Gold Rallies Against Western Sovereign Paper

Many people attribute gold’s rally to the possible collapse of the Euro; however, Lance Lewis, of Lewis Capital, a Registered Investment Advisor in Dallas wrote an article for Minyanville.com expressing his hypothesis. He thinks that gold is rallying in all the major currencies at the moment, providing further evidence that gold’s bull market isn't due solely to a weak dollar.


Lewis believes the reason gold is rallying now is more complex than just Portugal, Greece, Italy, and Spain’s (PIGS) sovereign debt problems and the decline of the euro. The real problem is with all the Western sovereign paper currencies including the US. When a monetary system breaks down, that leaves gold and other PMS as the only monetary refuge. The fact that gold prices continues to increase even as the dollar rallies against the euro and other debtor currencies tells us that the market see issues with the dollar in the future as well.

Lewis states that “even if there is a default in Europe and the ECB is eventually forced to flood the PIGS with euros (a lesson it learned from the Fed here in the US) that's when the market’s focus will then turn to the sovereign debt issues of the US and begin to sell the dollar and US debt.”

Gold investors need to look to the future and think ahead, if you look at countries with sovereign debt problems as dominoes, at the end of the line of dominoes is the biggest debtor of them all, the US. Once the market’s focus comes off the sovereign debt problems of the PIGS for a while, the sovereign debt vigilantes will simply then turn their guns on the US, and the market knows this. The gold market is finally thinking ahead (for once), and not waiting for the dominoes to fall.

To read Lewis’ article go here.