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How gold moved from commodity to currency in 2010

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Gold is climbing to new record highs — the yellow metal is now up 17% for the year. 





















As an aside, gold’s little brother, silver, has gained 17% just this month alone and is up 26% for the year. Gold has shifted from being a commodity towards being a currency. This year, there are three events have catapulted gold into currency status, and they all involve attempts by governments around the globe to devalue their own currencies or at least jeopardize the sanctity of the central bank balance sheet:

  1. The ECB’s decision to allow non-investment grade bonds as collateral on its balance sheet.

  2. The Fed’s decision not to allow, as was planned, an unwinding of its pregnant balance sheet with obvious implications for the growth rate in the monetary base.

  3. The decision by the Japanese government to unilaterally intervene in the foreign exchange to reverse the yen’s strength.

Source: Breakfast with Dave (gluskinsheff.com)


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