Gold Sets Another Record

2010-JUN-19

Five weeks ago gold closed in London at a new record high against the British pound. That result is not surprising. The pound is generally considered to be the weakest of the world's major currencies, so it is logical that it would fall first against the strength that gold has been displaying in recent weeks.

Surprisingly, the next currency to fall was the Swiss franc. Gold closed three weeks ago at a new record high against what used to be considered the world's premier 'safe-haven' currency. It no longer holds that title because the Swiss National Bank has been intervening to keep the Swiss franc from strengthening against the Euro, which has been sinking because of its well-publicized problems. So the Swiss franc has been falling along with the Euro, which itself has not been immune to gold's strength. Last week gold set a new record against the Euro.

Gold's new record this week is against the US dollar. Gold closed in London at a new all-time high of $1245.40, and did even better later in the day by closing in New York at $1257.20. More records for gold are likely in the weeks ahead because central banks are destroying the purchasing power of national currencies.

The following charts also illustrate why more records are likely. Gold's rising price trend is starting to accelerate. Note the hyperbolic pattern in each of these charts, which is normally a sign - but of course, not a guarantee - of higher prices.

The similarity of the pattern in the above charts is striking. Note how the pound chart doesn't look much different from that of the Euro chart or the dollar or franc. As I often say, in a world of floating currencies that bob up-and-down against each other depending on respective central bank policies, they are all sinking against gold, which leads to one last point.

As the sovereign debt crisis deepens and the debasement of national currencies at the hands of central bankers and politicians becomes increasingly recognized, more and more people are starting to understand the true nature of gold. It is not only money, but a better money than any national currency.