Morning Gold & Silver Market Report – 8/15/2011
40th Anniversary of Coming off the Gold Standard!
Forty years ago today, President Richard Nixon signed into a law a bill that would take the United States off the gold standard and signal to the rest of the world the end of the Bretton Woods agreement. The Bretton Woods agreement had fixed the price of the U.S. dollar to gold and the price of gold at $35 an ounce. The gold-fixed U.S. dollar had been the foundation of the global economy. Prior to 1971, there was an unspoken agreement amongst foreign treasuries not to ask for gold, which could produce a gold run. However in 1971, with the U.S. facing accelerating inflation and the expense of the Vietnam War, other countries began to lose faith in the U.S. dollar and began asking for payments in gold. Fearing a run on gold would deplete their gold reserves, along with growing concerns of a deficit trade imbalance with Japan; the Nixon administration went off the gold standard in order to devalue the U.S. dollar. Lowering the value of the U.S. dollar was able to marginally offset the trade imbalance and there was no run on the U.S. gold supply. In the time since this agreement was signed, gold prices have climbed 5000%, while the purchasing power of the U.S. dollar has continually declined.
U.S. stock futures were up in early morning hours, but have retreated on the report that New York manufacturing contracted for a third month in a row. The “Empire State” general business conditions index fell to negative 7.72 from a negative 3.76 the previous month. Economists had expected a rise to zero, so this represents a ten point swing off expectations.
The big event this week is tomorrow’s meeting between the leaders Germany and France. They are expected to come up with new plans to solve the euro zone debt crisis. One idea that has been floated is the creation of a euro bond. Many analysts see this as a positive development, but Germany has indicated that in their view, this is not an option.
At 8AM (CT) the APMEX precious metal prices were:
- Gold price - $1,741.70 – down $2.90
- Silver price - $39.31 – up 9 cents
- Platinum price - $1,797.00 – up 30 cents
- Palladium price - $753.50 – up $3.30