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A 4-Month Review
It makes sense at the end of every month to review the gain or loss in
various markets, but now is a particular opportune time for a review given that
we are one-third of the way through 2008. It also makes sense to look at recent
results given the growing chorus that the US dollar has bottomed and is
therefore due to strengthen.
The following table presents the gains/losses for the precious metals and
major currencies for the past month, year-to-date and 12-month periods.

There is nothing in this table to suggest that the US dollar has turned the
corner to reverse its bearish downtrend. Note particularly the 3.8% gain in
commodity prices this past month.
Rising commodity prices have been one of the strongest indications that the
flight out of the dollar into tangible assets is a real phenomenon. Rising
commodity prices last month provide strong evidence that any dollar 'strength'
was illusory. Though the dollar may have risen against other national
currencies, all of them were sinking against real things. Gold and silver were
the exception.
Both gold and silver declined last month, but both have respectable
year-to-date and 12-month gains. Though up 26.8% over the past twelve months,
gold only rose in seven of those months. Silver achieved its 22.7% 12-month gain
even though it rose in only six months. These results are evidence that it's
always a bumpy ride with markets – like the one we are experiencing at the
moment. But use these bumps wisely by continuing to accumulate precious metal.
Here's how I explained it recently in an email responding to a question about
the gold cartel and their ongoing effort to cap the gold price:

"I am not adverse to setbacks like the current one, or indeed, the
ongoing capping by the gold cartel. They have in fact done us a favour. Their
action is keeping gold at prices lower than they would be if the gold cartel
were not in there intervening to cap gold. This has enabled me and everyone
else who has been buying gold to acquire it at prices lower than the gold
price would otherwise be without the price capping. In short, the gold cartel
is keeping dollars and other fiat currency overvalued and gold undervalued,
thus enabling me and others to accumulate gold month after month with
available new earnings generated each month. That's a good thing in my view.
Think back to the 1960s. The gold cartel was active then too, trying to keep
gold at $35 per ounce when it was worth much more than that. We all know what
happened to gold in the 1970s after the gold cartel was eventually overwhelmed
back then by their foolish price capping activity. The same thing is happening
this time around, except that the gold cartel is allowing the gold price to
rise somewhat each time they recognize that they are losing a battle -- they
retreat to fight another day. So in conclusion, the gold cartel may be able to
keep gold under $1,000 for a few weeks, or perhaps even months. That just
gives us more time to accumulate it with new earnings we generate each month.
But eventually, values will be realized (like happened in the 1970s) and gold
will soar over $1,000."

When asked about the gold cartel, its activity and its motivation, I often
refer to an interesting observation by former Federal Reserve chairman Paul
Volcker. It is from the Nikkei Weekly, which in 2004 published excerpts
from his memoirs commenting on monetary policy and the rising gold price in the
1970s: "Joint intervention in gold sales to prevent a steep rise in the price
of gold, however, was not undertaken. That was a mistake." It was a
'mistake' in his view because the gold price did something the government didn't
like. It laid bare for all to see the government's empty rhetoric that it would
fight inflation.
The parallel to today is simply too obvious to ignore, given the government's
so-called 'strong' dollar policy, but the government is not making the same
'mistake' again. There is today "joint intervention" by central banks to
interfere with the normal supply/demand activity in the gold market. These
efforts are aimed at preventing gold from doing what it has always done
throughout history. Gold is a monetary barometer because its rising price
signals the mismanagement of a national currency.
So rather than take those steps needed to actually implement a strong dollar
policy and thereby fight inflation, the government-directed gold cartel instead
intervenes in the gold market "to prevent a steep rise in the price of
gold", which was Volcker's lament. Central bank intervention in the gold
market – which to me has been particularly obvious in recent weeks – is a bald
attempt to make us believe that the dollar is worthy of being the world's
reserve currency when in fact it is not.