THE price of gold hit a record of 1,111.20 dollars an ounce in trading in London on Monday, as the dollar weakened after a pledge by the G-20 states to continue to try to promote an economic recovery from the capitalist crisis by printing billions of paper notes.
The dollar slumped as much as 1.1 per cent against a basket of six major currencies after the Group of 20 governments agreed to continue the inflationary stimulus measures.
Gold has jumped by more than 5.7 per cent in the past month in London as the Dollar Index slipped 1.9 per cent, and as news last week of an Indian government bullion purchase of 200 tonnes raised speculation that other countries, such as China would follow suit.
Such a Chinese move would in fact be a devastating blow at the US dollar, driving the US over the edge of the abyss into bankruptcy. It would mean the Chinese state ceasing the financing of the giant US government deficit by transferring its funds from US Treasury bills into gold bricks.
As it is the fall in the price of the US dollar ‘will continue to have a very big impact on the metals and gold,’ Afshin Nabavi, a senior vice-president at bullion refiner MKS Finance SA in Geneva, said last Monday.
He warned the world that ‘Gold has got quite a way to go.’
Even indebted, semi-colonial states, such as Sri Lanka, which has just negotiated a major loan from the IMF, are seeking to buy gold.
‘We have been observing that the price of gold has been going up so we have been strategically buying gold over the past several months as part of a reserve management process of diversifying our portfolio,’ Sri Lanka Central Bank assistant governor Nandalal Weerasinghe said last Saturday.
The cash hungry IMF admitted last week that its sale of 200 tonnes of the metal to India’s central bank over a two-week period had been driven by the fact that it needed the 6.7 billion dollars it received in order to be able to continue to carry out its international function as a provider of credit.
At the centre of the capitalist storm are the two main imperialist states, the US and the UK, with their collapsed banks and crippled economies.
The US government is heading for a record national debt for 2009, estimated to be some $12,867.5 billion, and a 2010 national deficit, estimated to be $14,456.3 bn or 98.1 per cent of its GDP.
The US budget deficit was $455bn for 2008, while a $1.84 trillion federal budget deficit is projected for 2009.
In the UK the Brown policy of propping up the banks at whatever the cost has seen the national debt double, while the amount of money committed to guaranteeing the banks is now estimated to have reached £1.5 trillion, while the budget deficit for 2010 is estimated to reach over £200 bn.
These major imperialist economies are very vulnerable to a deepening of the crisis in any part of the world, whether it is a Colombia-Venezuela war that endangers the US oil supply from South America, or a sudden deepening of the crisis with Iran, bringing about a seizing up of the Middle Eastern oil supply, or a new Georgian-Russian war endangering central Asian gas and oil supplies.
Any one of these simmering crises erupting could send the price of oil rocketing upwards, and the pound and dollar collapsing, driving up the price of gold to near $2,000 an ounce.
The stampede into gold, and the developing flight out of paper money, is an attempt by the bourgeoisie to seize hold of value, when everywhere fictitious values, and all sorts of promises to pay, are being destroyed.
The phenomena is an expression of the death agony of the capitalist system.
For the productive forces to continue to develop requires their liberation from the private ownership of the means of production and the capitalist nation state by means of the socialist revolution on a world scale. We are now living in the period when this must be carried out.
