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THE GREAT DECEPTION AS GOLD HIT ALL TIME HIGHS

Richard J. Greene

Amazingly, while gold and other commodity related stocks continued to be sold off to levels that are at deep discounts to their intrinsic value in October, gold continued to break to new all time highs in most major currencies. On October 9th and 10th gold recorded new all time highs in many currencies including the Euro, the Australian Dollar, British Sterling, the Indian Rupee, the Russian Ruble, the South African Rand and many others. The Dow Jones Industrial Average Stock also recorded a multi decade low in terms of gold. Investors are getting a very much skewed view of gold's performance if they are viewing it in terms of the US Dollar or Yen. These are the two main currencies that have been used as cheap funding sources allowing speculators to take on incredible degrees of leverage to invest in higher yielding assets with much better fundamentals. The excessive debt is being unwound causing a very unnatural rise in the dollar as overleveraged investors raise dollars to pay down their excessive debt. This has caused an unlikely gift from heaven for foreigners holding dollars to sell their dollars which are being printed like at no other time in history while at the same time they are rising in value due to the even bigger buying by debtors selling other assets to pay down debt. The same is happening to the yen which is why in these two currencies gold has not yet recorded another new high like it has in the majority of other currencies.