Gold and silver fell yesterday ($923.30 down $29.70; Silver $13.34 down 52 cents) on profit taking and renewed risk appetite which saw equities rally internationally (prior to a late sell off in the US) and the dollar rally after its recent sharp falls.
Macroeconomic, systemic and monetary risk has seen the dollar, the euro and more particularly sterling fall versus gold in recent months. Gold would have likely risen by much more were it not for likely central bank and bullion bank gold sales which have artificially capped the price.
International quantitative easing, zero percent interest rates and competitive currency devaluations will see other fiat currencies come under pressure in the coming months. So called “safe haven” currencies such as the yen and the Swiss franc have fallen in recent weeks and are also likely to come under serious pressure in the coming months. The Swiss have in recent weeks been devaluing the Swiss franc by intervening in currency markets and selling millions of Swiss francs and buying euro.
The global financial and economic meltdown is leading to central banks internationally attempting to devalue their currencies and this has profound implications for investors and savers as it will lead to significant inflation in the coming months. An early manifestation of this and early warning signal was seen in the UK yesterday where the consumer price index rose to 3.2 per cent.
International quantitative easing, zero percent interest rates and competitive currency devaluations will likely see all fiat currencies fall against the finite currency that is gold and we have likely only seen the early stages of this in recent months.