A GOLD CRASH?

 

Gold briefly touched $5600 and then plunged in 48 hours all the way down to $4800.  An historic plunge unmatched in dollar terms, marking extreme volatility for this supposed safe haven asset.

On the other hand, you could say that over the course of the last year gold has moved steadily from $2500 to $4800 with brief bouts of weekly volatility.  Like almost every other asset during every other period in history.

It all depends on your time frame.

If you are a gold trader and you got in recently - well you got whacked.  The moral is: don't trade gold.  Unless you are trading for a central bank or a bullion bank you're out of your league.  

If  you are a gold investor and you've been in for the long haul, this is barely a hiccup.  If you're a new gold investor just hang in there.  Every condition that has been driving gold up over time is not only in place but intensifying.

Debt is spriraling out of control everywhere and especially in the United States.  Federal debt is growing at a trillion dollars every 100 days.  And consumer debt is at all time highs and growing rapidly.  Consider this: GDP is rising while real wages are falling!!!  GDP simply measures SPENDING.   So spending is rising while wages are falling.  What bridges that gap? DEBT.

Deglobalization is intensifying.  Those who only consider only the trade deficit think this a great.  But anyone who considers the other side of the balance sheet - the CAPITAL ACCOUNT DEFICIT knows this is a disaster for real inflation.  Just as it is a disaster for the value of the dollar.  Those 2 sentences mean the same thing.

And geopolitical tension are boiling.  The country is being torn apart by hatred.  Just as we are attacking enemies and one time allies alike, riving the world with hatred.

Those who celebrate this as the Neo Mercantalism and the rise of a realpolitik are missing s most important point about mercantalism which is this: There was a give and take to the colonial system that fueled 19th century mercantalism.  It may have had brutal aspects but colonializing powers often brought some stability to target areas: they brought industry and paved roads and schools and brought vaccines and modern medicine and hospitals and clean water, and electricity, just as they seized natural resources, and exploited native populations.  This worked for all parties to some extent.  The NEW 21st century MERCANTILISM is closer to neolithic barbarism seeking to bring nothing and take everything from rivals.  And everyone is a potential rival.  This brings nothing but instability everywhere.

So what has changed to bring the gold price a bit lower?  Nothing.  It's a market.  Markets are volatile because human appetites are volatile.

Only fools and those with a very real knowledge/power/monetary advantage seek to trade them.

So invest, and hold on, as long as the underlying conditons are intensifying.