Today, the First of June, 2012, stock markets across the world tumbled Europe collapsed and the USA saw its unemployment rate grow unexpectedly. As this happened, Gold jumped over $50.00 per ounce, going above $1600.00 per ounce for the first time in four months.
“Why?” was the question on everyone’s mind. Most gold traders knew the answer: The Central banks will print more money!” Debasing your currency, or popularly called: “Printing Money” was the new method of solving economic problems.
However, this method is not new. Kings, thousands of years ago, shaved gold from the edges of coins in order to mint new coins. In this way they cheated their citizens and created enough false new wealth to purchase arms or mercenaries. As the new “cheapened” coins began to circulate the price of real goods suddenly rose.
This was the cause of inflation in the days when gold was found in the currency. It is still the cause of inflation when paper is the currency.
Debasing a currency, whether gold or paper, produces inflation. Gold investors are well aware of this and they know that their commodity will soon be worth more than it is today.