Gold gains against all major currencies in Q1 2009

By Egon von Greyerz

Founder and Chairman

April 9, 2009

This week there will be a meeting between G20 leaders and central bankers in London to save the world economy.

Let us make it very clear – the meeting is bound to fail. There is no chance that the G20 leaders will reach an agreement that will save the world economy. Even two world leaders can’t agree on how to solve the biggest global financial crisis that the world has ever encountered, never mind twenty.  Each one of the twenty leaders has a different political agenda, and they will all blame each other, so there is no possibility whatsoever that the meeting will result in more than the normal platitudes about cooperation to solve the crisis. Both Merkel and Sarkozy have already rejected Gordon Brown’s proposed stimulus package, and that is before the meeting has even started.

But the main reason why the meeting will fail to reach a result is the worthless derivatives of over $ 1 quadrillion and unlimited amounts of toxic debt which will never be repaid with real money.

We have long said that we will have a worldwide depression which will be worse than the 1930’s. But worse than that it will be a hyperinflationary depression in many countries.

The famous financier George Soros agrees with us.  He sees a global financial meltdown and a major depression, as he explains in an interview in the Times today (Soros interview). Soros also states that the UK will probably have to be bailed out by the IMF, as we outlined in our February newsletter. But as we stated then, the IMF has also run out of money!

Although governments at the G20 meeting will not solve the insoluble world financial crisis, they will continue with the only thing they know – TO PRINT MORE MONEY!

There is only one way to protect yourself against a total debasement of most currencies – PHYSICAL GOLD.

Gold outperformed most assets in the first quarter of 2009.

On VON GREYERZ’S website, the  Gold charts pages show that gold gained between 4% and 7% against major currencies  in Q1 2009. In spite of being well off the highs for the quarter gold still showed an excellent return.

But even more importantly the Dow Jones declined 17% against gold in the first quarter with similar falls for most major stock markets against gold.

In the last four years, since the beginning of 2005, gold has gained over 75% against the dollar, 100% against the Euro and 170% against the pound whilst the Dow has lost 62% against Gold in the same period.

Not only has gold performed extremely well over the last four years (and even better since 1999), but it has also served as the best form of wealth protection –  if held in physical form, as it must be!

We have in the last few years advised investors to buy gold on pullbacks and not on breakouts. The recent pullback of $120 to $880 which could extend down to $850 is another excellent opportunity to buy gold  for long term investors.

In our view, we  haven’t seen the real move in gold yet which will come as a result of unlimited money printing by most governments due to exponential growth in losses on toxic debts and derivatives.

To hold physical gold is your only protection.

For 10 year charts of Gold against the US dollar, Euro, Pound, Swiss Franc and the Dow Jones click on Gold charts