edited and revised from various sources by Alex Wong
In 1933, when the US Dollar was still pegged to the Gold Standard, Franklin Roosevelt took an extraodinary step to overcome the Great Depression by devaluing the dollar via an executive order, whereby the government confiscated gold and raising its price by 69.3%. Due to the devalued dollar, asset and consumer prices started increasing, which kick-started a new round of inflation. This is called a reflation policy (re-inflation).
Consider George Soros’ recent proposal for a new monetary system involving the Special Drawing Rights, or SDRs, at the IMF: Currencies should be devalued … then repegged to each other and to SDRs … and then SDRs would be circulated as an international currency. (This sounds strikingly similar to Mahathir's proposal of Dinar Emas. Ironically, Mahathir blames Soros for all things evil about the 1998 Asian Financial Crisis).
Fears of the unknown long-term effects from the global financial crisis have sparked a new gold rush. With retail and wholesale clients around the world stocking up on the precious metal, many physical gold makers have been forced to suspend orders. (Remark: Please don't confuse this physical gold with the gold sold at the jewelry shop. Those are cosmetic golds. What is meant here is the gold in the form of Bullions and Coins, with 99.9% purity).
As the World Gold Council reported that the dollar demand for gold reached a quarterly record of $US32 billion ($50.73 billion) in the third quarter, industry insiders said the race to secure physical gold had reached an intensity that had never been witnessed before.
Europe are leading the demand, with Russia, Ukraine, Middle East and US all buying --All around the world there has been a heavy run on physical gold and there is a shortage of supply.
The only thing that is depressing the price of gold is the Futures market where mainly paper gold is traded. Notice that gold has an artificially low price on the paper contracts, which contradicts with staggering huge demand for physical gold. This condition defies the economic nature of real supply and real demand.
The paper gold market is flawed, and many people now want no part of it. What physical gold becomes available is being grabbed immediately. The gold futures contracts are traded at the COMEX and NYMEX, whose prices are routinely suppressed by a high volume of uneconomic short contracts by hedge funds, major banks and financial institutions.
However, with newly energized Russia & China building their gold treasures, with Arabs turning from distrusted Western paper and more toward gold & silver, look for the new players to offer support to the gold price. Gold is hitting back with a vengence.
