On a spot future closing basis, Gold closed on January 30 at $US 927.30. This is exactly $US 77.00 (or 7.67 percent) below the all time high of $US 1004.30 (again spot future closing basis) that Gold reached on March 18, 2008. In terms of Yen, the discrepancy is MUCH bigger. On January 30, Gold closed at Yen 83196. This is Yen 20037 (or 19.41 percent) below the Yen 103233 all time high which Gold reached on July 17, 2008.

In terms of most of the other major currencies in the world (other exceptions being the Chinese Yuan and currencies "pegged" to the US Dollar), Gold has been scaling all time highs for the past two weeks. That includes the Euro, the other potential global "reserve" currency. The reason for this is, of course, that all these currencies have been falling in exchange value against the US Dollar for the past six or seven months while the US Dollar has, in its turn, been falling against the Yen over the same period.

Gold reached its all time high in terms of US Dollars in March when the US Dollar index (USDX) hit bottom. Gold reached its all time high in terms of Yen when the commodity boom peaked in July. Why has the US Dollar and the Yen held up since then to the extent that Gold is still worth less in terms of these currencies than it was in the first half of 2008?

The rise in the US Dollar was ignited by a global wave of "deleveraging" - a desperate rush to reduce or eliminate debt, especially highly leveraged debt. Since the majority of this debt was denominated in US Dollars, the US being the reserve and international settlement currency, the demand for US Dollars to "deleverage" skyrocketed. This phenomenon is still going on, but it has a "use by" date which is approaching

The US Dollar is still the world's RESERVE currency. The US is the only nation in the world which can buy valuable goods and services anywhere WITHOUT having first to buy the currency of the nation from which it is buying. The US Dollar is an INTERNATIONAL trading currency as well as being a RESERVE currency. Finally, there is the simple fact that the rest of the world holds predominantly US Dollars as the "reserves" which form the foundation of their own monetary system. Without these "reserves", they haven't got a system.

The US Dollar is rapidly losing its reserve currency status. The planned debt issuance of the US Treasury over this calendar year - estimates range from $US 2.5 to well over $US 3 TRILLION - are not supportable. The rest of the world doesn't have that kind of money to lend. If the Obama Administration carries forward its "stimulus" (and other) policies, the stark prospect of a simple "monetisation" of the debt - by means of literal US Federal Reserve purchases of it - is a certainty. The status of the US Dollar, as an international trading and reserve currency, will not survive that. The end result is that the US Dollar will plummet, if not against all other global currencies then certainly against the one form of MONEY which is no-one else's liability - Gold.

And what of the Yen? The Japanese government has long been trapped in the same predicament which the Obama Administration is now entering. Japanese rates have been ZERO for years. Japanese government deficit spending has been immense (much bigger than past US deficit spending on a per capita basis) for years. Indeed, Japanese government debts are now so high that the only reason they continue to be "serviced" is the non-existent interest rate. The Japanese government cannot afford a positive interest rate. The US government will soon be in exactly the same trap. The BIG difference is that the Japanese people have savings while Americans (despite what has happened in recent months) do not.

If you want a signal of the approaching demise of the entire global fiat debt-based money debacle, look for the point at which Gold sets new all time highs against the US Dollar and/or the Yen. At that point, the push will start in earnest for the return to a rational global monetary system. Gold will be resisted, but it cannot be overcome. It is the only rational global form of money which has ever been discovered.

And of course we expect that silver will follow and possibly even surpass, % wise, gold.