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Will volatile fiat currencies present superior profit opportunity in bullion?

*Dow Theory Letters, by Richard Russell, December 21, 2009

”The ‘cost-nothing’ dollar has been the favored ‘free’ money currency that traders have used for the carry trade.  Tens of millions of dollars were borrowed by carry-trade speculators.  Finally, when the short side (borrow side) of the dollar became overloaded, something snapped, and traders have panicked recently to cover their dollar shorts.  Thus the dollar rally.

A dollar rally and rising rates for dollars obviously renders dollars more attractive.  As the dollar becomes more attractive, pressure builds on gold (as now).  Ultimately, gold is not just a safe alternative to the dollar, it is an alternative to ALL fiat currencies.

On top of that the dollar’s chief competitor, the euro, has ran into trouble and has sank against the buck.  The euro is having its troubles, with EU members Spain, Greece, Italy, France and Ireland all encountering economic problems.  As the euro sinks, the dollar rises against its chief competitor, the euro.

As suspicions of fiat money rises, more and more attention will focus on real money — gold.  Slowly, like the rising lady of the lake, consciousness regarding gold is reviving.  On the front page of Saturday’s WSJ is an article entitled, ‘Gold is the New Tupperware. And you’re invited to the Party.’  Of course, the comparison to Tupperware is a put-down on gold.  It seems that thousands of parties are being held and instead of something to buy, the parties are set up to as a means of buying gold.  The parties are sponsored by large enterprises.  It’s all so simple, it’s a way of attracting know-nothing people who are bringing in anything they have to sell which contains gold.  These yo-yo’s are stupidly dumping their gold items at the parties.  This is exactly the opposite of what’s happening in Europe where giant Harrod’s department store is offering bullion coins and bars for sale.  Most Americans still think that gold is overpriced (in a ‘bubble’) and that it’s time to sell it.  I guess they’re fated to learn the hard way.

I see that there is a total of 450,000 futures contracts on the COMEX are sold against gold.  Good luck to the gold short-sellers, 2010 is going to be an interesting year.

Remember, the central banks of the world now control the world’s money.  They love the power they now hold.  The banks have just one enemy — gold is their mortal enemy.  Gold is wealth outside the system.  If central banks could create gold, they’d love gold.  But they can’t do it.  So gold is the wild card of the world’s monetary universe.  It can’t be controlled by the ‘masters of the universe,’ much as they’d love to.  All the central banks can do is continue their propaganda and tell us why central banks (the Fed) are so necessary to the system.  At the same time, they can try to convince us that gold is a useless and a ‘barbaric relic’ of earlier ages.

There’s only one fact that the central banks won’t touch.  That fact is that there have been many fiat currencies in history, but no fiat money has ever survived.”


*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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