Dec 02
It’s Not Just the Dollar, Gold at Record High in Euros as Well
Posted by Kristjan Velbri | Posted in Gold | Posted on 02-12-2009
The popular misconception is that the price of gold is higher only due to a falling dollar. The truth couldn’t be further from that. Gold reached record highs in euros, Australian dollars, Japanese yen and other major currencies in the first half of 2009. Over the recent months, gold has made new highs in dollar terms as well. At the same time, the dollar has been falling, but with decreasing speed. The price of gold has been rocketing higher in all fiat currencies over the last few weeks and now, gold has reached a new highs in euro terms as well. This simple chart should dismiss the words of the naysayers, the paperbugs who still favor banks and who are hellbent on seeing the price of gold collapse.
The truth of the matter is that gold is going up in all fiat currencies because gold is a safe haven play. In times like these people flock to safety. As the price of gold goes up, speculation increases too, but we are still a long way from a mania phase. Gold has not reached new highs if you figure in CPI, the faulty government statistical figure. To make up for inflation, gold should reach $2358. If you prefer the unofficial CPI published by shadowstats.com, then gold should reach $7150 to reach new highs. Any way you look at it, gold has still not reached a mania phase. The public is still selling the remains of their scrap gold. When gold reaches mania phase as tech stocks did at the turn of the century, people will be piling into gold, not selling it. Magazine covers should provide an early warning signal of a top, but this should be used in conjunction with other, more reliable indicators such as the Dow to gold ratio and short term interest rates.
