Beauty & the Beast
By Adrian Ash
November 7, 2007
The current surge in Gold
Prices reflects much more than Dollar weakness. All official
money is sinking fast...
WITH THE WHOLE WORLD now squinting at the
fast-vanishing US Dollar, it was only ever a question of
"when" not "if" the bold and the
beautiful would start rejecting the mis-shapen greenback.
The imperial Dollar is just sooooo 20th century,
darling!
"We don't know what will happen to the
Dollar," says Patricia Bόndchen, sister and manager of
Gisele, the statuesque and shapely Brazilian super-model.
"So contracts starting now are more attractive in
Euros."
Her agent at IMG Models in New York begs to differ,
however. "Gisele does have contracts in Dollars [but] when
she works in Europe she gets paid in Euros. When she works in
the US she gets paid in Dollars...when she works in Brazil she
gets paid in Reals..."
But whatever hair-pulling and hissing is going on
between Gisele's people behind the catwalk, the former squeeze
of Leonardo DiCaprio has now asked for Euros, not Dollars, in
payment for promoting Dolce & Gabanna's new perfume,
"The One".
Being based near Milan, Italy, D&G no doubt had
plenty of Euros to hand. But Proctor & Gamble? According to
Veja magazine Brazil's best-selling weekly Gisele has
now demanded Euros instead of Dollars in her contract to promote
their Pantene shampoos and conditioners.
And who can blame her? Gisele made an income worth
$30 million in the year to June. If she kept that sum in US
Dollars, then this Beauty would have already lost 8.3% of her
earnings in four short months to the lumbering Beast...
Rejecting the US Dollar isn't a new gambit for
headline-hungry celebrities, however.
Last time the Dollar sank beneath the weight of its
own low-yielding Treasury bonds, soaring oil prices and a
looming recession, Bette Midler the comedienne and singer
famously demanded that her $600,000 fee for a European tour
in July 1978 be paid in South African gold coins.
Smart move, Bette! Eighteen months later, that
little mountain of Krugerrands would have been worth $2.1
million. In nominal dollars, her very worst return even at
the very nadir of gold's bear market two decades later would
have been a 35% gain.
So did Ms.Midler show more brains...if not more
beauty...than today's Ex-Dollar Superstar?
Gisele Bόndchen actually seems keen to quit the US
altogether. (Maybe The Enquirer should tell her current
beau, Tom Brady of the New England Patriots.) She cut the asking
price of her New York penthouse just last weekend. Now her West
Village apartment, with views of the Hudson thrown in for free,
is on the market for $9.2 million down from $10.9 million
previously according to the New York Post.
"In TriBeCa," the Post goes on,
"Russian supermodel Natalia Vodianova has discounted her
alluring, 5,000-square-foot penthouse from $11 million to $9.9
million."
Are the beautiful people turning bearish en masse
on both the greenback and on US real estate? If so, then they
might they want to show the brains of Bette Midler...instead of
the tanned mid-riff of Gisele.
Since the US Dollar reached parity with the Euro,
exactly five years ago this week, Gold
Priced in Euros has risen by nearly 70%.
Yes, that pales next to the Gold
Price in Dollars...now more than 140% higher from this time
in 2002.
And yes, "gold is the most reliable performer
as a hedge against Dollar movements," as Rhona O'Connell
found in a research report for the World
Gold Council last month. She compared the performance of
various commodities everything from zinc, cattle, heating
oil and palladium to sugar against the Dollar's changing
fortunes on the currency market.
O'Connell's yard-stick for the US Dollar was an
index of the world's next five most important currencies. Gold
bullion mirrored the changes in this Dollar index more closely
than any other physical commodity between Jan. 2005 and July
2007.
But gold is providing much more than just a Dollar
hedge. Given the political and economic barriers to raising
interest rates anywhere in the world right now, you might wonder
if it's simply going to keep on delivering, too.
Gold so far in November '07 has also broken out
against a whole series of other major currencies besides the US
Dollar. Gold
Priced in Euros just broke the top of May 2006, equal to
562 per ounce. The Japanese Yen is trading at a 23-year low
in terms of bullion. The Australian Dollar caught between
being a "commodity currency" and a debt-fuelled
Anglo-Saxon basket case has just sunk to new record lows
against gold.
And for British investors, gold has never been so
valuable...
What to make of it? Here at BullionVault,
we've been trying to figure out just what investors Buying
Gold Today can expect it to do for them.
Gold itself makes no promises, remember. Paying no
yield or interest and with little-to-no industrial usage
compared with silver or platinum gold really doesn't have
very much to recommend it. Not besides the verdict of history.
The ultimate store of value and wealth for more
than 3,000 years, gold is now drawing in a flood of investment
cash from private individuals across the world. The proof? It's
moving fast against ALL of the world's major currencies, not
just the Dollar.
We blame central bankers. And government wonks. And
those investment banks who created a flood of "near
money" assets at a record clip when they spied the mark of
low-income home-buyers with no hope of ever repaying a mortgage.
"Mervyn King's effective guarantee of the
liabilities of the British banking system is much more
significant than declining South African gold production,"
as John Hathaway of Tocqueville Asset Management puts it.
We'd add the Bernanke Put, too...plus the Bank of
Japan's zero-rate madness...the Swiss National Bank's sub-3%
rates...and the Eurozone's basic political fault-lines.
If you want to join Gisele's after-show party, then
perhaps you should buy Euros. Thrown in for free, you'll get the
yawning gaps between Germany's economy and the over-spent,
over-geared nations of Italy, Greece, Spain, Ireland and
Portugal.
But if you don't trust central bankers or
government paper, on the other hand, then make like Bette Midler
and Buy
Gold. Just don't pay the extortionate dealing charges and
insurance fees that buying a pile of Krugerrands will cost you.