The Gold Barometer
Gold is a valuable barometer of financial conditions.
When gold was the basis of the international monetary system, currencies were more or less stable, exchange rates fixed.
On a gold standard, countries didn’t have to bash their trading partners over exchange rates. An ounce of gold was an ounce of gold everywhere. It didn’t matter whose picture was stamped on it.
Of course, governments always try to corrupt their monetary systems to accrue more power, to fight needless wars, or to reward their cronies. One common technique of this corruption was the printing press. Since the paper money issued by those countries was simply a claim check for gold, they often printed more claim checks then they could back-up. Those that tried getting away with the usual government shenanigans involving creating “money” out of nothing, saw gold begin to flow out of their countries. The real price of gold in their currencies would go up, no matter what the government said the official exchange rate was.
Despite its pledge to redeem its dollars for gold at a fixed rate of $35 an ounce in the years after World War II, the US began printing more dollars than it had gold. In 1965, de Gaulle sent the French navy to pick up gold it had stored in the US.
By 1971 countries and central banks everywhere began lining up to exchange their US dollars for gold. It didn’t matter what the official gold price was. The real price had been rising for years.
Gold has always been a sensitive barometer of troubled economic conditions.
Today all the world’s currencies are nothing but empty representations of value. As such, they can be created at will. This is true of all currencies: Euros, Yen, Francs. Pounds, Yuan, and Dollars.
The rising price of gold reflects the corruption of the currencies.
That’s why gold is making multi-year highs in the dollar and all-time highs in many of the world’s currencies: the British pound, the Japanese yen, the Canadian and the Australian dollars, the Indian rupee, and the South African rand.
Now we have entered a great currency war in which nations fight over fictitious currency values and exchange rates.
As President Trump tweeted a few days ago, “As your president, one would think that I would be thrilled with our very strong dollar. I am not!”
That’s why he’s pushing for additional interest rate cuts.
The central objective of currency warriors is to devalue their money, to reduce its purchasing power.
In fact, as President Reagan’s budget director David Stockman said, “The U.S. Federal Reserve is the all-time champion of currency manipulation.”
What You Need to Know
You should know that Washington’s currency war will send gold prices higher… even if you support it.
You should know that Washington’s currency war will send gold prices higher… even if you don’t support it.
That is because reducing the value of a currency means it buys less. Less of everything, including gold and silver. This is true whether you are a Republican or a Democrat, whether you are a liberal or conservative.
Additionally, when people see governments destroying the purchasing power of their currency, they begin to move out of the weakening currency.
The move to the safety of gold starts off slowly at first (that’s the “smart money”; it is the first to move into gold). Eventually, there’s a stampede as more and more people figure out that the currency is not a reliable unit of account or store of value.
Gold has always been a sensitive barometer of troubled economic conditions. Today gold is telling you there is trouble ahead.
Be the smart money! Talk to your RME professional today about the steps you can take to protect yourself and your family,
