Two years ago, Lehman Brothers went bankrupt. Today the authorities would have you believe that the financial crisis is all but behind us.
Sure, the 'recovery' may be faltering a little, but that's just a temporary thing: give it a couple of months and all will be well.
Believe that? I don't think we do. And one quick look at the gold price should tell you that not very many other people do either...
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What's worrying gold?
Yesterday gold hit an all-time high in dollar terms $1,274.30 an ounce. Given that ten years ago not many people expected the price to ever hit even $500 again, that's quite a thing.
So what's gold worried about? Currencies. There has been a good correlation between worries over sovereign debt in Europe (as expressed by the rising yields on debt issued by the 'peripheral' countries yields rise as prices fall) and the gold price. This subject might have fought its way off the front pages, but is still lurking nastily in the background. The euro is just as much at risk as it was six months ago.
But it isn't just the euro that is bothering gold: it is the general race for the bottom among all currencies. The dollar has been on the slide recently (which of course partly explains the new high in the dollar gold price) but the Bank of Japan has now started intervening to get the yen down too. It has just sold something in the region of 300-500bn (£2.3bn to £3.9bn) worth in its efforts, reports Reuters.
That's worth noting simply because it is their first intervention since 2004. The Bank has clearly finally had enough of the strong yen stifling whatever recovery might be lurking behind the dismal economic data. The Japanese stock market surged as exporters applauded the move.
Watch out for deflation
But gold isn't just looking for today's currency degradations: it is also watching for the deflation that will bring more of them. There isn't much obvious sign of it about I've noted on our blog before that if you calculate US Consumer Price Index (CPI) inflation using European methods it isn't much lower than UK CPI (currently 3.1%).
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But regardless of the immediate evidence, the prevailing opinion is now much biased towards deflation. We are constantly told that all the things keeping our numbers above target are temporary influences, which in a matter of months will be cleansed from the data. Perhaps they are (although with commodity prices rising at speed it isn't exactly a given). But if there is one thing gold knows, it is that nothing brings inflation along faster than the fear of deflation: Why deflation is good for gold prices.
There's more money printing to come
Banks and governments hate stable prices. Without inflation they can't get on with their general work of favouring borrowers over savers and cutting the real wages of the population in the name of competition. So the very idea that the CPI might fall below 2% is enough to prompt massive intervention. There's bound to be more quantitative easing (QE) to come. And that, as the gold price is desperately trying to point out, will almost inevitably undermine currencies and leave us with very high inflation.
All this means that we should hang on to our gold: as all governments work to erode the value of their own currencies via inflation or outright intervention it is still pretty much the only safe place to be. You can find out more about investing in gold here.
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