Has The Next Bull Market For Gold Started?

Gold has been used as the currency of choice throughout history, despite what the central banks of the world say. Ben Bernanke, then the Fed Chairman, famously said that Gold is not money in 2011 during a congressional hearing with Senator Ron Paul.

Since President Nixon removed Gold's peg from the US Dollar in 1971, the world has officially come off the yellow metal's standard. This new fiat system is backed only by faith in the government who issue it. Once the gold standard was dropped, countries began printing more of their own currency. Today, the world has a cumulative total debt of $250 trillion as of the first quarter of 2018.

 

The world's debt has continued to accelerate in the last decade due to central banks manipulating interest rate and making it so cheap. As central banks start to tighten last year, it is no longer cheap to accumulate debt. As a natural consequence of the ever-expanding debt, the world's fiat currency will continue to devalue. A weaker currency makes it easier to pay off debts. For example, if the U.S. dollar's value falls in half, Americans will owe only 50% of the debt's value.

Indeed the yellow metal has continued to ascend against various world's fiat currency. Or more accurately, it is the currency against which Gold is measured that loses their value. Many people only look at Gold in terms of U.S. Dollar and conclude that Gold has been in the bear market in the past 7 years. However, when we look at other markets, we can see the yellow metal has been performing very strongly. For example, Gold has made a new all-time high against emerging market currencies. These include currencies like Turkish Lira, Russian Ruble, Indonesian Rupiah, South African Rand, Brazilian Real, and the Mexican Peso. Investors in these countries do not switch to more stable currencies like the Euro or the U.S. Dollar. Instead, they are moving to hard currency like Gold.

And it's not just against the emerging market currencies. This year, Gold has broken to a new all-time high against Australian Dollar as below's chart shows:

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Disclaimer: Futures, options, and over the counter foreign exchange products may involve substantial risk and may not be suitable for all investors. Leverage can work against you as well as for ...

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