Saturday, December 5, 2009


Many people ask when is the best time to buy gold as the price keeps changing, almost on an hourly basis. Currently the gold price is on an upward trend and

Sometimes there is a "trend" either upward or downward. You see on the news each day the price of gold fluctuating. Usually measured in terms of the US dollar per ounce.

But what is really happening here?

What does this really mean?

Gold Trends
The gold trend goes up and down in relation to the value of the dollar. The value of gold does not actually change very much at all. In fact if you checked back through history you would see that the value of gold over the past 200 years has hardly changed at all compared to the value of other goods. One ounce of gold today will purchase almost the same amount of goods as it did 50 years ago. The only change is actually the value of the currency not the gold. Inflation, recession (to use a popular word), all affect the value of the fiscal currency but generally do not affect gold.

The value of one ounce of gold, for example in the year 1800 was around $19-20US per ounce. These days it is in the 900 plus per ounce range, and rising. The large fluctuation as a direct result of the value of the decreasing.

The Value of Gold
A good example of the decrease in the value of the dollar, despite, or perhaps because of it, is the increase in the quantity of dollars being printed, According to the consumer price index What cost $20 in 1800 would cost 216.86 dollars in 2005. Also, if you were to buy exactly the same products in 2005 and 1800, they would cost you $20 and $1.85 cents respectively.

If the government decided top return to the gold standard and back every dollar by gold, there is so much printed dollars floating around now that it would take a good 50,000 dollars per ounce to ensure each dollar is backed by gold.

This could still happen and the government can still bring back the 1933 legislation to stop US citizens from owning gold if they wished. It would be very difficult to enforce and administer of course but there are other ways to do so. Buy back the gold using more printed money which becomes even of less value in terms of buying goods and services.

Michael Kosares, of USA Gold, notes the severe declining power of the US dollar in "Disturbing Trends".

And then, in stark contrast is the value of gold going up as the dollar goes down.

This explains why people purchase more gold during a recession when the value of the dollar (or whatever other fiscal currency they use) decreases in value. The value of the gold does not. Gold keeps it’s value and has done so for hundreds of years in fact.

When to Buy Gold
So what is the answer to the question. When is the best time to buy gold?

The best time to buy gold is right NOW! In fact it is always the best time to buy gold. If you were to purchase a small amount of gold bullion each month for the next 5 years, you would still beat inflation hands down.

GOODBYE EUROPE ... HELLO "EURUSSIA"... and "hello Gold!"

Alex Wallenwein,APRIL 2003 :

Forget about Bush's "axis of evil." Iran, Iraq, and North Korea are mere molehills in the current foreign policy landscape.

There is a groundswell of changing alliances in the making. It's already obvious manifestations are staring us right in the face - but we continue to talk and think as if the map of Europe was still composed of many differently colored splotches as it always had since WWII.

What formerly were friendly nations have become hostile elements of a newly emerging, competing power bloc. The major players in this regrouping of decades-old alliances are busily forming a new "axis", and after being publicly humiliated in the foreign policy arena for their blatantly pro-Saddam stance in the run-up to the US invasion of Iraq, they are about to turn the tables on the US, but this time on the economic battlefield.

The world has changed.

But it has not changed because of the US invasion of Iraq. Rather, the invasion and subsequent "liberation" of Iraq by coalition forces has only served to highlight the near-completion of a change that was in the making long before 9-11.

The international alliances most of us have grown up with and have learned to take for granted are now simply dead. They no longer exist, save in words only. Germany no longer is an ally of the United States. France probably never was, but now doesn't even feel the need to pretend anymore. Both countries now feel more sympathy and commonality with such benevolent regimes as Russia and China, with pre-war Iraq, Iran, Libya, Saudi-Arabia, and the Palestinian Authority, rather than with their old buddies, the US and Israel.

What changed them?

For one, these two European states are no longer "countries" in the classical sense. They have assumed a new, larger identity. They have divested themselves of key elements of their former national sovereignty, such as the power to determine who and what comes in and goes out of their borders, their own national currencies, and important trade decisions. They are now elements of what they perceive to be a pan-Eurasian axis.

As such, they feel they are destined for greater things in the world of men. No longer are they to chafe under the heavy burden of viewing themselves as having once been "saved" by the US from communist Russian aggression (in the case of Germany), or German aggression (in the case of France). Now, together, they are a force to be reckoned with, they think, a power of their own. As the saying goes: one finger can be broken, but five fingers make a fist.

They now have a super-currency, the euro, which further reduces any sense of national identity (and apparently causes widespread amnesia of their national histories as well).

Judging from the alliances they have forged, they apparently also lost any sense of who their natural allies vs. their natural predators are. As recent history shows, they are willing to embrace brutal, murdering dictators and totalitarian regimes, "trading with the enemy" so to speak, while acting and talking as if the US was their foe.

Well, in a way it is, although the word "foe" may be a bit too harsh. Let's say the word is "adversary" or "competitor."

But, competitor in what?

Power - and it's little brother: money. For their new common currency, the euro, has taken on a characteristic that puts it into direct conflict with the US dollar.

The dollar is a purely debt based currency with an adverse relationship to gold. Gold is the dollar's nemesis. When the gold price goes up, confidence in the dollar decreases and people start selling dollars.. It's usually a sign of impending or prevailing inflation.

The euro, on the other hand, has a "positive" relationship to gold. The European Central Bank, and all the euro member's central banks, value their gold reserves quarterly at actual market prices. That means, as the price of gold goes up, the value of their currency goes up as well, and by signing the "Washington Accord" in 1999 they have announced to the world that the dollar's gold-suppression jig is up.

