CEO, is expected to resign. Citigroup's stock is down 25 percent in less than a month. Further, it is rumoured that Robert Rubin, chairman of Citigroup's Executive Committee, is being "considered" as an interim replacement. Mr Rubin was, of course, US Treasury Secretary under Bill Clinton in the mid 1990s.
Not to worry - we have it on the highest authority - the US banking system is "healthy".
About two and a half months ago, the St Louis Fed's William Poole broke out of the financial establishment pack to warn that only a "calamity" would justify the Fed cutting rates. Since then, the Discount rate has had 1.25 percent lopped off it and the Fed Funds rate has been "trimmed" by 0.75 percent. This rate cutting, which was supposed to nip any potential "problems" in the bud, has just made things worse. That would be bad enough, but the REAL damage has been done in the simple fact that the rate cuts have starkly pointed to the seriousness of the actual situation. No Central Banker in his or her right mind cuts interest rates when the currency they control is hitting new all time lows on a daily basis on the global markets. Only someone steeped in modern "economics", in which actions only have consequences in areas where one WANTS them to have consequences, would do such a thing.
How bad is the real situation with the "healthy" banking system and indeed with the entire global fiat money system? Take a look at the $US Gold (and oil) price. That tells the story nicely.
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