Saturday, 13 April 2013

Gold being trashed to save the US dollar ?

The 'unexpected' crash in the cost of an ounce of gold has seen speculation rise that it's a final attempt to save the once mighty US dollar. ( click on graph to enlarge ).

It's years since the economy followed sound financial principles so rumours are now all that we can rely on to try and find out what's happening. In a free market economy an ounce of physical gold should be at least $6,000 dollars at the moment with the trillions in paper money being printed to 'save' the Western economy.

One rumour is that it's an alleged attempt by the privately owned US Federal Reserve to shore up their dollar as countries switch from US dollars to safer currencies. As the Fed prints more money in order to 'save' the US economy ( trillions have had no effect and the US debt levels are now rising above $16trillion.....unsustainable) the dollar loses more value. This should have the effect of increasing the value of gold as it's a limited asset. By allegedly 'encouraging' it's players to dump gold this will offset the rise in gold prices.

The mainstream media rumour is that the fall in the price of an ounce of gold is due to Cyprus being ordered by the unelected EU troika to sell off it's 14 tonnes of gold ( £400m ) in order to help pay it's debts to the troika. A debt that Cyprus picked up when buying Greek EU bonds. I wouldn't have thought that 14 tonnes would be here nor there in the bigger scheme of things.

The former Labour Party UK Chancellor Gordon Brown is famous for coining the phrase 'Brown's Bottom' after notifying the gold markets that he was about sell UK gold and then selling it for around $240 an ounce. Experts explained that by notifying the market in advance rather than selling the gold as and when there was a shortage had the effect of undermining it's sale value. Gold reached $1780 an ounce a few years later. Robbing the UK economy of hundreds of millions of pounds.

Gold has maintained it's intrinsic value for thousands of years. In Roman times an ounce of gold enabled you to buy a toga, a pair of fine leather sandals and a sword. The same as today.

I suspect that savvy gold bugs will ride out this storm. The attempt to undermine gold prices has been tried (and failed) for thousands of years. If you ever visit a country with an unstable government ( and even more unstable currency ) then watch the excited haggling in the gold souks and markets.

People in the West are now joining them.

I feel a song coming on...

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