Gold Market Flashing Debt Crisis Warning

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Gold Market Flashing Debt Crisis Warning

Interest-Rates / US Debt
Apr 11, 2010 - 10:07 AM

By: Larry_Edelson

When you’ve been trading gold for 32 years like I have, you develop a sixth sense for the precious yellow metal.

You can hear it speak to you. You can feel its heartbeat. You can interpret its signals.

Gold anticipates the not-so-obvious and often completely unforeseen economic developments better than any other investment I know of.

That’s why I am writing to you today. Gold’s rally last week to as high as $1,156 an ounce has an important message for all of us: It’s telling us that all is not well with the world and that something major is brewing out there.

What’s going on out there that’s not so obvious and that gold is picking up on?

It’s the relationship between China and the U.S. — and the implications of that relationship not just for the Chinese yuan, but also for the U.S. dollar.

You see, Treasury Secretary Tim Geithner travelled to Beijing this past week, where he got on his knees with his hat in his hand, begging Beijing to push up the value of its currency.

Now, no doubt, in the media, you’ve been hearing for years that China’s currency is undervalued.

But gold is telling you something different. It’s telling you the other side of the story.


If the yuan is undervalued, then the dollar must be overvalued, meaning the greenback will soon resume its sharp decline in value.

It’s telling you that if the Chinese yuan is undervalued, then the dollar must be overvalued against that currency too.
And that means that the U.S. dollar will soon resume its sharp decline in value, especially against what is now the world’s second largest economy.

So, right now, I want you to be prepared. First, by this heads up I’m sending you. And second, by understanding the historical progression of the relationship between gold and the dollar.

So let’s step back in time a bit …

How Gold and the Dollar Were Irrevocably Separated

It’s 1947. We’re in a London office on St. Swithins Lane. Inside are six members of the London Gold Committee. A bullion expert from N.M. Rothschild & Sons says, “Gentlemen, it is eleven o’clock.â€

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