Lonestar1

Five New Forces to Drive Gold Higher

There is no argument that $ has never been in such precarious state in its entire history. The break from the gold-peg did not cause a catastrophic collapse of $ was due to the fact that the west, including Japan, has to stay united to defeat a more pressing threat, i.e., the Soviet Union's expansionary policy. Instead, the $ is allowed to slide gradually and became "your problem" for the west. It was a small price to pay.

Today's world is different. $ is anchored to nothing. Or perhaps it is fair to say that $ is now pegged to a mix of Chinese yuan and Japanese yen, not the other way around as popularly manifested. Its strength in 2008 was derived from these two sources, in my mind. This is strange, because credit should be offered by producers, not the buyers.

And Europe is not threatened by anybody. That's why they were so itchy on G20 meeting in November. That is not to say they will have any chance to be successful. Indeed, they will have no chance.

I agree with the point 1 that this zero yields angered China and Japan. However, it is inconcieveable they would unwind their $ holdings, but there is no assurance that other lesser "stakeholders" wouldn't do so. Turbulance to come, for sure.

Gold is not an anti-$ trade. It is when all currencies are in question, which is clearly the case still unfolding given all the printing of paper money around the world, inlcuding China. How this is going to settle is wide open.