Interest rates have moved slightly lower as the Fedâ€™s intervention drives bonds up and yields lower. That will end early next year as demands for funds from both the private sector and government increases. Global capital has not expanded to meet those needs. Fed monetization of $500 billion is what foreign central banks are using to buy our Treasuries. Eventually the adverse effects of excess money and credit creation and budget deficits will take their toll. Commodity prices are already reflecting a flight to quality and gold and silver are attempting to make new highs. Wall Street and Washington tell us there is no inflation. If that were so why would gold and silver be acting in such a manner? The answer is flight to quality. There are no solid currencies left in the world to compete with gold, the only real money. This past week government repulsed breakout attempts by both gold and silver, but no matter what they do they will be eventually overwhelmed as more and more gold and silver will become the destination for hot money. The hedge against prolonged recession is in place and will be augmented soon by growing inflation. A double barreled dynamic.
We can argue all day long about deflationary and inflationary scenarios. It seems that both of these economic effects are in play right now, with a little bit of currency crisis added in for good measure. Eventually, we will be worrying about not inflation or deflation, but a total collapse of our currency on the world stage. A currency crisis, like the one we will probably experience, will likely occur as a result of what Martin Armstrong calls a loss in public confidence. When individuals lose confidence in the public sector, or the private sector for that matter, they will move their capital into the safest and highest quality assets available. At some point, this will probably NOT be US Treasuries, cash or stocks. This leaves internationally issued treasuries (Chinese bonds, anyone?) and precious metals. I am willing to bet, and in fact have, that the flight to quality will eventually fall on gold and silver, as suggested in Mr. Chapman’s article.
You say youâ€™d like to sleep at night and not have to worry about your wealth; well there is a way to accomplish that. Buy gold and silver related assets. After ten years gold has finally broken out over $1,000 an ounce, a signal that phase 2 of 3 or 4 phases has begun. Gold could reach anywhere from $1,200 to $1,700 an ounce before the year is over. If you buy gold and silver coins or bullion, take delivery and store them in your safe at home. At this stage of the gold and silver bull market anchor your portfolio with 3 or 4 of the strongest producing mining companies and exploration shares. In the 1977 to 1981 period some of the leveraged speculative shares went from $0.35 to $55.00 and that could well happen again. In todayâ€™s markets this is how you preserve your wealth.
While trying to predict the short-term price of gold is, for me at least, comparable to trying to isolate the specific position of an electron on an atomic level, long-term, most informed readers can surmise that gold will be higher, much higher, than it is today. We may not be able to predict the specific position of a quantum particle at a specific time, but we can, with pretty good accuracy, predict how the entire atom will act over time. (I am no physicist, so any of you genius types out there, please feel free to slam my analogy and provide your own). Therefore, I cannot agree for certain with Mr. Chapman’s calls for gold prices of $1200 – $1700 by the end of the year. There are a lot of interested parties doing interesting things that may negatively impact the price of gold, especially if the US Dollar rallies again. But long-term, given how governments around the world are ‘responding’ to this crisis, paper currencies are toast and gold is going through the roof. End of story.
My father, an avid follower of economics and world events, likes to quote, in Latin, something he agrees with Martin Armstrong on:
“NATURAM EXPELLAS FURCA,TAMEN USQUE RECURRET”
(You may drive nature out with a pitchfork, but she will keep coming back)