Wednesday, March 4, 2015
GOLD: DON'T PANIC
Gold: As everything goes against gold, and it falls below 1200 once again
DO NOT PANIC
We are in the middle of an enormous Dollar bull market.
The Euro is imploding. It is a flawed currency and will probably not survive.
The Yen is being quantitatively eased into oblivion
The Ruble is all but worthless.
The Real is suffering a crisis of confidence.
All that money is flowing and will continue to flow into the relative safety of the US dollar
DOLLAR INDEX 5 Year chart. The dollar index will get much much stronger. Because the US dollar is the only viable reserve currency. It has become the global safety play.
YET the dollar strength is not indicative of a strong US economy.
In fact the US economy growing at about 2 percent with stagnant to declining wages; a vastly underemployed work force; with historically low household formation; and Zero percent interest rates that are crippling savers, the elderly, and the middle class while creating vast misallocations of capital with virtually no lending, no capital investment and a money multiplier that has fallen to historic lows.
As the dollar continues to strengthen in this environment it will not be long before the economy sinks back into recession.
When that happens - AND IT HAS ALWAYS HAPPENED - the dollar will continue to strengthen - and at the same time GOLD WILL RISE AGAIN.
WHY? Because once we sink unequivocally back into recession with rates at ZERO and a middle class that is already drowning - CONFIDENCE in the FINANCIAL SYSTEM WILL CRATER.
And that is what will kick gold back into the stratosphere. Gold is a measure of financial stability. It has nothing to do with deflation or inflation. It is simply a measure of financial stability. And when that goes, gold rises.
Whether at that time - and it won't be long from now - gold is at 1000 or 1100 or 1200 - who really cares? Gold is still 400 percent higher - right now near the very low - than it was when it took off in 2000.
And once it starts to move as confidence cracks - it will move fast and furious and anyone who doesn't own bullion at that time will have a hell of a time finding any.
And remember this: though you read all sorts of claims reminding you that if you had only bought stocks in X year instead of gold you'd now have doubled your money. It all depends on X. If you'd bought nasdaq in 2000 when gold was at 300 you'd still be way down inflation adjusted compared to a 400 percent gain in gold. That's just playing with statistics. Any idiot can do it.
It takes confidence in believing your own eyes to have the conviction to make money OVER TIME.