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Gold's New Record Highs

The commentary below is for the benefit of our readers from opinion makers and writers not associated with Euro Pacific. We do not guarantee the accuracy and completeness of third-party authored content. Opinions expressed are those of the writer, and may or may not reflect those held by Euro Pacific, or its CEO, Peter Schiff.
Jim Turk
October 21, 2008

Gold closed last week and made new record highs this week against the Australian dollar, Canadian dollar, Indian rupee, South African rand and British pound. Here are gold's long-term charts against these currencies.

Gold did not close this week with a new record high against the euro or the US dollar. But gold remains in a clear uptrend against both of these currencies, as we can see from the following long-term charts (the price of gold in Deutschemarks is used until it was subsumed into the euro).

Gold was not the only thing making new records this past week. US government debt is soaring as it borrows money to pay for the bank bailouts concocted by it in recent weeks.

From September 30, 2007 to the end of this past fiscal year on September 30, 2008, total federal debt grew by $1.0 trillion, from 9,007,653,372,262.48 to $10,024,724,896,912.49, which is an 11.3% annual rate of growth. The federal debt as of October 16, 2008 is now $10,331,139,000,845.92. So in just 16 days since the end of the last fiscal year, the federal debt has grown by an astounding $331.1 billion, which is a 75.5% annual rate of growth. It has taken just 16 days to borrow one-third of what the government borrowed in all of last year.

The following chart is from Ed Steer, a regular contributor to "Casey's Daily Resource Plus" published by Casey Research (http://www.caseyresearch.com/). This chart of weekly T-bill issuance visually portrays this accelerated growth of federal debt.



The above chart shows T-bills only, and therefore excludes the growth of other federal debt instruments. Also, this $10.3 trillion debt total I refer to above excludes the federal government's unfunded liabilities. When these are added, the total obligations of the federal government are $110 trillion, or at least that's what they were estimated to be last May by Dallas Federal Reserve president Richard Fisher. The federal government's unfunded liabilities, and therefore its total obligations, have obviously grown further since then, and are now some unknown number greater than $110 trillion.

In short, the US federal government is staggering under the world's heaviest debt load. To meet its obligations and promises, the Federal Reserve will continue to create "unlimited" amounts of dollars.

That word - "unlimited" - is getting used frequently in the media these days. Bloomberg reported on October 13th that "policy makers offered banks unlimited dollar funding." The Wall Street Journal reported on October 14th that "The U.S. Federal Reserve agreed to provide unlimited dollars to three major European central banks." Then on October 15th Japan jumped into this dollar creation frenzy too, and according to Bloomberg: "The Bank of Japan said it will offer lenders as many dollars as they want." Bloomberg went on to say that dollars will be provided at fixed interest rates for an "unlimited amount", quoting from the actual BoJ announcement.

At this time of "unlimited" dollar creation we need to take to heart the words of Warren Buffett's father, Howard Buffett, while serving as a Congressman from Omaha. In a now famous speech in 1947, Rep. Howard Buffett said: "When the people's right to restrain public spending by demanding gold coin was taken away from them, the automatic flow of strength from the grass-roots to enforce economy in Washington was disconnected...The gold standard acted as a silent watchdog to prevent unlimited public spending."

The gold standard is long gone so it no longer acts as a "silent watchdog to prevent unlimited public spending". Because it is no longer prevented, unlimited public spending is what we are now getting. In addition to the countless ways the federal government spends - or wastes, as many would no doubt add - the dollars flowing through its accounts, it is now spending unlimited dollars to bail out banks worldwide, a reality which I think makes clear the dollar's bleak future.

To achieve this unlimited public spending, central banks are creating an unlimited amount of dollars, which will in time mean that there is no limit as to how high the gold price will reach. The new record high in the gold price against the currencies mentioned above will soon be joined by new record highs in gold against the US dollar, euro and every other national currency around the globe.

While the gold standard - what Rep. Buffett called a "silent watchdog" - is gone, gold itself is a watchdog too, and not a silent one. Gold cannot "prevent unlimited public spending" like the gold standard, but a rising gold price - like a barking dog - can warn of danger.

For several years the Gold Anti-Trust Action Committee (www.gata.org) has diligently explained why and how central bankers under the direction of the US government - the henchmen of the nefarious 'gold cartel' - have been capping the gold price. Their solitary aim is to silence the gold "watchdog", in the hope of making people unaware of the danger of holding dollars. But the watchdog is now barking in many countries as the gold price reaches new records against those currencies.

Importantly, the debasement of the dollar is becoming so profound as central banks create "unlimited" amounts, the gold cartel will no longer be able to stop the watchdog from barking by capping the gold price. I expect new record highs in gold against the dollar and the euro by the end of this year.

Jim Turk is the Founder and Chairman of Gold Money. For more information, you can access their website at