By Julian D.W. Phillips
The focus in the Gold Market has always been on the Dollar price of gold, writes Julian Phillips of the Gold Forecaster. And yet we have ample evidence of why we should not price gold in the US Dollar at all.
Just as the oil price should not be priced in the Dollar, the fall of the Dollar has clouded the state of the global economy, its monetary system, as well as most of its markets. That's why the silver and Gold Prices have moved fairly closely with the Euro, both heading in the opposite direction to the Dollar.
But should Gold be attached so faithfully to the Euro? A look at the Gold Price in Euros is helpful keep our perspective on the precious metals.
The Gold Price in Euros is a better reflection of the metal's rise, because it's based in a currency that has remained a relatively healthy measure of value.
By looking at gold and silver through these eyes, we are in a better position to gauge the consensus of global market opinion on the state of the world's money system, without the corrupting influence of a weak Dollar.
Gold, Silver Euros: Inverse Measure of Confidence
For the gold and silver prices to be able to reflect inversely the levels of confidence in the world's money system, we would have to put them, ideally, in a currency neutral position. But this is not possible all fully convertible currencies fluctuate, often wildly, on a day to day basis.
So choosing a robust currency as our base, we get a little closer to expressing global confidence in terms of the Gold Market. The currency of choice then becomes the world's second leading currency, the Euro.
The European single currency reflects a high degree of strength as shown in the foreign exchange markets of the world. By pricing Gold in the Euro we can also better see its safe haven value against a strong currency. And with the potentially disastrous times for the global financial system that we now live in, such a solid gauge would help us to extract local influences, in particular those dragging that currency down, and get a global perspective.
Should anyone doubt the level of danger the money system faces, you only have to listen to the chairman of the Federal Reserve, Ben Bernanke, describing just why the Fed had to step in and protect the entire US financial system, which could easily have collapsed. There is no doubt in our mind that the ripples from that scenario would have sent a financial tsunami across the entire global monetary system, probably causing it to collapse.
So any item that can act outside the paper currency world, which is dependent on the performance of men and their management of wealth, reflecting a common value , is needed in these days.
Take Note: Please do not confuse this concept with that of usable money, however. Gold may not act as a medium of exchange for buying and selling goods, but today it clearly acts as a measure of value as well as a store of wealth roles it fulfilled for quite a few thousand years before 1970.
JULIAN PHILLIPS one half of the highly respected team at GoldForecaster.com began his career in the financial markets back in 1970, when he left the British Army after serving as an Officer in the Light Infantry in Malaya, Mauritius, and Belfast.
First he worked in Timber Management and then joined the London Stock Exchange, qualifying as a member and specializing from the beginning in currencies, gold and the Dollar Premium . On moving to South Africa, Julian was appointed a macro economist for the Electricity Supply Commission guiding currency decisions on the multi billion foreign Loan Portfolio before joining Chase Manhattan and the UK Merchant Bank, Hill Samuel, in Johannesburg.
There he specialized in gold, before moving to Capetown, where he established the Fund Management department of the Board of Executors. Julian returned to the Gold World over two years ago, contributing his exceptional experience and insights to Global Watch: The Gold Forecaster.