Everyone is trying to figure out whether we are experiencing massive Debt Deflation, or incipient Hyper-Inflation due to furious central bank printing to combat the debt deflation.
As these two brutal forces battle it out, how will Gold react?
The most important thing to understand in figuring this out is that Gold is a Currency.
Most analysts still don't get this.
But if Gold is a currency how come I can't buy bread with it?
Gold has been a currency for 5000 years at least, and nobody has ever been able to buy bread with it. Gold has always been far too valuable for quotidian purchases. Gold has always been a unit of account and a store of value for GOVERNMENTS and the extremely wealthy, not common citizens.
Right now, as I write, all the major central banks of the world are using Gold as a Reserve Currency. Right now, as I write, the Central Banks are preparing rules that make gold a Tier One Reserve Currency for Commercial Banks.
Some analysts will still be very confused by the fact that they still can't buy bread with it. Or eggs. Or toilet paper. So they will just never get that gold is a currency.
But let's just say you can get your head around the fact that gold is a currency.
So what does this mean in terms of the Inflation Deflation debate?
It means that if we have massive or hyper inflation down the road, gold, like all tangible assets will appreciate.
But if we have Deflation, then gold - as the only Currency that can not be printed - will become far more valuable.
During Deflation wealth accrues to the most stable CURRENCY. THAT IS GOLD.
Some analysts get very confused when they look at the last Deflation in the 1930's and they see Gold Stocks did very well. But that was because private ownership of gold was outlawed. That is not the case now. It will not be outlawed because it is now a Global Currency.
Don't be confused. Only Physical Gold is a currency. Only Physical Gold will survive the settling of massive Debt.
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