Niall Ferguson: Dollar Is Doomed, U.S. Empire Is Finished

Gold
Gold is trading at $1.056/oz this morning and traded in a very tight range overnight. In EUR and GBP terms, gold is trading at €707/oz and £638/oz respectively.

With oil and the dollar trading near their respective recent highs and recent lows, gold continues to be well supported. It appears to be consolidating after its recent break out above previous resistance around $1,030/oz. Gold was up yesterday despite weakness seen in equity markets in the US and this equity weakness has continued in Asia and Europe. Should we have another sell off in stock markets (which looks likely) gold may also fall and be correlated in the short term. However, as seen in recent years gold will likely fall by less and recover quicker meaning that the correlation will be only in the short term. In the medium and long term, gold is inversely correlated to equities (and currencies) and this is why it remains an important diversification for prudent investors.

Concerns about the health of the US economy and the dollar, and concerns about the decline of American power in a globalised multi polar world with an increasingly powerful China (see Niall Ferguson interview at The Economist’s Buttonwood Gathering on our home page), shows why gold remains an important and essential long term investment.

Silver
Silver is currently trading at $17.46/oz, €11.68/oz and £10.54.

Platinum Group Metals
Platinum is trading at $1,375/oz and palladium is currently trading at $342/oz. Rhodium is trading at $1,800/oz and has broken out and looks robust and could see further gains.

Disclosure: no positions

Comments

[doubleguns:]

It ain't over till the fat lady sings. If we take back Washington we can save the empire. I hope. goooh.com.... last chance.

Oct 21 09:17 AM

[SSALarry:]

Yawn, just another guy talking his book.

The more everyone screams gold is going higher, $1,500, $2,000 even $5,000, the more I think we are at the top.

Oct 21 09:54 AM

[ManAboutDallas:]

"everyone" ISN'T screaming, it's STILL just a very, VERY few who recognise the problem and clearly understand where gold is going, and WHY.

When your shoeshine boy starts talking about gold, THEN you've got a "top".


On Oct 21 09:54 AM SSALarry wrote:

> Yawn, just another guy talking his book.
>
> The more everyone screams gold is going higher, $1,500, $2,000 even
> $5,000, the more I think we are at the top.

Oct 21 10:30 AM

[ThirtyNineW...:]

I see several advertisements a day telling me to rush out and buy gold. I own some gold, but the level of hype is definitely making me hold off on buying more.

Oct 21 10:55 AM

[Donald Ingram:]

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crises should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
-Ludwig von Mises

The authorities may choose door #1 or door #2, but not both. It looks like door #2 the catastrophe. In this case gold will continue to rise as the dollar falls. Continue on this path - then yes - the dollar and the great American experiment will fail. What a shame.

Oct 21 10:56 AM

[raidcan:]

Niall - I don't think ghold is trading at $1.056 - get the math correct
or find another occupation

Oct 21 12:45 PM

[Turbonium:]

Everyone predicts... the present. If it's doom and gloom today, the pundits say, "This is it. It's gloom and doom forever".

If it's blue skies today... you guessed it, it's blue skies tomorrow.

I have a hard time thinking the "empire is over". Things change. The U.S. has vast resources in its people and institutions. They are built and functioning. This latest downturn is a house cleaning, nothing more.

Oct 21 06:30 PM

[ManAboutDallas:]

Never opened a history book in your entire life, have 'ya, Sparky?


On Oct 21 06:30 PM Turbonium wrote:

> Everyone predicts... the present. If it's doom and gloom today, the
> pundits say, "This is it. It's gloom and doom forever".
>
> If it's blue skies today... you guessed it, it's blue skies tomorrow.
>
>
> I have a hard time thinking the "empire is over". Things change.
> The U.S. has vast resources in its people and institutions. They
> are built and functioning. This latest downturn is a house cleaning,
> nothing more.

Oct 21 06:54 PM

[joe stugots:]

it is the extreme right wing say all the neg..forget about it the sun is shinning

Oct 21 07:10 PM

[phdinsuntan...:]

Phillips curve revival: is the unexpected, not the expected inflation the way to create jobs. Gold is telling us that no private jobs will be created with the world devaluation: no deception is policy failure. Inflation will come to both CPI and PPI suddenly with the devaluation via import costs, as all imported inputs go bananas starting with crude oil, thats why natgas is free in the US. stagflation 2010 the obvious outcome . Total macro mismanagement now: study Bolivia economy in the 1970s, it was better treated. Oz dollar only anglo currency doing the right thing. maybe the Korean won in the north east, Euro got a piece of the east, nice and elegant move from royal family girl. Better than gold until now. China free riding. Europe? Is not a country: statu quo by consensus. Perseve in FX: Chile pesos, south african rand and willing to set the trigger anytime. Paul V, too senior to do the right thing? W got Bj funds for the 1001 night oil games and now crude flowing east home, debt well thanks, dying. Kenya folks, oh boys, a bank soon, to play your white dust trade Afgan dog race sport, and get folks under control at home dude. What a well planned mess! and totally predicted. Orange growers and rigs necks smiling, amateurs they said. Something has to be given, BO? I dont know, you tell me.

