Today Gold closed at $701.50 an ounce in New York. This is the highest level since 1980. Gold is predicted to continue its rise.

Analysts feel that the recent nuclear unrest in Iran, as well as rising oil prices have caused an increase in the value of gold and other precious metals such as platinum.

It has been posed that Gold is obsolete, when it comes to use as a currency and bartering vehicle. The recent rise may be a reflection of inflation instead of a come back. Gold's former glory, investment potential and overall popularity is lost in the past.

Others feel Gold will regain its former weight as in earlier centuries. When all else fails, gold will remain a viable exchange material for the necessities of life. It remains the foundation for our economy. It is expensive to mine and process, therefore assuring a fixed supply in turn holding a solid investment potential.

Is Gold obsolete as a currency and bartering vehicle? Has Oil taken its place? What other commodity has taken gold's former glory?

With weakening of paper currency and continuing Middle East unrest, will gold regain its value in our economy? Does gold have the potential to strengthen and become more desirable than paper currency? Does it remain a valuable driving force in world economics?

I'm sorry, but this is completely the wrong headline.

The value of gold against the US dollar is in meteoric rise, and most US news outlets are ranting about this spectacular rise, in unprecidented levels, over $100 in the past year.

However, in the rest of the world, people are reporting on the slow and steady rise of the price of Gold, impressive to be sure, but hardly meteoric. Why is that?


Because the price of gold against the Euro has been rising slowly but steadily. The REAL story here is NOT the rise in the price of gold, but the continued and unceasing depreciation of the US dollar on the world market.

In Canada the news outlets are ranting about the spectacular rise of the Canadian dollar in value, now at 0.91 cents US, when two years ago it was at 0.67 cents US. Yet Canadians have started noticing that while the value of the dollar is improving, they are not getting the same fantastic exchange rates against other currencies. Why? The Canadian dollar is growing based on exceptional economic performance, but the vast majority of this 'spike' is because the value of the Canadian dollar is set against the US DOLLAR, which is in near-freefall.

http://goldprice.org/news/2005/06/euro-gold-price.html

http://www.cbc.ca/news/background/dollar_cdn/

This is not a huge surprise. The economist has been printing articles for months talking about the fact that Bush Jr's spendthrift ways and record levels of deficit are seriously hurting the US economy. Both the outgoing federal reserve Chair Greenspan AND the incoming federal reserve Chair, in their last and first speeches respectively, spoke about the precarious situation of the US economy due to this rapid and constant spending of money we do not have, the inevitable depreciation of the dollar, and the possible disasterous effect if the dollar ceases to be the internationally traded commodities currency.

The irony is, of course, that historically the primary cause for the piurchase of gold has been as security against dropping or fluctuating currencies.



I have maintained for ages that the REAL legacy of Bush Jr, if his ways continue, will not be Iraq but the serious damage he has done to the nigh-indestructable US economy. Mind you, one should not be surprised. Spending money he did not have and running up huge debts are exactly why every business venture Bush jr was in charge of BEFORE he entered politics failed.

So the price of Gold rising is a story, but the real story is WHY the relative price of gold is surging so far so fast in the US...

Ron Paul gave a speech on this subject to the House of Representatives: What the Price of Gold Is Telling Us

Although he adds in a few extraneous items, the part on gold is fundamentally sound:


The gold standard has many benefits. Representative Paul has concerns that some foreign country will set up a true gold standard currency, but I doubt any country could amass the gold that would be required to back a new world standard currency.

Is Gold obsolete as a currency and bartering vehicle? Has Oil taken its place? What other commodity has taken gold's former glory?

I doubt anyone this side of Thunderdome considers oil a useful commodity money. The supply is not fixed and thus the value would fluctuate too greatly. However, a fixed currency standard is a good thing and gold has done the trick for thousands of years.

With weakening of paper currency and continuing Middle East unrest, will gold regain its value in our economy? Does gold have the potential to strengthen and become more desirable than paper currency? Does it remain a valuable driving force in world economics?

It is very possible that a new gold standard will emerge. The current monetary model (for all economies, not just the US) is based on confidence. If a significant number of players lose confidence in fiat currency (issued by every country in the world) then the value will fall, perhaps dramatically.

