Gold at New Euro Record

2010-FEB-17

Gold closed yesterday at a new record high against the Euro. I will state this noteworthy achievement in another way to put it into its proper context. Because gold is still the world's numéraire by which all things can be usefully measured, the purchasing power of the Euro yesterday hit a record low when compared to the purchasing power of gold. It had to happen sooner or later, just as I suggested back on 1 October 2009 shortly after the US dollar's purchasing power fell to a new low compared to that of gold.

Here is what I said in an alert announcing the new record high US dollar price of gold. "Though gold has not made a new monthly record high against other currencies, I suggest being patient. It will happen soon enough, given that central banks around the world continue to debase national currencies. Every currency is falling against gold, some are just falling faster, and the US dollar in this regard is 'leading' the pack - I should say, falling the fastest."

Of the world's major currencies, now the Euro is falling the fastest, so now I need to reverse what I said back in October. If you are waiting for a new record high in gold in terms of the US dollar, be patient. It will happen soon enough because the Federal Reserve and the US government continue to debase the dollar.

Here's my point. We live in a world of floating currencies that bob up-and-down against each other as a consequence of what central banks in each country might be doing at any given time. But all national currencies are sinking against gold.