The table below shows the annual performance of Gold in US Dollar terms over the past TEN YEARS - from the beginning of 1999. Please note that all the price data here is based on spot future CLOSING prices on the COMEX. Note the anomaly - the ONLY "down" year for $US Gold over the past decade came in 2000.
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It's now official, 2008 has been another year of gains for Gold in $US terms. In the face of the worst "commodities" price crash ever recorded, bigger and more rapid than even the one at the outset of the Great Depression of the 1930s, Gold has conclusively proven that it has no rival as a means of preserving purchasing power this year. It's performance perfectly reflects its viability as MONEY!
The importance of this lies in the simple fact that every conceivable effect of the ever-worsening global financial crisis has been addressed this year. The one thing which has NOT been done, at least not by those in charge of the system, is to probe beneath the effects of the crisis to unearth the cause.
The cause is the simple fact that because every money in the world has no connection to anything tangible, governments and central banks can, with the help of the fractional reserve system of banking, create as much as they want. Theree is no legal or political limit to monetary inflation - except one. That sole limit is confidence in the future purchasing power of the money. 2008 was the year in which that confidence came under increasing pressure. 2009 is the year when that confidence will break down.
As the year comes to a close, most people are still flocking to government debt paper, not because they are particularly "confident" in it, but because they still believe it represents the ultimate in financial "safety". Yields across all maturities on US Treasury paper have never been lower than they are now. That means these yields have nowhere to go but UP. And when bond yields go UP, the prices paid for the bonds on the secondary markets goes DOWN. That is the signal event which is almost certain to happen at some point in the year to come.
As you can see from the table above, Gold in $US terms had its smallest gains since 2004 in the year just ended. But compare its performance with almost ANY other form of investment denominated in any paper currency, and it is fair to say that Gold has enjoyed one of its best years EVER in 2008.
It is very likely indeed that Gold will enjoy an even better year in 2009
We will not be publishing our regular commentary on this page on January 2. Our next regular Gold This Week (GTW) commentary will be posted on January 9, 2009.
(Chart appears here in original analysis)
As you can see, a new low was hit on the chart when spot future Gold closed in New York at $US 705 on November 13. This pushed the chart two "Xs" below the $US 715 support level established in late October and equalled early in November. Then came the first big turnaround - and upturn on the chart - of November 14. The region between $US 700-720 firmed as SOLID support for Gold. That support "zone" was emphatically confirmed as Gold rose by just over $US 110 between November 13 and November 28
A month ago,just over half that rise was given back as Gold retreated to the top of its previous distribution zone. That proved to be SOLID support, as shown by the movement on the chart since Gold rebounded from the $US 750 area shows.
We began the table below in 2007 and have extended it through 2008, even though Gold in all four currencies in the table remain well above their 2006 highs. Gold breaking out to new all time highs in $US terms at the end of January led to bull market highs in all four currencies. And as you can see, in March, Gold improved upon those January levels in all four currencies as spot future Gold closed above the $US 1000 level for the first time ever in the middle of March.
In mid (northern) summer, we had a new entry on the table for the first time since Gold topped the $US 1000 level in March. On July 17, Gold rose to 103233 Yen. That was a new 2008 high for the metal in terms of the Japanese currency. Then the Fannie/Freddie bailout plan went to work. Three weeks ago, on October 8, with the announcement of co-ordinated interest rate cuts by SIX major world central banks (including the Fed), Gold hit new all time highs in terms of the Australian Dollar, the Euro and many other major world currencies. That situation was reversed with the onset of savage global deleveraging which is still going on. How much longer? As stated above, the US Dollar has broken down over the past two weeks. Continue to watch the US Dollar exchange rates and US Treasury yields. When Treasury yields start to rise, the jig is all but UP.
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