Wednesday, November 11, 2009

Gold: The Avenger

Justice does exist in the world, whether people choose to practice it or not. The men of ability are being avenged. The avenger is reality. Its weapon is slow, silent, invisible, and men perceive it only by its consequences—by the gutted ruins and the moans of agony it leaves in its wake. The name of the weapon is: inflation.

Ayn Rand, Egalitarianism and Inflation
Bloomberg reports:

Gold surged to a record $1,119.10 an ounce in New York on speculation a decline in the dollar will spark demand for the precious metal as an alternative asset.

The metal climbed for the eighth straight session, the longest rally since January 2006. Before rebounding today, the dollar extended a slump to a 15-month low against a basket of currencies. India’s central bank bought gold last month to diversify reserves.

“The interest that central banks have shown for gold has really lit a fire under the market,” said Matt Zeman, a metals trader at LaSalle Futures Group Inc. in Chicago. “People are questioning the value of not only the U.S. currency, but all paper currencies. Investors are more comfortable holding gold.”
You know, sometimes I just love reality.

4 comments:

Burgess Laughlin said...

Right now, gold is the tallest poppy in the field. I wonder how long it will be before the egalitarians start campaigning for controls on gold trading and ownership.

Doug Reich said...

Burgess,

Anyone who thinks you are joking should recall that in 1933, FDR banned the private ownership of gold by executive order.

See:
http://www.wellsfargonevadagold.com/confiscation-order.pdf

"By virtue of the authority vested in me by Section 5 (b) of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933 ..., in which Congress declared that a serious emergency exists, I as President, do declare that the national emergency still exists; that the continued private hoarding of gold and silver by subjects of the United States poses a grave threat to the peace, equal justice, and well-being of the United States; and that appropriate measures must be taken immediately to protect the interests of our people." Franklin Roosevelt - March 9, 1933

timm said...

Though I don't always agree with him, Donald Luskin has an amusing piece on gold that's worth reading:

http://www.smartmoney.com/investing/economy/300000-in-the-palm-of-my-hand/?page=all#

Doug Reich said...

Timm,

Awesome article! Thanks for linking.

Note that in 1913, all of the nation's gold was forced to be turned over (for safekeeping) to the Federal Reserve. The original Fed Reserve Notes were redeemable in gold. As I mentioned in last comment, in 1933, FDR outlawed private holding of gold and made paper money irredeemable. The article said that most of the gold in that bunker was being held in custory for foreign central banks. So, where did American's gold go?

I know we lost a lot during the Bretton Woods era when the U.S. was still obligated to redeem foreign central banks in gold. That is what forced to Nixon to "close the gold window" in 1971 as the U.S. policy of inflation led to outflows of gold.

Ok, so the gold is gone, yet, the Fed claims to be holding something like 260 million oz. on their balance sheet.

Where is this 260 million oz. if not in that bunker?

Has anyone researched this? This whole process constitutes the biggest robbery in world history.