Gold and silver's recovery in recent days proved to be temporary and further falls were seen yesterday (sharply in silver) prior to a tentative recovery overnight and then more falls again this morning. The euro has stabilized after recent sharp falls and euro gold at €1,050/oz remains comfortably above €1,000/oz after a period of correction and consolidation. Euro gold looks like it is set to break above record highs of €1,072/oz (12/28/10) and target €1,100/oz as the European debt crisis deepens.
Cross Currency Rates at 1030 (London AM Fix)
The massive disconnect between the COMEX spot and futures prices and the physical market continues with leveraged, powerful players on Wall Street (primarily hedge funds and Wall Street banks) able to effect short term sell offs in the paper market despite the very strong supply, demand fundamentals in the physical bullion market.
Those who have been wrongly calling gold and silver bubbles in recent years fail to realize that gold and silver are no ordinary assets, indeed many contend that they are not assets at all, rather they are money. The precious metals were demonetized in the second half of the 20th century as unbacked paper currencies (fiat money) became accepted globally.
USD Gold - 1 Year (Daily)
Those continuing to call gold a bubble do not understand monetary economics and the growing trend towards the gradual remonetisation of gold. This is due to the unstable nature of the global financial system and markets and growing concerns about all fiat currencies including the international reserve currency, the U.S. dollar and major reserve currencies such as the British pound, the Japanese yen and the euro.
Ultra loose monetary policies and global currency debasement renders confident assertions of gold and silver being bubbles simplistic and naïve.
Indeed, with growing calls for a return to the Gold Standard, the latest from billionaire media magnate Steve Forbes (see news), gold looks set to at least rise to its 1980 adjusted high of $2,400/oz.
Forbes said in an interview that people know that something is wrong with the dollar.
What seems astonishing today could become conventional wisdom in a short period of time, Forbes said. He concluded that you cannot trash your money without repercussions.
He thus echoes long term gold standard advocate Representative Ron Paul and the recent advocation of a return to some form of Gold Standard by World Bank President Robert Zoellick.
A return to a Gold Standard would likely see gold revalued to thousands of dollars per ounce.