As far as the economy and deficits, see this article: IS THERE A FEDERAL DEFICIT? by Walter E. Williams.

Gold may have done the trick for thousands of years, but with present instituted regulations would it be necessary to revive it? Couldn't we use diamonds, platinum or any other gem or metal as the standard since each of these are limited in quantity at present? Technically Oil is limited. It remains a natural resource. All natural resources are limited.

Looking at the price of gas. Per USD/gallon:
Hong Kong $5.62
Venezuela $0.14
Do these prices reflect the economies of these countries? Its very possible. Do gas and oil prices run the US economy? Yes.



Must US economics be compared to world economics? The Canadian dollar exceeded the US dollar today. 1 US dollar is now worth 1.10 Canadian dollars. I believe for the first time in 35 years. But is this a reflection of the strengthening Canadian economy or the failing US economy? Or neither? Canada has not suffered with a poor economy for the past 35 years. They have a smaller population and a government different from the US. That de-valued dollar means very little except to analysts. Countries with de-valued dollars attract US and tourists from other countries looking for a vacation country that gives them bang for the buck. All the better for those countries. It can be argued Canada may suffer with an exchange rate higher than the US dollar.

The interest in gold may just be a new surge by survivalists. It is no secret most Americans are very disappointed with President Bush. Our confidence for the current government is poor. But is our confidence in the economy just as poor? As unfortunate as it is, most wars or military conflicts with US involvement have boosted the US economy. The second world war pulled us out of the Great Depression.

During the 1970's and 1980's those individuals holding gold sold off. To profit? Evidently they had plenty of confidence in paper money to liquidate their solid holdings. Gold prices have remained low for the past 25 years. Just as any other stock, gold has highs and lows. Could gold be the commodity to invest in now? It may not gain its former glory but gold has a place in the economy that has yet to be rivaled.

Each President manipulates the economy and foreign diplomacy. One President started Viet Nam another stopped it. When Bush leaves office, the politics will change again. Some countries retain the same leaders for decades. This results in very little change in politics over a long period of time, good or bad. Luckily Americans can choose a new leader very 4 years. (No one should admit to voting for Bush for a second term.)

With weakening of paper currency and continuing Middle East unrest, will gold regain its value in our economy? Does gold have the potential to strengthen and become more desirable than paper currency? Does it remain a valuable driving force in world economics? Since Gold is a material thing like Real Estate, Oil, and Wall Street Shares, it is subject to speculation. The Record spike in Gold Prices could be more a reflection of Investors' anxiety rather than a reflection of the "true" value of other things like Dollars and Euros. The fact that the Federal Government has increased the Debt Ceiling multiple times during the Bush administration as well as close down the M-3 records doesn't help the situation at all.

Is Gold obsolete as a currency and bartering vehicle? Has Oil taken its place? What other commodity has taken gold's former glory?

After 5000 years of recorded history, gold will always be a vehicle or store of wealth. If I remember correctly the Egytians had a bushels of wheat that they used as trade. For oil to take over gold's position as a store of wealth it must be easily transported and carried upon your person. So the question is, "do you want to start hoarding drums of oil in your back yard?

With weakening of paper currency and continuing Middle East unrest, will gold regain its value in our economy? Does gold have the potential to strengthen and become more desirable than paper currency? Does it remain a valuable driving force in world economics?

I think gold will see a resurgence in the world of paper fiat. The question is, "how much". This depends on how willing the governments of commodity driven currencies let their own note fall. What you have described is a last man standing scenario of paper currencies. What most likely will happen is that we will see a digital currency which houses whatever rate of aggregate you can afford. The Central Fund of Canada does something very close to that.

I've heard it proposed in the silver markets in Mexico that there is pressure to adopt a bretton-woods like backing of silver on the peso. It is very popular except within the governement (surprise surprise). What may happen in certain parts of the world is that a unitless currency may trade along with cash and be valued at whatever the ounce rate is at the moment.

Returning to the digital currency, it will have to be based on either a singular commodity or it may be a basket of the most valuable commodites of our time. It all depends where we are talking about.