Good Reading:
As subscribers to The Privateer know, we concentrated in the most recent issue on the situation surrounding Gold and the U.S. Dollar, particularly concerning the blow out in swap spreads on the U.S. debt markets and the interesting proposal, made by the Republicans in the House, that the IMF repatriate Gold to its original Central Bank owners and then have those Central Banks revalue it from "Official" to market price.
The huge present irony of the situation is that U.S. market players are now more or less resigned to another rate hike at the August 24 FOMC meeting, taking as their cue the blow out in hourly earnings announced on August 6. The consensus is that "inflationary pressures" are building up in the U.S. economy.
What is actually building up in the U.S. economy is another lending freeze, just like the one last Fall which prompted the three Fed rate cuts.
U.S. stock markets are tottering, with the broader indices having suffered much worse recent damage than has the Dow. Bond yields are spiralling upward once again, with 30-year yields spiking 10 basis points on August 6 and 10-year yields up 14 basis points. For Privateer subscribers, the present situation here is analysed in some detail on our Subscribers' Pages
There are only two "saving graces" in the present situation. For the moment at least, the Dollar itself has stopped falling. And Gold, good old Gold, is flat as the proverbial pancake. As has so often been the case over the past two years, the worse the situation, the more docile the Gold price.
Wait a minute, isn't it true that when things get really bad (as in July 1997, November 1997, and especially when Russia defaulted in August 1998) the Gold price takes a header. Yes, it has been true in the past. But so far this time, it is not true.
Last May, when Gold stocks had spiked suddenly and Gold was up to $US 290 and threatening to go higher, the BoE stepped into the breach and announced Gold auctions. This was the first official announcement of Gold sales before the fact for more than 20 years. It worked, Gold plummeted.
Now, everyone involved in the decision to announce those Auctions, up to and including the BoE Head, Mr Eddy George, has claimed that they did not go along with the decision when it was made. Somebody must have?
The financial crisis which kicked off just over two years ago has progressively affected every major nation and region in the world, except one. It has not, up until recently, affected the U.S.. But now, it IS affecting the U.S.
And because it has now reached the center of the financial world - the U.S. - one would think that by the precedents of the past two years, Gold would be plummeting. Well, it has been plummeting, but not against the U.S. Dollar. Nor for the past month.
In the battle between honest money and fiat money, the main antagonists have always been the Dollar and Gold. Now, and for the past month, they have been locked together. In all previous "crisis points", someone, somewhere, should have come up with a Gold sale announcement or some other "bombshell" by now to deep six the Gold price again. It hasn't happened. In all the past "crisis peaks", the escape route was into the Dollar and into U.S. stocks and especially bonds. Now, there is unmistakeable evidence that this route is no longer being taken.
If the U.S. is no longer seen as a financial "save haven", then foreign investors who have been sending their capital there are faced with some very hard options. They can keep their assets at home, or they can look for a "safe haven" replacement for Dollars and Dollar denominated assets. More fundamentally, they can stay inside the system, or consider moving some of their assets outside it. There is only one place to go outside the system. That's Gold (and silver).
By Gold, we do not mean Gold derivatives, which are an integral part of the financial system and which have made the control of the Gold price possible, we mean actual physical Gold.
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