Brent spot crude has fallen nearly 9% from last week's high at 147.47 amid growing concerns that high prices and a slowing US economy will continue to erode demand for oil. In fact, risks to growth are on the rise around the globe.

Even the economic juggernaut that is China is being strained by the 76% rise in oil prices over the past year. The Chinese economy is built as much on cheap transportation as it is on cheap labor.

In recent years, China has aggressively sought to develop the lagging economies of western provinces. Creating manufacturing centers in the west boosted those economies and stemmed the tide of workers flowing into the large coastal cities in search of prosperity. However, ever-rising transportation costs now leaves those western cities more vulnerable to significant growth risks.

The cost of shipping goods from China to markets in the US and Europe have increased by as much as 40-50% over the past year. Western manufacturing cities must also incur the costs of freighting their goods east to port cities either by rail or by truck. Earlier this month, China raised internal freight rates by 17%.

Despite ongoing government subsidies, profit margins are shrinking rapidly. This probably goes a long way toward explaining the more than 50% decline in the Chinese stock market. Factor in rising labor costs and the 17% rise in the yuan since it was de-pegged from the dollar in 2005 and you can build a case for a significant slow-down.

The rising costs of doing business in China translate into higher costs for goods here in America, contributing to the already brisk pace of inflation. US CPI surged 1.1% in June, the largest monthly jump since 1982. BLS data now shows the year-on-year rate of inflation at 5.02%, although in reality it is probably more than double that level.

The emerging BRIC economies are presently the primary drivers of the global economy. If economic growth in the BRIC nations stall, the risks of a global recession are heightened.

An FX trader friend of mine told me earlier in the week that far too much attention is being paid to the economic turmoil here in the US. He suggested that fallout from the subprime/credit/liquidity crisis has yet to truly hit the rest of the world. He believes strongly that it will.

He was buying dollars on the premise that when the "stuff" really hits the fan, the greenback is likely to regain some status as a safe-haven currency. He's a smart and savvy trader and could well realize some short-term gains on his trade, but I had to disagree.

The dollar may indeed benefit from risk aversion flows out of some of the emerging currencies. However, if I'm holding euro, sterling, yen or swissy, I'm thinking I'm not inclined to jump from the frying pan into the fire. I'd be looking for a tangible asset, that I can take physical possession of, to store my wealth.

Of course physical gold is the ideal vehicle for wealth preservation. Gold is easy to buy, extremely liquid and easy to store. We've seen gold make substantial gains against all of the major currencies in the past week, returning considerable credence to the long-term uptrends against each.

Gold Market Movers:

Philly Fed index for Jul at -16.3. Market was looking for an improvement from -17.1 in Jul.

US housing starts for Jun surged 9.1%, well above market expectations.

US initial claims for the week ended 12-Jul higher at 366k, versus 348k in the previous week.

China CPI slowed to 7.1% y/y.

Gold: the precious laggard that will hit $2,000

Sovereign funds cut exposure to weak dollar

Oil falls, but consumer prices remain a concern