Energy Efficiency

Over 5 years, gold has increased in US$ by 182% an annualised increase of 23% p.a; the US$ has fallen 65% in value in that time, so it begs the question as to the value of any currency against the ‘real’ value of gold.

On one hand, the major players enjoy the status of a strong currency; however, given that the USA is printing money hand over fist and thereby watering the value of the US$ and fast approaching a $3 trillion debt, is this but a deliberate scheme of actually reducing the value of debts being repaid?

In 2004 the US$ bought 0.8040 Euros; 108.15 Yen; 0.5456 Pounds; 8.2768 Yuan; 0.78 Aussie$

In 2009 the US$ now buys 0.75 Euros (-8%); 99 Yen (-8.5%); 0.66 Pounds (+21% – its strange that the UK government is buying junk USA bonds); 7 Yuan (-15.4% ) and 0.92 Aussie (+18%).

Gold sold for US$455 on December 3rd 2004 and hit US$1200 on December 3rd 2009 a rise just under 264%. You can do the maths for any given currency; however, it is clear to see that other currencies ‘values’ falling.

It’s disturbing to see the media ‘report the success’ of the Aussie $ against the US$ while the US$ continues to lose ground on the international exchange rate.

There is a consensus that for oil production the minimum return should be $80 a barrel and with the growing demand for gold by the worlds country’s focus for gold, that the minimum production cost is about $1,000 as a minimum return for gold.

Given that few countries have more than a 20% weighting in gold to support their currency and the concern of a devaluing / inflation driven pressure on the US$ and subsequent devaluing of countries that have heavily invested in the US$ to try and maintain parity reduce the exchange rate loss / maintain the debt amount, gold will be the only recognized ‘real’ currency; and if that is the case, then gold could well double in the next year or so to US$2,500, particularly given that there is a lot of debt hidden by the banks and that gold sales / purchases – in paper form or promissory notes – have far exceeded actual gold held.

As to whether the US$ remains the measuring stick is the tricky one, as more countries avoid the US$ in payments of any description. A concern I have is that countries like China and even India are making payments to us (Australia) in US$, thereby making us prop up an already collapsing monetary regime.

But at the end of the day, you can’t eat gold and as is the case in Cuba now, farming is the most respected occupation.