The radical decline of the gold price in the last 24 hours was apparently echoing the downturn of the equity markets. A comparison to the situation of December 2008 shows a similar correlation with the Dollar rising as the ultimate haven of panic in a potential systemic crisis.

 

But the Dollar has hardly a chance to regain its historic position given current perspectives of the US economy and the bottomless debts. The capital is also moving from the EURO to the USD because safe haven currencies are locked or they are on the brink of being blocked. The Chinese Yuan meanwhile is still kept behind the Great Wall of state control.

 

Synchronically the GBP has eased with very clever timing and a very market synchronized policy in Britain.

 

In the same time the credit crunch risks in Europe reappeared with still hidden effects that have probably pushed significant volumes of gold on the market to secure liquidity. All these processes happen in hyperfast transactions and reactions creating the current diffuse image of a stormy ocean seen from the distance: a grey cloud carrying a diffuse threat or just a temporary spectacle.

 

It is indeed assumable that tectonic frictions related to the booming BRICS world on the one hand and the debt stricken West, driven by massive trade imbalances and systemic differences, might evoke a quake forcing the world rapidly into a new, potentially unprecedented, balance.

 

Given the high level of uncontrollability of this dynamics there is evidence and logic in the revival of the Dollar as a resort of necessity, maybe beyond current expectations. But that might be not a long term trend.

It would be poison for the recovery of the US economy.

 

While the current rise of the Dollar might be welcomed by the Chinese government as one of the best antidotes to the dangerous inflation trends in the country, Russia for example might suffer from declining commodity prices and slowing Western economies (we might even see the convertibility of the Russian Ruble sooner than that of the Chinese Yuan).

The US, Europe and Russia don’t benefit from a rising Dollar even if some of them have still not acknowledged or admitted this fact.

 

This is why easing politics needed to be continued to keep the system running and to rebalance the current global systemic gaps in the smoothest way possible. To much pain can be dangerous, socially, politically and economically.

 

This is why gold might recover soon, ahead of the equity markets. Its function is to slow down systemic shifts and currency erosion that are the interdependent key factors of the current crisis.