Right? Well, fact is, the action has actually been greatly muted if we allow for the shocking volatility in gold’s No.1 competitor for “safe haven” funds, the almighty US Dollar.

You see, like so much else, the market action just described only sets Gold in terms of the greenback (against which it has still tripled since July 1999).

Versus pretty much every other world currency, in contrast, gold in fact enjoyed a banner month this October – delivering gut-wrenching volatility plus new record highs – starting right here in London, home to the world’s $60 billion-a-day trade in wholesale Gold Bullion Bars (a.k.a. the “spot market”).

Mid-month, gold also leapt to new record highs for Australian, Canadian, Danish, Estonian, Hong Kong, Hungarian, Icelandic, New Zealand, Norwegian, South African, South Korean, Swedish, Turkish and Russian investors.

Oh, and the 350 million souls in the Eurozone. Plus the 1.1 billion people of India.

Prices of gold have of course slipped back – and sharply – against all major currencies since reaching €685 an ounce for European investors and savers on Oct. 10th. (That marked a near-tripling from the low of Jan. 2000.) In the spot market, gold’s now trading almost 13% lower as the month-end draws near.

And notable by its absence from the rogues’ gallery of fast-sinking currency zones listed above is the Chinese Yuan, as well. More spectacularly, the world-destroying Japanese Yen has squashed the prices of gold since turning sharply higher against everything – real estate, global equities, emerging-market debt, even the Tokyo Nikkei – in mid-July.

But if we really are witnessing a global currency crisis led by the destructive reversal of the Yen Carry Trade (and it certainly looks like it from inside a wallet of Sterling or Ne Zealand Dollars, let alone Forints or Krona), then just what kind of fight is gold putting up as the apparent “ultimate” safe-guard against currency shocks?

Regular visitors to this site may recall a chart we offered in August this year, a chart showing the Prices of gold in terms of the world’s top 10 currencies by economic output. It’s not perfect; the GDP weightings for 2008 will need revising, perhaps, when this year’s full-year data becomes available early next year.

But as a measure of truly globalized gold price, it both softens the US Dollar’s long slide of 2002-2008 on the currency markets, as well as tempering this month’s intemperate highs in gold bullion vs. the Aussie, Loonie, HK Dollar, Forint, Kiwi, Krone, Rand, Won, Lira, Ruble, Euro, Pound Sterling, Rupee and various Kronas.

You can’t help but spot the volatility – otherwise known as “My gold just crapped out!”

The way “quant jocks” figure the violence in asset prices, in fact, the daily volatility in this global gold price has more than doubled since August to a three-decade record.

You might also note, however, that gold really has risen sharply against all major world currencies so far this decade, not just the US Dollar. And no one should imagine it will be an easy ride – whether up or down – from here.

There’s too much at stake when you try to measure that $60 billion daily turnover in physical gold against the $3.2 trillion daily turnover in official government currencies.

Adrian Ash
for The Daily Reckoning Australia

Source: Prices of Gold in the Top 10 World Currencies

Open interest numbers for Tuesday’s take-down in both gold and silver were a bit of a surprise. Gold o.i. only fell 362 contracts and silver o.i. was down 1,429 contracts. That’s not a lot (especially for gold) considering the price damage that was done. The COT on Friday will hopefully tell us more.

I see that SLV…the silver ETF…added another 1.9 million ounces yesterday, and the silver ETF…GLD…sold off another 200,000 ounces.

Looking at the gold and silver charts, I note that the gold price is about $35 above its 200-day m.a. and silver is a little over $1 above its 200-day m.a. Can/will the ‘8 or less’ traders try to get the price down to that level so they can force more tech funds to liquidate their longs? Don’t know, but it wouldn’t take a lot of effort…which you can see by looking at the carnage we had on Tuesday. After the big price correction in May/June of 2006, the 200-day moving averages were reached in the correction of both metals. Will history repeat itself? Here’s the 3-year gold chart for your perusal. The 3-year silver chart looks identical. The link is here.

And…one more thing. June is a big delivery month for gold…and options expiry is less than two weeks away, so if the bullion banks ever wanted to do the dirty, the timing couldn’t be better. We’ll see.

Two more stories today. The first one is the report from the CFTC that the silver market is not manipulated by anyone. Their report in 2004 said the same thing. So I guess the ‘8 or less’ traders holding 79% of all the short positions in both Comex gold and silver, is not a short-side corner on the market. If not…then what percentage is? The headline reads “New Study Finds Silver Futures Market is Functioning Properly”. The link is here.

The second story is from Bloomberg. Paul Volcker has been in the news in the last couple of days. Yesterday he was speaking in front of the Joint Economic Committee in Washington and he had a few things to say that are worth noting. The headline reads “Volcker Says Fed Interventions Risk Political Battles” and the link is here.

If there is a real loss of confidence in the dollar, then I think we are in trouble. That is something that has to watched…..That has to be very much in the forefront of our thinking, without that, we are back to inflation of the 1970s…or worse. – Former Federal Chairman Paul Volcker – 14 May 2008

The news on Bloomberg and Reuters yesterday was terrible. As far as the eye can see, it’s sheer economic, financial and monetary madness out there. It’s impossible to make any sense out of anything, and I’m not going to waste any more mental energy trying to figure it out. It’s probably a good idea if you did the same…and save yourself a lot of grief.

See you tomorrow.

Casey Research correspondent-at-large Ed Steer is a keen observer of the financial scene and a board member of GATA.org.
Source: And then there’s this…Thursday, May 15th, 2008