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Gold Gets Polished, Dollar Gets Polished Off?


Talk of an SDR currency raises doubt about dollar's future.

Editor's Note: The following was posted in real time on our premium Buzz & Banter. It's being shared here for the benefit of the Minyanville community.

I can't believe I'm seeing this on the wires. After having said yesterday that he was opposed to an SDR currency, Tim Geithner just said he's now "open" to China's suggestion of an SDR currency system?

Huh? One wonders if he received an angry phone call from his boss last night. (i.e. The Chinese?)

And now, Geithner is saying the dollar will remain the world's reserve currency? This is mass chaos, but the genie may now be out of the bottle. As I've said, it's the uncertainty about the dollar's future that this is triggering that is ultimately the most bullish thing for gold - and this latest flip-flop from Geithner is just more sauce for the goose.

Technically, a move to an SDR system (see the details on the SDR here) would still leave the dollar as the "reserve" currency, since an SDR is made up of euros, dollars, yen, and pounds. However, it would also be a devaluation of the dollar by about 34%, given that the dollar is only 0.66 SDRs. Keep in mind that a move to such an SDR system would also mean that OPEC would be moving to this basket, as well.

I have no idea if anything will come of this or not, but the uncertainty that it raises with respect to the dollar's future is no doubt bullish for gold (take a look at GLD) and the gold mining stocks.
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Position in gold and gold stocks

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