There are two, best-known financial publications: in the United States, The Wall Street Journal and in London, England and Europe the Financial Times. While the former contains a great deal of statistical information, it is a propagandist for anti-government attitudes and is a strident voice for the business community. On the other hand, Europe’s Financial Times is a far more balanced, and hence, authoritative publication.
Several years ago an editorial in the latter-mentioned paper praised the British government for its decision to sell half of the Treasury’s gold reserves, then at $265 an ounce, and place the proceeds in interest-bearing government bonds. In general, the Financial Times has held an anti-gold stance.
It should be noted that those sales of gold had been preceded many years previously when the British Treasury sold half of its then existing gold reserves at $35 an ounce. Furthermore, Canada, almost alone of the world’s leading nations, sold its entire stockpile of gold at much below current levels, and literally has no gold reserves. With gold now commanding a price of around $1,000 an ounce, it is obvious that those moves were shameful mistakes.
A few months ago it was astonishing to read an editorial in the Financial Times supporting an about-turn in its opinion, an important message for central bankers. “Gold is the new global currency … There was a time when gold was money. In today’s uncertain world, the yellow metal is back in fashion.”
This article explained that, “Part of gold’s allure is its traditional status as a safe haven. It is seen as a store of value when everything else seems risky. A better way to think of gold as central bankers used to before America dropped the gold standard not as a commodity, but as another currency.”
One certainly has to question the wisdom of that newspaper when it had applauded the sales of gold reserves, as all of the above-cited facts were in place in previous decades. The same reasoning that now is accepted should have been acknowledged at the earlier date.
According to the Financial Times, gold is benefitting from diversification away from equities, with commodities emerging as an important asset class. Above all, however, the relationship between the U.S. dollar and the new response of the world’s central banks to the credit crisis and economic problems, all combine to make gold so interesting at the present time. Most of the major nations have been increasing money supply at an extraordinary pace, in excess of 10 per cent annually, and the U.S. is expanding its money supply by $35-billion per week. With gold as a limited, fixed currency, and supplies no longer growing very much annually, the value-price of gold seems sure to rise substantially.
According to financial expert John Ing, “The metal will move to $1,200 an ounce in the near term, based on a combination of positive gold fundamentals such as increased demand, reduced supplies, and strong investment claims.”
Those factors, plus gold’s increasing acceptance as “the new global currency,” almost ensure higher gold prices.