Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19
Gold Price Gann Angle Update - 10th July 19
Crude Oil Prices and the 2019 Hurricane Season - 10th July 19
Can Gold Recover from Friday’s Strong Payrolls Hit? - 10th July 19
Netflix’s Worst Nightmare Has Come True - 10th July 19
LIMITLESS - Improving Cognitive Function and Fighting Brain Ageing Right Now! - 10th July 19
US Dollar Strength Will Drive Markets Higher - 10th July 19
Government-Pumped Student Loan Bubble Sets Up Next Financial Crisis - 10th July 19
Stock Market SPX 3000 Dream is Pushed Away: Pullback of 5-10% is Coming - 10th July 19
July 2019 GBPUSD Market Update and Outlook - 10th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Obama Hope, Change and Gold

Commodities / Gold and Silver 2012 Nov 07, 2012 - 12:12 PM GMT

By: Adrian_Ash

Commodities

Best Financial Markets Analysis ArticleTen years after the American century ended, should an optimist choose to buy gold...?

GOLD doesn't mind a bit of hope or change. It doesn't care about anything much, what with being just an inert metal and all.


But those people who buy gold tend to fear for the future, and they fear the change it might bring. At the very least they are anxious. Gold offers insurance, whether to Western savers trying to second-guess interest rates or the stock market, or to Asian households suddenly able to make discretionary savings each month from their small, but growing income.

So what kind of future might see the gold price jump 1.7% p – as it did in 1 hour on Tuesday – only to hold that rally as Barack Obama claimed a second term in the White House, before easing off as the rest of the financial markets sank two, three and more per cent on Wednesday?

The peaceful war-making president now has another 4 years pulling the levers and twisting the dials which control the direction of the USA. Or at least, that's the idea. But this stuff is a long way from flying killer drones by remote. And while Obama quickly bagged an outright victory last night in the number of electoral colleges – America's version of first past the post – he still needs to win a clear majority in the "popular vote" too. Because otherwise (or so analysts and pundits reckon), the Republican-controlled House will feel empowered to block his budgets and bills. It might feel obliged anyway.

Twiddle all the knobs you like. They don't work anymore.

January 2013 still looms, therefore, inviting that nasty thug Fiscal Cliff along to ruin the world's New Year party. Half-a-trillion dollars of unfunded spending is set to vanish, unless US politicians can agree to extend a series of tax cuts and benefits. And last time Washington's boxers sank into a clinch and refused to break, back in summer 2011, world stock markets plunged, and gold surged to record highs above $1900 per ounce. Because the S&P ratings agency downgraded the federal government's $13.5 trillion debt from AAA, and the US lost its "risk free" status as a debtor.

Today the US debt has grown to more than $16 trillion. World stock markets have recovered (no thanks to the unending Eurozone crisis), and gold has retreated. But might "that hope-changey thing" – as ex-vice presidential candidate Sarah Palin mocked Obama's core promise in 2010, aping the T-shirts of grassroots Tea Party activists – lose all power to its instrument panels again?

Tuesday's sudden and sharp rally in gold did not predict last night's party in Chicago. It was driven by leveraged traders getting whacked when the price crept above $1700. Selling gold short – in anticipation of further falls – has proved a foolhardy move plenty of times in the last 5 years of crisis. And Obama's second victory has so far only confirmed gold's jump against a backdrop of everything else sinking. Because true hope and real change are still pending. And outside the United States, investors the world over will need to start to believing in the levers and dials of US politics once more to undo the 12-year bull market in that careless, unrusting lump.

The point runs deeper than the partisan sniping just endured by TV viewers and newspapers the world over. Because whoever had won last night, "the American way [is] to make fools of pessimists," claims TIME columnist Joe Klein. Whereas gold is the ultimate pessimists' investment, a hedge (at the very least) against politicians losing whatever control they thought they had and only making things worse with their meddling.

Big picture? Against gold, and on the side of "the American way", is the very 20th century belief that we live in a world "where man has achieved a self-conscious mastery of nature...[and so money should] be a creation of government," as British Museum academics put it in their History of Money.

Choosing that path, and dispensing with gold or silver limits on the amount of stuff we can all promise each other through money, would make currency "subject and responsive to rational manipulation and control." Or so the politicians and bureaucrats of the 20th century, the American century, believed. But the US authorities also built the world's greatest-ever hoard of gold too. Because even optimists need insurance.

"By making clear that we are establishing permanent metallic reserves in the possession and ownership of the federal government," said F.D.Roosevelt to Congress in 1934, "we can organize a currency system which is both sound and adequate."

The subterfuge was plain – freeing the Dollar from gold began with hoarding a mountain of gold to back it. But only with that hoard, that redoubt and refuge at Fort Knox in place could America grasp the bright future ahead.

Where's that future a decade after the optimists' century, the American century ended? Prices to buy gold have risen 6-fold. President Obama just got a second shot at hope and change.

By Adrian Ash
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules