Fed To Prompt Currency Crash and Return To Gold Standard

Today’s AM fix was USD 1,608.50, EUR 1,228.80 and GBP 1,062.28 per ounce.

Yesterday’s AM fix was USD 1,597.25, EUR 1,219.65 and GBP 1,052.07 per ounce.

Gold climbed $19.30 or 1.3% yesterday in New York and closed at $1,613.90/oz. Silver surged to as high as $29.456 and ended with a gain of 1.2%.

Gold’s 1.3% gain yesterday was its biggest one-day gain in three months, as Federal Reserve Chairman Ben Bernanke's defense of U.S. debt monetisation confirmed bullion's inflation hedging appeal.

‘Helicopter Bernanke’ confirmed the Fed’s ultra dovish monetary policies are to continue which supported gold as a hedge against central banks' cash printing.

Gold is trading flat today near a one and a half week high hit yesterday as Federal Reserve Chairman Ben Bernanke defended the U.S. ultra loose monetary policy.

The selloff in gold ETFs in February underscores the weakness in gold sentiment among retail investors that has been prominent recently.

Our trading desk has never been so busy - on the sell side - as weak hands and lack of conviction buyers have engaged in panic selling.

However, the sell off’s genesis was again hedge fund and bank paper players on the COMEX many of whom still have large concentrated short positions.

February is set to be the weakest month in terms of gold ETF outflows thus far, and the decline is set to exceed the 2.3 million ounces liquidated back in January 2011.

Total known gold holdings held by exchange traded funds worldwide include the SPDR, ETF Securities, ZKB, iShares, Swiss & Global, Central Fund, Credit Suisse, Source, New Gold, Sprott Gold, Deutsche Bank, Central Goldtrust, Claymore (now iShares), and Goldist.

It is important to note that despite the significant decline in gold holdings in January 2011, gold bottomed at $1,313/oz on January 27, 2011 and then embarked on its nearly 50% increase or $600 increase to record nominal highs above $1,900/oz.

World powers and Iran ended two days of talks over the Islamic Republic’s disputed nuclear program with a pledge to hold further discussions at both technical and political levels, an Iranian official said.

The officials adjourned without an announcement on a proposal by the U.S. and its partners to ease some banking, petrochemical and gold sanctions if Iran curbs its atomic activities.

Jim Grant, astute monetary economist and respected author of the Interest Rate Observer said in a Bloomberg interview overnight that the dollar would crash and a new Gold Standard would be the end result of the U.S. Federal Reserve’s irresponsibilities.

Although the interviewer said that Grant’s remarks were inflammatory Grant said that it is important to examine our monetary affairs over the sweep of time.

“Over 100 years ago the U.S. Fed was founded and in 1944 at Bretton Woods they decided there would be no more Gold Standard but rather a U.S. dollar that was backed by gold. If you fast forward to the present we now have a full blown PhD standard where the former heads of Economic Departments are running federal institutions. Central Banks across the world are waging an all out struggle against the price mechanism which is going against Adam Smith’s invisible hand.”

A guest host said that no one in academia is calling for a Gold Standard and suggested it would result in a deflationary period for the U.S.

Grant disagreed and said that the Gold Standard is the only answer as it was monetary system good practice for the 100 years ending in 1914, whereas everything else since has been a “try out”.

Grant says that he expects more quantitative easing from the U. S. Fed, and likens their single mindedness to a doctor prescribing to a patient that is clearly overmedicated.

He notes, credit in the world is an infinite sum of numerous simultaneous equations. He notes that if humans knew how to allocate credit than the USSR would have been a success. Socialists unions over manipulating credit don’t work.

Therefore, just as central banks are continually try to print their way out of our current global debt crisis their manipulation is not working.