Editorial: Gold smashes price records

Gold prices are typically strong in September and October as Western goldsmiths and jewellers stock up on inventory needed for the flurry of jewelry giving over the Christmas and New Year’s holidays.

But so far October has delivered more excitement than usual for gold miners and investors, as gold prices have shot up to record nominal highs well above US$1,000 per oz.

After tantalizing us by flitting around the US$1,000-per-oz. mark for all of September, gold started making its big move on Tuesday, Oct. 6, jumping first to a London PM fix of US$1,038.75 per oz. Prices kept climbing for the rest of the week, ending on a high note in London of US$1,051.50.

At presstime, even more price records had been shattered on Oct. 12 and 13, with intraday trading hitting an all-time nominal high of US$1,069.50 per oz. on Oct. 13 and a record US$1,064.50-per-oz. AM fix on Oct. 13.

Gold’s tagalong little brother, silver, popped up to almost US$18 per oz. but still has a long way to go to ever beat its all-time, Hunt-brother-fuelled nominal record high of US$49.95 per oz. in 1980. 

In fact, just about every kind of commodity has had a great October pricewise, including oil, which is daily reaching new yearly highs. 

It’s now widely observed that a growing number of global investors are justifiably fearful that America’s global economic and political leadership is slipping ineluctably into competitors’ hands. 

As a result, they continue to unload U.S. dollars and pile into hard assets as well as the currencies of commodity exporting countries like Canada and Australia. The loonie, for instance, is once again approaching parity with the greenback, trading just shy of US97¢ at presstime.

Adding to the confusion for the average U.S. citizen is the big rise in U.S. stock markets. But this is much more the result of a government-induced liquidity bubble than any underlying strength in the American economy, where the commercial real estate sector looks set to be the next economic pillar to crumble as this difficult year grinds on.

The idea that gold is in a historically long and strong bull market that mirrors the greenback’s agonizing decline is an old one to our readers.

But it is notable that this “gospel of gold” — that the yellow metal is our eternal, primary protection against our government recklessly debasing our currency — is now cropping up again and again in mainstream conservative media in the U.S., from Fox News Channel commentaries on TV to worried callers phoning talk-radio shows to former Republican vice-presidential candidate Sarah Palin blogging about the dollar-gold relationship on her Facebook page.

The decline of the U.S. dollar — best measured by a rising gold price — is steadily becoming a major political issue for the 2010 mid-term elections in the U.S.

This means gold awareness is reaching a deeper and broader penetration in the public mind than anytime since the 1980 spike, and thus the gold bull market is entering a new phase that will be driven significantly by retail gold buying, especially by U.S. dollar holders.

A more practical result of this new phase for gold miners and investors is that the US$1,000-per-oz. benchmark is all of a sudden flipping from being gold’s long-term price ceiling to its new price floor.

We’re truly entering a new era for gold as more and more investors grasp the colossal monetary and moral bankruptcy of the U.S. government and then decide to shed their U.S. dollars for hard assets.