Richard Russell talks about gold replacing the dollar in international transactions...

“In a deal concluded in the 1970s, it was agreed that all transactions of oil would be done in US dollars. Thus the US dollar became the world's reserve currency, used for trading in most materials and commodities.”

“This created a huge desire and need for dollars. As a result the US dollar became wanted and thus strong, heading higher and higher. The ‘expensive’ dollar led to high US unemployment and a strained economy. Inflation enveloped the US, particularly in housing.

But recent shocker, India and China have started to buy Iranian oil, not with dollars, but with gold. If this continues, it will be bearish for the dollar and bullish for gold. The strong dollar will also be bearish for the US economy. So let's keep our eyes on the dollar and gold.

The chart below shows gold in relation to stocks. Since August stocks have outpaced gold. But note the recent upturn in the ratio. Gold is now starting to act stronger than stocks. Something new is taking place. Is gold taking the place of dollars in transactions including the buying and selling of oil? If so, the dollar's reign as the king of currencies will be toppled, and gold will be the new king.

Below, a little head-and-shoulders bottom and then higher.

Below, an ascending wedge, often seen in bear market rallies.

Stocks down and gold higher. Are these the new trends? Dow down 4 out of the last 5 trading sessions. Market short term is oversold and should rally.”

If we see gold replacing the dollar as the world’s reserve currency, this will be accompanied by a collapse of confidence in the current financial system and panic buying in gold. This will create a move in gold, as Sinclair says, “That will light your hair on fire.”

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/1/28_Russell_-_Gold_Threatening_Dollars_Reserve_Currency_Status.html