GoldCore Insight - Currency Wars: Bye Bye Petrodollar – Buy, Buy Gold

Today’s AM fix was USD 1,580.00, EUR 1,196.15 and GBP 1,034.78 per ounce.Yesterday’s AM fix was USD 1,568.50, EUR 1,189.34 and GBP 1,030.96 per ounce.

Silver is trading at $28.65/oz, €21.80/oz and £18.81/oz. Platinum is trading at $1,611.50/oz, palladium at $731.00/oz and rhodium at $1,175/oz.

Gold climbed $12.30 or 0.79% yesterday in New York and closed at $1,576.90/oz. Silver surged to a high of $28.88 and finished with a gain of 0.53%. Euro gold climbed back to €1,196/oz and platinum lost $32.50 to $1,613/oz.

Cross Currency Table – (Bloomberg)

Gold recovered on Friday, adding to gains yesterday on news that the U.S. economy is still faltering and concerns that the U.S. Fed’s QE will continue despite assertions to the contrary.

The U.S. economic growth stalled in Q4, and the jobless rate rose up to 7.9% this January.

Investors will look for clues in Bernanke’s testimony before the U.S. Congress on Tuesday and Wednesday. However, the fiscal cliff drop is still dangerous as the U.S. government will embark on spending cuts, debt limits and the U.S. Fed has every reason to keep its stimulus package in place.

Smart money bought the dip yesterday, especially in China where premiums in Shanghai were nearly $20/oz over market prices.

In the Eurozone, the EU commission said today that Europe will not recover until 2014.

Fearful investors continued liquidating positions in ETFs like SPDR Gold Trust, which saw its largest one day fall in positions yesterday in the past year and a half.

Gold Spot $/oz, 5 days – (Bloomberg)

GoldCore Insight - Currency Wars: Bye Bye Petrodollar – Buy, Buy GoldCurrency wars are probably one of the greatest risks posed to the wealth of nations today.

In September 2010, Guido Mantega, Brazil's finance minister, warned that an "international currency war" had broken out, as governments around the globe peg their currencies and devalue their currencies against each other.

His comments were echoed by senior Russian and Chinese officials.

The G20 said last week that there would be no currency wars and some central bankers such as the ECB's Mario Draghi have recently dismissed talk of "currency wars" as excessive.

Sir Humphrey, the wily civil servant in 'Yes Prime Minister', always stressed how important it was “to never believe anything until it is officially denied.”

Competitive currency devaluations are in effect a continuation of currency debasement. Debasement is simply the devaluing of one's currency or money. In ancient and medieval history it used to be done through the clipping of gold and silver coins.

Today it is done through excessive money creation through the printing of, and indeed the electronic creations of billions and billions of dollars, pounds, euros and other fiat currencies. Indeed, today central bankers are creating billions and billions of electronic money simply by pressing a few buttons on a computer.

Currency wars are set to deepen as most industrial nations in the western world are close to insolvent and look on the verge of recessions – potentially deep ones.

The fiscal situation of the U.S., the largest economy in the world, is appalling with the national debt having increased from $5.7 trillion in 2000 to over $16.5 trillion today.

Besides the U.S. national debt of over $16.5 trillion, the U.S. has off balance sheet debt or unfunded liabilities of between $70 trillion and $100 trillion.

The U.S. will never be able to pay these debts back and so it will attempt to inflate them away through currency devaluation. This poses risks to the global reserve currency status of the dollar - especially as the world moves to a multi polar world where India, Russia, Brazil and China exert their increasing economic and political power.

XAU/GBP Currency – (Bloomberg)

XAU/EUR Currency – (Bloomberg)

This is why it is important to consider the energy money nexus and to look holistically at the world of energy and money as Chris Sanders has done in this interesting insight.

Currency wars and the threats posed to the U.S. dollar as the global reserve currency of the world, make owning physical gold essential to all who wish to preserve wealth in the coming years.

We do not endorse the opinions of guest contributors but where we find an argument interesting and potentially valuable to our clients and the public in helping to protect and grow wealth we share it.

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