Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21
Bitcoin Halvings Price Forecast and Stock to Flow Analysis - 18th Jul 21
Dell S3220DGF Unboxing and Stand Assembly - 32 Inch 165hz Curved Gaming Monitor Amazon Discount - 18th Jul 21
What Does The Fed Mean By “Transitory Inflation” And Why Is It Important To Understand? - 18th Jul 21
Will the US stock market’s worsening breadth matter? - 18th Jul 21
Bitcoin Halving's Price Projection Forecasts Trend Trajectory - 18th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

What's Really Driving the Gold Price?

Commodities / Gold and Silver 2011 Mar 25, 2011 - 06:52 PM GMT

By: Julian_DW_Phillips

Commodities

Best Financial Markets Analysis ArticleGold attracts tremendous emotion from people and it has always done so. It manages to bring out the extremes in investors, reporters, governments. It's either hated or loved. Copper isn't, nickel isn't and coal isn't. You can call it a commodity, a barbarous relic, money or a wealth preserver. Whatever title you use, someone will react. As a metal, it has certain qualities that other metals don't have, but that's not what produces these reactions. It's not even its price rise over the last decade that causes the noise. In fact, it's not about gold at all. Governments have in turn loved it, hated it and now are beginning to love it again. It's what it's purported to represent that causes all the fuss. Just look at the reasons put forward by some as to why it's rising in price and you get the picture.


Rejection of Capitalism, or paper currencies, or the unreliability of man


Gold defeats the Technical picture

Gold has defied many sound technical analysts forecasts of late and it continues to do so rising to record levels in the dollar. It still has to rise to €1070 to beat the euro highs and if it does with the dollar falling heavily a rise to that price with the dollar at around $1.42 against the euro, you will see a dollar price of $1,519. It doesn't seem far away does it? Why should it be rising so strongly?

Communist Capitalism

We heard one commentator ask if this was the rejection of capitalism. Nothing so restricted, we say. It goes far deeper than that. A look at China shows a communist for of capitalism [if there is such a thing] and they are doing very well with it, yet they are buying gold, buying silver, buying gold, buying silver... We are looking at the entire structure on which global economies are built on to see why. Could it be a rejection of the entire monetary systems of the world? That's part of it. Is it something deeper than that, going down to the behavior of man from the individual to all powerful government? We think so. A fact that most are realizing now is, that man is incapable of leaving the underlying principles that should dominate money without interference. What goes wrong? National interests kick in. Selfish influences discolor money's value. Power that comes from controlling money becomes irresistible and distortions are inevitable, as we are seeing.

Trade Deficits exact Tributes

For instance, a perpetual trade deficit becomes a way of exacting 'tribute' from trade partners who accept newly printed money in payment. All other nations have to earn that money through trade surpluses or face a cheapening of their own money. By pricing international trade in the dollar, the business gained in U.S. banks from foreign global trade is vast. All the benefits of being the world's superpower accrue to the nation dominating the world's global reserve currency. That is until international trust is lost in that nation and another superpower rises to share and eventually take on that crown of power. In the past that position has been the subject of wars, but in today's world the battleground is economic and financial.

Means of Exchange as Governments melt

Man will always need and use a means of exchange even if it descends to barter, but history has shown that the only money that has proved enduring is one free from individual national influence in this world. Gold and silver have carried that mantle and always will. The experiment with manmade money could only last as long as man's determination to provide a money that moved from simply a means of exchange to a measure of value. Man's inherent nature ensures that. We are now at the point where manmade money is losing its value and most men can see this and don't like it. They feel betrayed at the most basic of levels and by their own governments.

Remarkably, in the first 100 days of 2011, we have seen the effectiveness of government melting. We are not just referring to those in the Middle East, but to the collapse or emasculation of governments in the developed world. The U.S. and the U.K. have governments that are now only capable of functioning well when issues agreed by both sides come to the fore. Citizens are appalled when they see their leaders unable to agree on critical matters such as reining in excessive spending and debt growth.

As to the sight of money creation through quantitative easing for the benefit of boosting economic growth one is made tense in the knowledge that this is a process that undermines confidence in and the value of money, in savings, investments and trade. If such devaluations were fully realized then the flight to gold and silver and out of manmade money would rise to a stampede.

The Function of Money

In the past money was an item whose principal role was to measure value. Its secondary role was to function as a means of exchange. By using a desirable commodity to act as money it was made to be attractive to all men wherever they were on this planet. By using an item of limited availability, the ability of man to expand it beyond its accepted value was curtailed. Buy using an internationally recognized and accepted item of high value men, wherever they were, would use it. The moment one nation could dominate money and its international acceptability, the only way if could be used effectively was if that nation dominated all nations. Rome was a case in point. The U.K. morphing into the U.S. rule ensured that first the pound sterling and then the dollar ruled global money.

In moving from gold to manmade money, dependence on the behavior of government became total. The only link to the ongoing credibility was to the oil price which created an ongoing international demand for the dollar. Break that and the entire credibility of the dollar rests on trust in the U.S. monetary system, so far, hardly an inspiring performance.

The last forty years has been an incredible experiment with manmade money made possible only by lulling mankind into acceptance through economic growth. Take that growth away and its path to rejection will be a short one. Since 2007 we have started down that road.

Gold Forecaster regularly covers all fundamental and Technical aspects of the gold price in the weekly newsletter. To subscribe, please visit www.GoldForecaster.com

By Julian D. W. Phillips
Gold-Authentic Money

Copyright 2011 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