In my blog of September 11th, 2007 (Gold Knows), I had opined: "It wasn't more than five minutes into Ben Bernake's speech in Germany today, as he again tried to explain away the Chernobyl-like global financial imbalances as a mere 'savings glut,' that gold began to levitate. Within minutes, gold had traded nearly $10/ounce higher. Savings glut? That sounds like a good thing. Gold knows what Gentle Ben doesn't."
The price of real money (gold bullion), had just breached the $700 price for the first time since the early 1980s. Since my post on that day, the U.S. Federal Reserve-- in conjunction with the U.S. Treasury and with the backing by Congress and the White House, have bailed-out Bear Stearns (BSC), that nations fifth largest investment bank (and its counterparties); and more recently, Fannie Mae (FNM) and Freddie Mac (FRE). Combined, the latter two entities have roughly $5-trillion of "agency" debt outstanding and either own or insure another approximately $6-trillion worth of mortgage debt. This debt is effectively now backed by the U.S. taxpayer. Furthermore, the Office of Management and Budget (OMB) says that the annual budget deficit will set a new record of roughly $450-billion for the fiscal year. While reality is actually much worse. As of today (Aug 19th, 2008), the total U.S. Federal debt has increased by over $620-billion, year-over-year, when many "off balance sheet" items are included. I beleive the real additional U.S. Federal deficit for all of 2009 will come perilously close to a $1-trillion!!! Add another roughly $45-trillion of existing private and local government debt along with untold trillions of unfunded entitlements promised to an aging and winded U.S. citizenry making the recent rally in the U.S. dollar somewhat unsustainable.
Much of the rest of the world has now been infected by the credit bug causing competing currencies to become marginally less attractive as foreign currency holders recalibrate their holdings. Again, there is no evidence that the dollar will retake its place as a reserve currency any time soon. Its just that the news here in London and throughout the rest of Europe and Asia is trying to be digested on the margin. Accordingly, gold's retreat back under $800/ounce for the first time since last November, appears to be a function of "forced" liquidations associated with an over-leveraged world even as the fundamental reasons for owning a form of money, gold, that is unable to be conjured-up from thin air, becomes marginally more attractive as testament to the recent surge in physical demand in recent days. The anomaly of "forced liquidations" is giving a world, soaked with fiat paper, its latest and perhaps last chance for some time to own gold under $800/ounce.
The price of real money (gold bullion), had just breached the $700 price for the first time since the early 1980s. Since my post on that day, the U.S. Federal Reserve-- in conjunction with the U.S. Treasury and with the backing by Congress and the White House, have bailed-out Bear Stearns (BSC), that nations fifth largest investment bank (and its counterparties); and more recently, Fannie Mae (FNM) and Freddie Mac (FRE). Combined, the latter two entities have roughly $5-trillion of "agency" debt outstanding and either own or insure another approximately $6-trillion worth of mortgage debt. This debt is effectively now backed by the U.S. taxpayer. Furthermore, the Office of Management and Budget (OMB) says that the annual budget deficit will set a new record of roughly $450-billion for the fiscal year. While reality is actually much worse. As of today (Aug 19th, 2008), the total U.S. Federal debt has increased by over $620-billion, year-over-year, when many "off balance sheet" items are included. I beleive the real additional U.S. Federal deficit for all of 2009 will come perilously close to a $1-trillion!!! Add another roughly $45-trillion of existing private and local government debt along with untold trillions of unfunded entitlements promised to an aging and winded U.S. citizenry making the recent rally in the U.S. dollar somewhat unsustainable.
Much of the rest of the world has now been infected by the credit bug causing competing currencies to become marginally less attractive as foreign currency holders recalibrate their holdings. Again, there is no evidence that the dollar will retake its place as a reserve currency any time soon. Its just that the news here in London and throughout the rest of Europe and Asia is trying to be digested on the margin. Accordingly, gold's retreat back under $800/ounce for the first time since last November, appears to be a function of "forced" liquidations associated with an over-leveraged world even as the fundamental reasons for owning a form of money, gold, that is unable to be conjured-up from thin air, becomes marginally more attractive as testament to the recent surge in physical demand in recent days. The anomaly of "forced liquidations" is giving a world, soaked with fiat paper, its latest and perhaps last chance for some time to own gold under $800/ounce.
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