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Remember the Golden Rule: He who has the gold makes the rules.
As nations get rich, typically, they buy gold - or steal it. What else can they do? How else can they protect their wealth?
When Britain was the world's dominant empire, it loaded up so much gold in the Bank of England that the floor collapsed. Then, power shifted to America. The United States collected its war debts and the gold went back to the U.S.A with the doughboys. In a few years, the United States had the world's largest stockpile, in Fort Knox, Kentucky.
But now, two things have changed.
First, wealth is shifting away from the United States. America is no longer a growing power, but a fading one. The real money is being made in other places. The energy exporters, for example, are piling up money - especially dollars - at breakneck speed. And the Asian exporters too are making trillions.
Second, the world is losing confidence in the dollar as never before. Everyone knows the Bernanke Fed can't defend the buck. There are too many of them. Instead, Bernanke has to try to fight the economic slump - with more cash and credit... further inflating the world's supply of dollars. That's why the U.S. dollar index is at its lowest level in 35 years. "Dollar: it will only get worse," says CNNMoney.
This leaves the foreigners in a tight spot. They've got trillions worth of dollars... and the buck is falling. What are they going to do?
Russia and Qatar are buying heavily. Qatar is using its oil revenues to buy a tonne of gold per month. Russia is buying three or four times as much, and now has more gold in stock than the Bank of England.
China is said to be buying too - but very cautiously. China has so many dollars, if it wanted, it could buy almost half of all the gold ever mined.
Looking ahead, it is hard to see what would stop gold now - except a worldwide financial meltdown. Some commentators insist that Western governments will sell their gold to take advantage of the high price. The IMF has already been cleared to sell nearly $100 million worth - to cover its budget shortfalls. But with the price rising... and the inflation pumps working round the clock... what central banker or treasury secretary is going to want to be the one who sells the family's silver now?