COMMENTARY - ProspectingJournal.com – November 8, 2010 – Thanks to the work of gold miners, the TSX rallied to its highest level since September 2008. When it's hot, it's hot, and the nominal price of gold hit another high today, pulling along with it the value of the nation's leading index. Despite a stronger day in recent memory for the $US, gold held steady today topping $1400 for the first time in history. But while gold's value was influencing the markets in a positive way, it was its surprising vote of confidence from World Bank President Robert Zoellick that will stand as the most memorable contribution from the precious metal today.

Zoellick wrote today that the leading economies should consider the adoption of a modified global gold standard to guide the world's currencies. While Central Banks around the world are restraining from commenting, this conversation has been started officially by a large presence in the banking world. Moving from the current fiat currency format back to pre-1970s methods of gauging dollar and debt values to the price of gold is not something that is favoured by all, but the suggestion itself shows the severity of the situation the world's currency concerns have gotten to.

"(The new system) is likely to need to involve the dollar, the euro, the yen, the pound and (a Chinese yuan) that moves towards internationalisation and then an open capital account,” said Zoellick. "The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values.”

Those who would be instrumental in making such a change are not voicing much support for the proposition. If there were to be a debate on the issue, then some facts could be exchanged about the pros and cons of the “old system.” But, in the time since the adoption of a fiat-based system, it's not like we've seen the kind of stability we were assured. Currency issues are most definitely on the agenda at the G20 meeting in Seoul, Korea, but it is doubtful that this gold standard idea will be even uttered.

While much criticism is being levelled at the Federal Reserve's Quantitative Easing plan to drop $600 billion from a figurative helicopter over the economy, what better way to cut the Fed's influence off at the knees? Backed by gold, the $US, the euro, the yen, etc. are all determined by true value and not by the amount of ink in the printing presses.

This all comes within the recent news that Congressman Ron Paul (R) is taking over from Barney Frank (D) as chairman of Congress' Monetary Policy subcommittee. There is no bigger enemy of the Fed, and critic of the QE2 doling than Ron Paul, who has on many occasions blamed the fiat currency structure for many of the United States' financial problems. At this point in history, strange ideas like moving towards a gold standard sound at the very least plausible. Ruffled confidence in currencies is pulling safe-haven seekers to the metal and its producers, making the metal a faux-currency of its own, gold standard or not.

That said, confidence in gold today was amplified by its big players having big days. Barrick Gold [ABG – TSX] rose by 4.7% today, as the market rallied support for the world's top producer. Ventana Gold Corp. [VEN – TSX] had a huge day, rising 15% after announcing its forecast for average annual production of 347,000 ounces of gold equivalent for the first six years of its La Bodega gold project in Colombia. Other precious metal producers benefited today, especially in the silver sector with Silver Wheaton Corp. [SLW – TSX] having another big day w a 7.37% increase coming off of silver's big day to open the week.

It's a midas touch world out there now, as gold triumphed the day as a game-changer. The physical metal itself had a big gain day, stocks in its producers uniformly rose, and the periphery metals gained along with it. The story of what happens to gold from here on out has yet to be determined, but you can be certain that its reign at the top of the headlines will not end any time soon.

by G. Joel Chury

ProspectingJournal.com

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DISCLOSURE: No fee has been paid for the production and distribution of this article and as such should be viewed in the context of a commentary. The author does not own any shares of the companies referred to within the article.