Silver And Gold, Silver And Gold

As the graphic from the Onion above says, are we suddenly in "Fear of everything but gold?" Not quite, but we get the picture. Gold settled at a record nominal high today. The previous high was $825.50, set Jan. 21, 1980, or $2,128.09, adjusted for inflation, according to the Minneapolis Fed Calculator. Official US inflation estimates have been laughably conservative through much of that period, so the all-time high probably clocks in nearer to USD $4-5,000 per ounce in today's value.

Gold, the stock markets, and oil are starting to correlate as as you would traditionally expect, meaning they're starting to move in opposite price directions. This is news because it has not been the case for much of the past several years, when both gold, oil, and stock indices had surprisingly strange correlation patterns. This amongst other things led some observant market-watchers (such as the Canadian Govt. Pension Fund) to conclude that a) US stock markets were being gamed back upwards via derivatives buying, and b) that the US, or somebody, was selling its gold reserves in order to finance such buying.

If those sound like conspiracy theories, one might bear in mind (rimshot) that the Soviets emptied their gold reserves via under-the-table sales in the early 1980s while their armies were fighting protracted asymmetrical conflicts with Islamic insurgencies. Of course our government, being so fiscally conservative, could never suffer a similar fate in a million years. But you do have to put your money somewhere.

There are other places offering relatively good value besides gold. For example, Jay-Z, a popular rapper, is flashing Euros like Japanese folding fans in a music video while Gisele Bundchen no longer accepts payment in dollars. Wholesale drug dealers started switching to the Euro three years ago...which means American intelligence agencies are also now, insofar as possible, Euro-denominated. Meanwhile, the Canadian dollar is at an all-time high, as silver nears its nominal all-time peak. Rolls of ordinary copper wire at Home Depot have nearly tripled in price since 2005.

Not espousing any sort of panic here, just an eye to conservative diversification. Besides, everything's FINE!! The city of Cleveland is allocating $100 million to demolish vacant homes. Plenty of building opportunities there, and the new construction markets are still going very strong in Iraq, Africa, and Central Asia. Citicorp, America's largest bank, may have lost a third of its value over the last few weeks, but it hired former (Clinton) Treasury Secretary Bob Rubin to more effectively grovel for a bailout at the Fed's door. Speaking of the Fed, it pumped another $40 billion shot into the credit markets last Thursday. Best of all, the American economy grew at a faster-than-expected rate, unemployment is lower than expected, and the core inflation rate is clocking in at, oh, about 2% or so. Mother Russia would be proud.