Whilst Gold prices expressed in US dollar seems to be the main focus of our market, Gold prices in terms of the Euro Currency is going parabolic. Expressing a markets' performance in terms of a Gold price shows that the US sharemarket is similarly performing badly, it is nowhere near as bad as the EuroCurrency markets.



The United States, UK, Australia etc, have a clear monetary advantage over the EuroZone. When an economy gets into trouble, Governments get the option of printing money and/or devaluing their currency in isolation to other countries. Obviously the EuroZone hasn't got this option, since it is a basket of countries who have locked their currencies into one. The pressure needs to be released in the reduced purchasing power of their assets.

Locking currency values firmly against another value just doesn't seem to work. This is even whether it is a Gold Standard, or a single currency. There is much talk about moving back to a Gold Standard as a true store of value. The effect has always been the same. Whilst not really being a proponent of current Keynesian economics (Government spending to fill the gap from a contraction in the public sector, printing money etc.), a Gold Standard would eventually produce the same strains as was experienced in the 1930's. The presumption is that an economy can not expand faster than the supply of Gold it controls. So to expand money supply, you either need more Gold, or the value of the Gold increases in value. Locking your currency to the value of your Gold, whilst every other country does the same, is the same as Germany valuing it's economy in Euros and Greece valuing its economy in the same Euros. One is strong and one is weak, and eventually the relationship needs to break up.

The flipside , of course, currently looks just as bad, as out of control Government spending continually kicks the can down the road. Any Standard relies on fiscal restraint. The Euro standard was that deficits needed to be constrained to 3% of GDP. As many countries politically decided not to follow the rules, we now find ourselves in this situation. As Britain moved away from economic dominance in the early 20th Century, so to will the US dollar eventually lose its position as the World's reserve currency.