The US dollar continues to crumble, threatening to throw the global system of floating currencies out of control.
Speaking today in Beijing, Vice Chairman of China's National People's Congress, Cheng Siwei, hinted that China should diversify some of its US$1.4 trillion worth of foreign currency reserves into ‘strong currencies'.
This obviously precludes the US dollar, which has been falling steadily against a range of currencies since September.
However, in recent weeks the US dollar decline has threatened to turn into a rout and today's comments have pushed the greenback to new lows.
The dollar slumped against the euro, the British pound and the Canadian and Aussie dollar, to name just a few.
Gold, the world's ultimate currency, has also been a major beneficiary of US dollar weakness.
Gold futures rose to US$823 per ounce in regular trading on the New York Metals Exchange (NYMEX) yesterday and increased another US$13, to US$836 an ounce in after hours trade.
The yellow metal is now close to taking out its all-time high of US$850, set back in January of 1980.
And with the US dollar looking increasingly shaky in the eyes of global investors, it may hit that level before the end of the week.
Gold is also rising in Aussie dollar terms, reaching $890 an ounce in today's trade.
The US dollar has been the world's reserve currency since 1971, when President Nixon broke the greenback's link with gold, which had been at a ratio of US$35 dollars to one ounce since the Bretton Woods agreement was signed in 1944.
However, given the persistent rise of the yellow metal over the past few years, the gold market is signalling global investor distrust in the management of the US dollar.
A reserve currency is meant to represent stability and a reliable store of value and with the US dollar in steady decline since 2000, it no longer fulfils this role. US authorities do not appear to be in a position to defend their currency though.
Their banking system is under pressure and more interest rates cuts are expected as the US economy tries to ward off the impact of the housing crisis.
As gold approaches its historic highs, oil is making new ones.
