The price rise in gold is telling us the truth, not about gold, but about the dollar. The US external deficit has to be reduced. That means the dollar has to fall further. There is no early prospect of a return to confidence in the US stock markets. There is no point in the US raising interest rates, which would weaken the US economy and only postpone the necessary realignment of dollar exchange rates. In Britain, stock markets are likely to remain weak; probably the housing market will turn down without the need for an increase in interest rates. Gold will continue to outperform stock markets, as it has for the past two years. Pension funds are going to be in serious difficulties. All of this does not look like a short-term adjustment. We may well find that the decline of the dollar is the most important global movement of the decade.
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