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Gold Calls the World Bankers' Bluffs
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In last week’s essay we discussed the frightening chart of the US dollar index. In particular we focused on the manner in which the Dollar has broken critical support (76) and is on its way to its all time low of 72. Below that… and we’re in uncharted territory.
It’s not surprising really… you can’t throw TRILLIONS of dollars around without damaging your country’s currency (especially when the country already owed $9 trillion to begin with). Which is why the Feds “interventions” are so idiotic. You can dress up money printing however you like with clever acronyms, but in the end printing money is just printing money.
Indeed, a brief recap of the Feds’ moves are as follows:
- The Federal Reserve cuts interest rates from 5.25-0.25% (Sept ’07-today)
- The Bear Stearns deal/ Fed buys $30 billion in junk mortgages (March ’08)
- The Fed opens various lending windows to investment banks (March ’08)
- The SEC proposes banning short-selling on financial stocks (July ’08)
- The Treasury buys Fannie/Freddie for $400 billion (Sept ’08)
- The Fed takes over AIG for $85 billion (Sept ’08)
- The Fed doles out $25 billion for the auto makers (Sept ’08)
- The Feds’ $700 billion Troubled Assets Relief Program (TARP) (Oct ’08)
- The Fed buys commercial paper (non-bank debt) from non-financial firms (Oct ’08)
- The Fed offers $540 billion to backstop money market funds (Oct ’08)
- The Feds backs up to $280 billion of Citigroup’s liabilities (Oct ’08).
- $40 billion more to AIG (Nov ’08)
- Feds agree to back up $140 billion of Bank of America’s liabilities (Jan ’09)
- Obama’s $787 Billion Stimulus (Jan ’09)
- The Fed’s $300 billion Quantitative Easing Program (Mar ’09)
- The Fed buying $1.25 trillion in agency mortgage backed securities (Mar ’09-’10)
- The Fed buying $200 billion in agency debt (Mar ’09-’10)
- Cash for Clunkers I & II (July-August ’09)
And that’s a BRIEF recap (I’m sure I left something out).
Long-time readers know that I’m no fan of Ben Bernanke. But Bailout Ben is in no way unique in his thinking (though he has managed to spend more money than WWI, WWII, and the New Deal combined).
Indeed, virtually every central bank in the world has engaged in a massive printing orgy. Australia, Canada, China, Germany, Korea, Russia, even South Africa and Turkey have all engaged in Stimulus plans in one form or another.
They’ve also all done Gold a HUGE favor by devaluing their currencies via massive money printing. This is most obvious in the US, where Gold has broken $1,000 an ounce (a crucial line of resistance) and hit an all-time nominal high relative to the US dollar (note: I am using the Gold etf (GLD) as a proxy for gold in the charts).
As you can see, Gold has been on a tear relative to the US dollar starting in November of last year (2008). In terms of world currencies, Gold has made the most aggressive moves again the US dollar. Many thought it was simply the result of Bailout Ben’s Quantitative Easing Program…
But then, something strange happened in October. Gold ALSO started breaking above critical resistance levels in the Japanese Yen:
The Euro:
The historically “gold-backed” Swiss Franc:
And even the “commodity-friendly” Canadian Dollar:
For those doubters, the message is clear: what’s going on with Gold today is no longer about Bailout Ben’s profligate monetary policy. We are seeing a full-blown flight from paper around the world.
Gold has called the World Bankers’ bluffs.
Gold has effectively stated “you CANNOT print money like madmen and NOT damage your currency. People WILL seek a currency that CANNOT be devalued.”
To be blunt, Gold’s moves against some of the stronger currencies (Yen, Euro) are not as pronounced as those against the US Dollar (they’ve yet to hit an all-time high). However, ALL of the above charts show Gold breaking above critical historical points of resistance. Most importantly, this is happening ACROSS THE BOARD.
This is a major sign that Gold is likely entering the next leg up. The story here is no longer about flight from the US Dollar. It is now about a worldwide flight from paper money.
The implications of this are enormous. We might actually be seeing the first signs of a global currency crisis brewing here. For certain the Dollar’s status as world reserve currency is now in question. But Gold’s moves could also be telling us that NO paper money is to be trusted.
This is most pronounced in the US where the Fed now accounts for nearly 50% of Treasury purchases. Indeed, if it weren’t for the Fed’s own purchases of Treasuries ($164 billion out of $339 billion in 2Q09), the US Treasury market would have almost assuredly had numerous failed auctions in the last six months.
Obviously, Foreign Investors are fleeing the Dollar: between 1Q09 and 2Q09, Foreign Holders of US debt reduced their purchases from $159 billion in 1Q09 to $101 billion in 2Q09 (a 40% DECREASE). But from the looks of the above charts, they might be fleeing other paper currencies as well.
Folks, something BIG is brewing here. And I’m already showing readers how to profit from the coming Gold explosion as investors around the world flee paper money for the one currency that CAN’T be devalued: GOLD.
While most investors buy bullion or the Gold ETF, I’ve found a unique way to buy 700+ million ounces of gold with ONE INVESTMENT. Even more incredibly, this investment currently values these incredible reserves at a measly $188 an ounce (less than one fourth the current market price).
I’ve detailed everything in a FREE Special Report How to Buy Gold For $188 an Ounce.
Good Investing!
Graham Summers
****
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