AUGUST 1: WHAT DRIVES GOLD FROM HERE?

 

Gold is firmly esconced in new high territory around $2400.  Anyone waiting for one great drop to get into this raging bull could wait a very long time.  A quick dip is always possible of course, but a much more salient question is what could drive gold higher from here?

The Fed is done raising.  Not because inflation has been beaten but because everyone realizes that with hundreds of trillions of dollars of debt in our system rates can't go any higher without provoking a crisis.

So Fed cutting is not likely to drive gold much higher.  That's been baked in for a while.

And that's what Americans are used to looking at as the great indicator.

So: What is likely to drive gold much higher?

The unexpected.

Here's a list of things that are happening as I write that nobody in the US is paying any attention to - so if they intensify to the point where Americans start to notice gold will soar:

1) Russia hosts the Brics in October.  The Brics now include many of the middle east oil producing countries, the South American oil producing countries, and many of the African mining economies.  IF anything that represents an intensification of the DeDollarization process  - that is the entire point of the BRICS movement - intensifies at this meeting - or APPEARS to intensify at this meeting - fears of dollar depreciation could make gold soar.

2) Escalation of the middle east war that comprisises much of the oil producing world.  Iran backed by China and Russia is fighting Isreal - backed by the US and Europe - through Hezbollah and Hamas - and DIRECTLY.  The US media talks about possible escaltions.  It is escalating.  The qestion is when we notice.  Probably not until after our election.  But we could be forced to notice at any time.  Then fears of WW III will make gold soar. 

Also - for those who think that the US can be energy independent then it won't matter - that's stupid.  A) we have plenty of oil - but all the cheap oil has been drilled.  The remaining oil wll be eincreasingly expensive to drill.  In other words, Highly Inflationary.  B) No matter how oil independent we are, war in the Midlle East means the closing of shipping lanes through which most of the worlds goods are transported.  This will be highly inflationary.  C) War is highly inflationary.

3) Breakdown in norms of civility in the US.  This has reached a point far beyond anything I could ever have imagined, and I remember the Viet Nam era.  We're way beyond that in terms of  corrosive civil discouse.  As this worsens violence will follow and gold will soar.

4) Finally whenever the Debt problem -which is insolvable - except through Default which will cause endless depression or massive inflation - whenever this comes to the fore of US consciousness through cor;porate defaults, bank failures, mass layoffs. yield curve control, currency dislocations - all the things that regularly occur through the accumulation of massive debt - gold will soar.

If you don't think any of the above is likely - well you're in the club of mainstream american consciousness.  So you don't need gold anyway.  Everything is fine.

If, like me, you think everything above is occuring to some extent and it's just a question of when  it will intensify to the point where everyone will have to notice then the question of when gold soars is simply a question of when everyone will notice.

I'd say soon for some or all of it.

So how high is Soar?

Well, right now the US investor has allocated Half of one percent of their portfolio to gold.  The long term average is 2 percent.  At times of stress this has gone to 5 perecent.

You do the math.