18 February 2009

Gold Strikes Historic Levels in Most Currencies


With all equities markets deep in the red MSM and bloggers have missed out on this easy scoop for several weeks: Gold currently strikes new all-time highs in most currencies. This sensational news, omitted in all those media that are normally quick to recommend this or that paper "asset", which in the end is always only somebody else's obligation, can be revealed at this blog exclusively, a Google news search shows. ;-)
Gold traded for more than €771 and GBP 682 in the first time in history.
The strong rise in the price of gold to new historic records in most countries except the USA is a logical reaction to the credit and solvency crisis that engulfs the globe as investors, nervous about a total market fallout, flee all paper promises and seek a truly safe haven.
Gold has never lost its value in more than 3,500 years whereas no fiat currency became older than a human's lifespan so far. Check out its resistance against inflation here.

GRAPH: Gold priced in Euro has been on a tear since late November. It also outpaced all other asset classes. Chart courtesy of Stockcharts.com
I have been recommending investments in gold and mining shares since 2005. Licking my wounds from last year's biggest and longest decline in this equity sector in 80 years I will at least have a story to tell to my grandchildren.
But the fundamental outlook has only worsened in the past 4 years. Having correctly called for a sharp economic downturn in the USA since 2005 I nevertheless failed to recognize the dramatic situation in the Eurozone and the recent hard landing of China. This global worsening only underscores the value of holding the only asset that is not someone else's obligation. The Euro is as doomed as are Federal Reserve Notes and nobody outside the UK cares about Sterling anymore.
We are about to witness the era of busted major fiat currencies that will go the way out as did all unbacked fiat curencies in the past 1,000 years.
The Chinese tried it in the 11th century and it ended in a revolt.
The same happened in France in the 18th century where it gave birth to the republic.
The decline of the Austro-Hungarian empire in WWI came on the heels of hyper inflation and
Germany's fate could have taken another turn in the 1920s, if it were not for hyper inflation that paved the way for Adolf Hitler.
Unfortunately we could end up as it happened in past crises: Everybody will be a millionaire beggar.

1 comment:

Patrick said...

Well, I´ll just have to keep flipping. Almost doubled my money today via a fractal limit order, using lots of leverage of course. Seems like a hot ticket, what could go wrong?