Monday, May 08, 2006

Bull in Bear's Skin

Financial Sense: Bull in Bear's Skin

This article discusses the question if the global central bank's quietly allowing the devaluation of their currencies against gold by allowing Gold to raise. And it seems to conclude that it is not impossible to do. I still dont understand everything from the article and would like forum members to disset for all of us.

Posted by skannan @ 11:54 AM (638 views)
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1. Ticktock said...

There are many many conspiricy theories in the gold/silver market and none of us mere mortals are ever likely to know what is really going on.
However, Gold has long been viewed by many as the only true store of wealth, and the asset that you can most rely on when all else fails. Therefore as risk and uncertainty increase in the world, so too (in theory) does the US$ price of gold. Theory being that gold will always be accepted as currency, or payment of last resort, but the same cannot be said for fiat (paper) money, which is nothing but an IOU from a central Bank. These IOUs used to be linked to the price of bullion (B.Woods system) but no longer. If the realationship between Gold and the US was restored today, Gold would be thousands of US$ per Oz. Some believe that this link will one day have to be restored in order to restore global economic order, and restore confidence in any new fiat system that might replace the current one when it fails. (fiat currency systems always fail) . There are good conspiricy theories of Central banks (our own included) being coerced into swapping gold bullion reserves for paper $US. Ive always found it strange that the US (who has the biggest bullion reserve) should be so insistant that Gold is nothing but a 'barbourous rhelic' & that central banks should sell it all immediately (to them) or face economic doom. Interesting too, to watch the pressure building on the German Central bank to do the same (2nd largest bullion reserves) but the Bundesbank are having none of it.
Of course it can be (and is) argued, that changes in US$ Gold price speak more of the plunging value of the $ (as central banks have a habbit of printing too much paper to inflate their way out of problems) than of an actual rise in value of gold itself. Many believe that the actual price of Gold does not fluctuate at all (as there is a fairly fixed ammount of it either above or below ground) merely that the currency in which its value is measured, fluctuates constantly (and usually deliberately)
The Fed has attempted to devalue the US$ against other single currencies (i.e. 30%ish against the euro in the last few years) but it has not resolved their problems. Gold is more and more being used as a quasi currency, and it is possible (as i think is claimed in the article) that in order to maintain stability, and not mess up economies around the world (as the anglo/us banks usually do to escape their own problems) that they may simply allow gold to rise in value, presumeably against all of the hiddiously over valued western currencies.
I have no idea what effect this may or may not have, but its certainly not a bad plug for buying bullion........and the shorts are always very good at coming up with these!!!

Monday, May 8, 2006 01:24PM Report Comment

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