Has the True GOLD Bull Begun? and The Coming World Currency Crisis
November 26, 2003
Gold in US Dollars
Gold bullion really looks like it is in a super bull market when one looks at it in dollars, but take a look at gold in other currencies and you see the makings of the “coming world currency crisis.” What we are witnessing right now are just the first rumblings of this huge major upheaval that is slowly taking place. The mighty dollar has been dethroned and the other currencies are just providing temporary safe havens as the rats jump from one sinking ship to one that has only sprung a leak, but is rapidly filling up. The end will not be pleasant as every major currency starts to collapse.
Gold will ultimately rally in every major currency. That will be the time we will have a feeding frenzy in Gold Bullion and Shares. And at the same time, we will slowly be leading to the panic stage where gold will start truly taking off. It will not be unnatural towards the end to see spikes of $100 or more day. I am going to put all the charts of the weak currencies first. Surprise, surprise! Gold is gaining value in all the major (weak) currencies of the world to date and losing value in the smaller stronger currencies.
Gold in Deutsche Marks
Gold in French Francs
Gold In British Pounds
The Stronger Currencies
At this stage, even the Indian Rupee is much stronger than the US dollar as you can see that the current highs of Gold bullion priced in Dollars are not reflected when Gold is priced in Rupees. The price of Gold was still higher in Feb 03 than it is in November 2003. It pays to keep an eye on the price of Gold in other currencies. If you don’t have time, consider joining our free newsletter where we will attempt to inform you of new break outs or break downs.
Gold in Indian Rupees
The big boys when it comes to currency strength.
Gold in Euros
Gold in Japanese Yen
Gold in Australian Dollars
Gold in Canadian Dollars
The big daddy of them all, the South African Rand is the strongest currency in the world.
I have been bullish on the Rand since Nov 2003. Those that heeded that call have made a fortune in futures and over 100% by just switching currencies. However that’s not the point right now. The point is that in Rands, gold has been getting hammered to death. When it breaks out here, watch the Feds get ground into mince meat and the true nightmare for the ignorant will begin.
Gold in South African Rand
Gold is currently rising in price in the weaker currencies. Once the strongest currencies, now they are slowly but surely taking in their last gasps of air. This is just a sign of what is to come. Eventually all the currencies will crash and then we will have the true grandfather of all currency crashes as there will be no safe place to run to except Gold, the ultimate currency. We are waiting for a pull back before we go on a buying spree in Gold stocks. However, use any significant pull back to add gold and Silver bullion to your portfolio.
Commentary from John Tyler
I would like to throw my support behind Sol; you�d better listen, or the golden opportunity of a lifetime will be missed.
We were out fishing the other day, and my mate �Nifty� Neville the plumber was quizzing me on investments as we toiled in piscatorial heaven, dragging the next few day�s dinner from the ocean bottom. (�Nifty� Nev inspired me to write The Nifty 50 Trading System� � he was about to spend $8000 on a �black box� system that promised immediate fortune. This mob went out of business the next month).
The advice always goes both ways, and �Nifty� Nev gave me his spiel on the stupidity of buying gold. He told me how twenty years ago, one of his workers bought a miniature gold ingot and wore it on a chain around his neck. He had bought it at the top of the last Bull Run when gold hit $800 an ounce.
Nifty� Nev was right and wrong. Timing is crucial. Don’t get caught buying at the top!
There are multiple forces at work that are combining to produce a typhoon of gold speculation:
Gold will rise in value across all currencies, and will become the only �money� of value
Inflation will, become more apparent in every day prices of consumer goods
All the big miners will have few hedged forward positions. Barrack is now unwinding its huge forward hedge book. This has acted like a pressure release valve on any of the recent gold runs. This will be gone.
Big new gold discoveries are harder to come by. Miners are going deeper.
I could continue, but there is still a nasty fish infestation for �Nifty� Nev and I to work on. As we were pulling in the lines, Nifty�s line when taught. The reel screamed. An 80 lb. Line was snapped as if it were gossamer.
Gold is the big one; don’t let it get away.
Fortune Favor the Informed John Tyler AKA The Infognome.
Commentary from George Paulos http://www.freebuck.com
In the US, it is clear that gold is trending up and has been in a bull market for close to 3 years. However, the technical picture is less clear when measured in international currencies. Like most commodities, gold is priced in dollars on international markets, but many currencies are now appreciating against the dollar. This makes gold investing less profitable to investors living in countries with strong currencies. Sol makes note of the strength in the South African Rand. This has implications beyond just the price of metal in that country. A quick look at the major South African gold stocks (DROOY, HMY, GFI) shows that they have dramatically underperformed the North American shares over the last year. The strong Rand pushes up costs for SA miners and hurts profitability; therefore those stocks have been hurt as a result. The lesson here is that gold mining stocks benefit when the host country’s currency weakens. Countries that have big exports of commodities will probably experience stronger currencies. This makes US gold mining stocks more attractive and gold mining stocks in commodity exporting countries less attractive.
I agree with Sol that all currencies will ultimately weaken against gold. All global currencies are now fiat. That means that no currency is convertible to a fixed quantity of gold or any other commodity. This makes it easy for governments to manipulate currencies. It is often in the interests of exporting countries to have weaker currencies in order to sell their products at relatively lower cost with respect to competing exporters. This leads to a competition between countries to depreciate currencies at an ever-increasing pace in a race to the bottom. This is known as a beggar thy neighbor policy. The net result of these competitive currency devaluations is a general rise in commodity prices. Gold gets a double boost in this situation because it is both a commodity and a currency. Private investors will likely rush to gold to protect their purchasing power.
There are two possible scenarios that could cloud the picture for gold however. One would be a general trade war with competing countries erecting trade restrictions and tariff barriers. We are already seeing some of this happen with the Bush Administrations steel and lumber tariffs. If this escalates, it could create a global recession that might actually collapse commodity prices as trade declines. Another scenario where there are widespread defaults on private debt obligations would also create a recession and a possible decline in commodity prices. Gold may or may not do well under those circumstances.
As all countries crank up the currency printing presses in a vain attempt to fight the effects of global overcapacity, I believe that we will experience both inflation and deflation simultaneously as a result. Inflation will likely raise prices of commodities, energy, and the other necessities of life. Inflation in these items will cut into disposable income and cause deflation to continue in manufactured goods and may spill over into debt-financed goods such as autos and homes because of the resulting cash crunch. Gold will almost certainly do well under these chaotic circumstances as the traditional safe haven against uncertainty.