Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

A Credit Crisis? No its a Confidence Crisis! Gold?

Commodities / Gold & Silver Oct 10, 2008 - 11:36 AM GMT

By: Julian_DW_Phillips

Commodities Best Financial Markets Analysis ArticleEvents on the banking, credit and foreign exchange fronts are behaving in a startling and frightening way. Not only are equity markets crashing but currencies are worrisome especially now with what appears to be a strong $, but falling against the Yen. We saw a dropping € against the $, with the news from the Eurozone confirming it is infected with the same financial virus as the States. With both currencies weakening, their relationship to each other is losing relevance as they fall against gold. This is now confirmed as gold broke through the $900 barrier this week. Yes, as the currencies are falling against gold, it's not simply a credit crisis out there. Let's call a spade a spade; it's a confidence crisis!


Confidence in the banking system has been mortally wounded. This is contracting the global economies [maybe Asia can limit the decay in its own system?]. Central Banks are in danger of losing their own credibility as the crisis persists and as they slash interest rates. After all, it's not a matter of rates, but confidence in the entire system and its instruments. Investors are seeing their own wealth fall victim to the markets on a daily basis and are searching for something that can avoid that decay. If profits can be made from the decline in the market as well, it's a bonus! Therefore, gold is moving back into the spotlight.

Bankers don't trust each other!

The decay of confidence is moving with the speed of a contagious disease. The Fed is doing all it can to restore confidence not amongst the public, but within the banking community. Trained to examine creditworthiness, they won't even give credit to each other. Bernanke is saying in effect that the U.S. Treasury, no the U.S. itself, stands behind credit amongst you bankers to the extent that we will take the debt you have, re-package it with a government guarantee and put it back into the market. Foreign governments need that reassurance, as well as U.S., European and every other banker in the world too. The principle behind this is that bankers are supposed to realize that if governments go down, they are going down too, so why refuse government debt? But the high levels of LIBOR [London Interbank Offered Rate - the rate bankers lend to each other] continue at exorbitant levels. This bodes more ill for the financial world itself, regardless of Paulson's package. After all, if the package and lower interest rates do not work, it means that confidence is lost! The next move will leave disarray in currency markets.

The contagion is in Europe now and governments are falling over themselves to guarantee deposits as customers pull out deposits. Major surplus countries are staring in horror [major depositors in the global banking world], captured by the fact that they have so many deposits with the U.S. government [and others] that they can't afford to pull out. They are stuck with the $ and see little alternative to it as the € seems to be headed in the same direction now. It is unlikely though that they will just sit still and absorb losses. So what will they do? Could they begin to unload some currencies and retain some value?

These two global trading blocs have most other nations dependent on them for their own economic viability, towing them along through the ills affecting them. There is no way out of the situation for almost any economy unless they are relatively self-sufficient economies [such as China]. The only solution is the restoration of confidence.

This piece is not saying that the banking system will run to gold as money, because it would not be practical to replace gold where paper is right now . First, it would have to be taken into government custody. Then, as in 1935, it would need to be revalued so that it could be spread far and wide, with bankers, cap in hand promising not to print money to excess and while telling their customers, "live now, pay later". We're not there just yet, but are we headed that way?

No, until governments reform the financial system in a manner that can restore trust in banking, credit and savings, gold will remain where it is now, in individual's hands worldwide and in the vaults of governments wise enough to retain their holdings in the event of that inevitable 'rainy day'. That day is here!

Is gold immune to the confidence crisis?

As confidence wanes, will gold be pulled down with other assets? We believe that once the de-leveraging hemorrhaging has abated, investment funds moving into gold will take the reins. Gold will do its job of retaining value when other assets won't . After all, the net effect of inflation and deflation is the same; you have less value to buy goods with! Gold will hold on to the confidence it receives now with a very large number of investors coming across from other markets to it, taking it much higher.

With money being issued in seeming trillions, one quality of gold stands head and shoulders above the rest; gold is a limited edition item. It can be traded from Mongolia to Central Africa, Dubai to Denver and anywhere else in the world. It doesn't rely on government support, or handouts, or promises of payment. And that means everything at the moment.

The gold market is about to enter the final stage of its evolution. This stage springs from failing confidence in paper money, currently as bad as any pre-war situation and heads back into the investment world as an important component of responsible portfolios. If governments can accede to the disciplines that gold imposes on them, they will also start to buy gold. But this is the hardest leap for them because they have been fighting gold off from being relevant to the money world [and promoting paper money] for nearly 40 years [since Nixon closed the gold window in 1971]. Once they endorse gold by buying it, there will be a flood of funds looking for it.

Will governments turn back to gold?

It is possible, perhaps probable, that, as in 1933 - 1935, gold captures the attention of governments again. As we said above, if it does, they will want to hold it away from the public and for the same reasons. What has become starkly evident is that gold cannot be manipulated long-term, as it was over the last 30 years by governments. Too much confidence has been lost in the last year in the monetary system for a credible attack on gold to persist with the $ being held up as the alternative, so gold perhaps will be used to shore up that confidence, in some way. But this will not happen until the monetary system is almost in disarray. If they do return to gold, you will have no notice whatsoever, most likely on a Monday morning [since that seems to be the way of notifying you these days] and you will see it as a done deal. Will you be you sitting without your gold?

What price will gold rise to and when should it be bought?

Available to Subscribers only – subscribe through www.GoldForecaster.com

By Julian D. W. Phillips
Gold-Authentic Money

Copyright 2008 Authentic Money. All Rights Reserved.
Julian Phillips - was receiving his qualifications to join the London Stock Exchange. He was already deeply immersed in the currency turmoil engulfing world in 1970 and the Institutional Gold Markets, and writing for magazines such as "Accountancy" and the "International Currency Review" He still writes for the ICR.

What is Gold-Authentic Money all about ? Our business is GOLD! Whether it be trends, charts, reports or other factors that have bearing on the price of gold, our aim is to enable you to understand and profit from the Gold Market.

Disclaimer - This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold-Authentic Money / Julian D. W. Phillips, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold-Authentic Money / Julian D. W. Phillips make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold-Authentic Money / Julian D. W. Phillips only and are subject to change without notice.

Julian DW Phillips Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules