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The Bullion Buzz - October 27, 2009

"Mischief springs from the power which the monied interest derives from a paper currency which they are able to control, and from the multitude of corporations with exclusive privileges…which are employed for their benefit."

Why the Rise in the Gold Price is Different This Time
Julian Phillips
Gold has had an impressive price climb since the summer, leading many to wonder when it will fall back to much lower levels. With gold, there is always a need to quantify, to measure, to relate. Over the last few years, gold was thought to move against oil, but lately this has not been the case. Gold was thought to be anti-inflationary, but lately it has been rising in the absence of inflation. Gold was thought to be tied to growth or lack thereof, but when deflation hit and gold held its price, that idea was dropped. In general, the gold price was thought to be tied to something American, yet 90% of the world’s bullion is traded in London. The need to quantify has to be countered with the realization that there are times when reason and measurability are absent.  The gold market is now reflecting one of those times. When emotions creep in, many professionals retreat until they can find something else to measure that emotion against.   By that time the damage has often been done. Consider the recent Independent report that said oil would soon be priced in something other than US dollars. The point of this article was that it precipitated pent-up emotion against the US dollar. Now the dollar will be seen in that negative light, not as a strong currency dominating other world currencies. There was a point in time when the Titanic changed from being an unsinkable ship to a sinking ship. The breakout in the gold price was just such a point in time. There has been a change in measuring value.  Until recently, everything was measured in US dollars; now other measures of value are needed.  For years now Phillips has said that the day will come when we won’t say that gold is $1,000 per ounce, but rather that $1,000 is worth an ounce of gold. That day is here.

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