Oct 21 07:38 PM

[phdinsuntan...:]

BA may be

Oct 21 07:40 PM

[NUNAY the KING:]

Only two things need to be done at this time to have this economy continue on the right track. Tomorrow, the Fed needs to announce a Fed rate change to 0.5%. Not enough to kill the economy, and just enough to tell everybody that it is not going to let commodities run one way and the dollar another. After that, it needs to come out and say that all of the rest of the unspent money allocated for TARP etc. is not going to be spent, instead used to pay down the increasing debt.
I guess Tom Hanks said it best in Apollo 13. "There are a thousand things that need to be done in a specific order...your talking about #657 and we are on #2", or something like that. Well this is my #1 & 2 of the thousand.
Would love to see 10% tax cut on all business and EVERYONE in government (State & Fed) take a 5% pay cut, (maybe announce for 1 year next year to give people time to prep), but that is not going to happen with all of the pansies we have in Government, and that goes for both parties.

Oct 21 08:33 PM

[sdavid0419:]

Once again I'm reading the words "doom and gloom" and once again I'm stating I'm not a doom and gloom'er. I'm just defending my position against the obvious inflation that I believe is already under way. The mezmerizing machine in DC thinks because they altered the way inflation is calculated so they could rip off old folks on fixed incomes means that it doesn't exist. I even heard one of their operatives on the FOX business block suggest the old folks should not get a flat $250 but should give back because of "deflation". This talking head moron forgot to tell you that even though social security didn't increase the medical insurance benefits did. In fact so did college tuition. So have groceries. Yes gas is $1.00/gal cheaper than a year ago but has been steadily rising over the past 7 months. Someone slipped up and released the August wholesale prices and they were up an annualized rate of 20.4% so I've been waiting for the September wholesale prices which for some reason haven't been reported yet. I wonder why. We are getting so many lies out of washington and absolutely absurd behavior from our elected officials I for one believe in the golden rule. He who owns the gold makes the rules and if these overpaid wall street greedy pigs try to take over MY country I want to hold the gold.

Oct 22 06:33 AM

[User 343579:]

I just think that Americans are too damn spoiled and always think they need to have everything. If everyone would get rid of cell phones and cable T.V., and all the other crap people don't need, families could save some money and not be in such tight spots as we are in as a whole. Families would be much healthier and be closer. In todays world, drugs are causing such a huge problem in almost every family one way or another. This is not to say that some can't afford all these extra things that are just giving soo much money to China, Japan, Tiawan, and who knows how many other countries. Then comes the need for so many cars and all the unnecessary driving we do that just gives all the money to the oil countries which can afford them all the weapons they turn around and use on us Americans.

The U.S. will fall as no leader stays on top forever. Look at history and every ruler has fallen. Greed is the work of Satan. When you factor in the drugs that are such a huge problem in our country that again gives soo much money to yet even more countries that are against us Americans, how can anyone expect America to stay the leader of the free world. I could go on for days but people listen, think for a minute, and then are right back to living way above their means or pop another pill, drink another beer, smoke another joint, smoke more crack, or whatever. How did people survive when there were no cell phone, cable tv, ipods, restraunts on almost every corners, $150 gym shoes which again, made in another country, and so many other things. I hear all the time that cell phones are so great and are needed in case of an emergency so they have to have them.

This is all so much B.S. that if we want to get America back, we the people need to take action now and not when it is too late if it is not already. Our national debt would be a lot less if we did not keep buying these things we do not need which are only sending our money to other countries which are giving them power. It sucks when you pay $300 or $400 for a cell phone only to have to pay $50 or $100 or more every month to just use the damn thing. Then in a year or so, a knew phone is made and people have to have the newest and best so they again go and waste their hard eaned money to buy another one.

Gold and Silver come down to being the base of all currency and with the way any country especially the U.S. prints paper money, there is not enough gold or silver to back it. The only way is to up the price of gold and silver. If ever a day does come back to where gold will be used as money, silver will have to play a larger roll than gold be it would be in possible to make $1 or $5 gold peice as it only takes such a small piece to equal those amounts of money, it could only be done with silver. Oh Lord, how could I forget video games in this? We Americans should worry about our own people and country before we can ever think of helping anyone else. We saved the world twice and then we will turn around and lose control of our country by being so dumb thinking we need all these things that in reality are just making us worse off than ever before. If I see another person driving down the street in their car talking on their cell phone while they are eating a triple cheese burger or whatever, I think I will scream.

Oct 22 12:47 PM

[mloren:]

Typical promotion hype. Shame on this Harvard History prof. Why is it so prudent to buy gold? How about oil or other commodities that may have more upside than gold? I remember the same hype about gold 30 years ago. It fell like a rock. True, the US has serious deficit problems. May our government take it serious and work on deficit reduction. By the way Japan is way worse than the US and Japan is not falling in the Ocean.

Oct 22 01:01 PM

[Frugal Joe:]

the dollars serious collapse is not "if" but when.

I suspect they (Ben, Timmy, and Ob*ma) will let it die slowly so as to avoid a panic. Just check out the dollar index chart...it's been falling steadily.

One serious result will be very high prices on all goods especially imported goods...cars, and just about everything in Walmart.

Oct 22 07:35 PM

[437339:]

user343579

I have never used a cellphone -an " electronic leash " per my sister .They also cause cancer .Ted kennedy , an example , always on the cell phone . Don't have cable either .A great reseacher David Carrigan , at Tulane University , once told my dear friend , " the severe obesity + severe heart disease problems began in the US with the advent of the ' fast food " industry . Hey , my grandparents lived till their late 90's , NEVER ate this crap . Neither do I . I agree with your statement .

Oct 24 04:03 AM

[obuzzardo:]

Railing against American ignorance is stupid.
Why don't you figure out WHY we are all so ignorant and address that?
I bet you don't know do you.

Oct 25 12:43 AM