The dollar is still hamstrung by being tied to an artificial, government-decreed, quasi-official price of gold at the whopping rate of $42.222 per ounce. [See Title 31, United States Code, Section 5117(b).] Obviously, with the market price of gold currently above $330, that "official price" has nothing to do with the realities of the gold market. It is actually a remnant of the gold standard days when every dollar was immediately convertible into gold on demand, at a stated rate.

Being thus tied down, the US government and banking elite can never afford to let the price of gold float freely according to actual market forces (yes, that old, worn-out "demand and supply" thingy. Gets you all the time!)

This little difference in the valuation of gold makes the euro the undisputed, hands-down future winner of the euro vs dollar conflict. Well, not really the future winner anymore. The euro has already delivered its knock-out punch. What you are witnessing is the agonizingly slow fall of the US dollar giant to the floor of the boxing ring. It's just too early for the count.

Without going into the intricate details of the relationship, the euro's guaranteed future success can best be explained this way: free market forces can never be violated with impunity for a very long time. They always reassert themselves - sooner or later.

The euro was constructed to take advantage of free market forces - especially the free market of gold. The dollar is anchored in a useless, repressive scheme that cannot allow market forces to prevail vis-a-vis gold.

Ergo, the dollar is doomed.

And that is precisely the cause for the cold shoulder central Europeans are currently showing the US. They know they got the dollar "bagged," and the dollar's past and current reserve-currency status makes it an extremely worthwhile target for them, indeed.

Once it is replaced as the world's reserve currency, the dollar - and with it the United States - will cease to be a world superpower. Such is the calculation of Europe, and that calculation drives it directly into the arms of Mother Russia.

Of course, mother Russia welcomes Germany and France. Soon mother Russia will swallow (uhhum, "join") greater Europe. When Russia and Europe merge, merge they surely will - but not in the way Europe anticipates. Russia will be the last one to laugh. She could not compete with Reagan's America militarily or economically. Now she simply sits back and watches Bush's America exhaust herself fighting the price of gold - a fight which strengthens the euro at every turn.

The more America struggles, the more the euro's noose tightens around her neck. And the Russian bear sits back, ready to devour the certain winner.

America is like a sheep, still oblivious of the euro-pean threat, grazing happily on the greenback's still-lush pastures. And Europe is like a splendid salmon in the river of economic life, swimming and jumping mightily toward what it believes to be its ultimate destination, blissfully unaware of the bear that waits, one paw raised, a frozen statue of cunning and death.

Alright, enough melodramatics. The bottom line is: when the euro defeats the dollar and America crumbles, Russia will devour Europe, China will devour Asia, and then both will probably fight over the scraps that remain of America.

And all of America's current military might will lay waste when the international currency reserve dollars return home, causing hyper-inflation and economic havoc. There will be no more financial power to pay for expensive military campaigns. All of her recent victories in Afghanistan and Iraq will be forgotten, unless ...

... unless Sir Alan "Greenspin" and George W. Bush wise up and take the lid off the gold price, let the dollar ride its inevitable ascent, and retain a chance to compete with the euro for world reserve currency status on a more even playing field.

It would truly be ironic if the US, the country that always harped on other countries' needs to adopt more "free market" strategies, should do itself in by fighting free market forces, while the "free gold" euro becomes the currency of socialist and totalitarian regimes of the world - and defeats the supposedly free-market, capitalist United States in the process.

Well, nobody could ever say that God doesn't have a sense of humor.

And who is the total, undisputed winner in this contest?


As the dollar crumbles and loses its control of the price of gold, the yellow metal will soar to heights theretofore unimagined. Nothing will stop it. All economic forces will aid it in its ascent to investment orbit, where it will stay for many years to come, cruising the outer ionosphere of the financial continuum because, at that time, gold will be favored by the money powers of the world including - of all creatures of the human mind - the world's most powerful central banks.

For then, a rising gold price will boost their collective reserves, and therefore their currencies' values, not undermine them as has been the case before the euro's advent.

Gold will be free, and the dollar will be dead: so be careful where you put your money !

April 30, 2003

US Dollar Strength, Weakness and the Price of Gold: A Primer

When the US Dollar gets stronger, it takes fewer dollars to buy any commodity that is priced in $USD. When the US Dollar gets weaker it takes more dollars to purchase the same commodity.

The price of all US Dollar denominated commodities, like gold, will change to reflect the fact that it will take fewer or more dollars to buy that commodity. So it’s quite possible, in fact it’s almost always the case that a portion of the change in the price of gold is really just a reflection of a change in the value of the US Dollar. Sometimes that portion is insignificant. But often the opposite is true where the entire change in the gold price is simply a mathematical recalculation of an ever-changing US Dollar value.

When the dollar gets strong, gold appears to go down, and vice versa. That accounts for part of the fluctuations that we see in the value of gold.

The other part is an actual increase in the supply or demand for gold. If the price is higher when being measured not only in US Dollars, but also in Euros, Pounds Sterling, Japanese Yen, and every other major currency, then we know the gold demand is higher and it has actually increased in value.

Consequently, if gold is higher in US Dollars while at the same time cheaper in every other currency, then we can conclude that the US Dollar has weakened, and that gold has actually lost value in all other currencies. But the price, because it is being quoted in $USD will be higher and give the illusion of gold becoming more valuable. In such a case the devaluation of gold, due to increased supply on the market, is camouflaged by a weakened US Dollar.

Our feature on breaks the change of the price of gold into 2 components. One part shows you how much of that change can be attributed to US Dollar strength, or lack of it. The other portion is indicative of how much the price changed as a result of normal trading. Interestingly whatever changes happen to the price of gold as a result of US Dollar strength/weakness also occurs to every other US Dollar denominated commodity by the exact same proportion.