Eerie timing right after our last post on Zimbabwe, this story appeared on the Telegraph yesterday about how gold has been climbing in recent months due to fears that the bailouts will result in the debasement of money and hyperinflation.
In dollar terms, gold is at a seven-month high of $964. This is below last spring’s peak of $1,030 but the circumstances today are radically different. The dollar itself has become a safe haven as the crisis goes from bad to worse – if only because it is the currency of a unified and powerful nation with institutions that have been tested over time. It is not yet clear how well the eurozone’s 16-strong bloc of disparate states will respond to extreme stress. The euro dived two cents to $1.26 against the dollar, threatening to break below a 24-year upward trend line.
Crucially, gold has decoupled from oil and base metals, finding once again its ancient role as a store of wealth in dangerous times.
Is this tick-up in gold price a reflection of reality, or just the fears and anticipation of people and investors? Then again, maybe the fears ARE the reality.