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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Let’s Talk About Gold!

Commodities / Gold & Silver 2009 Oct 20, 2009 - 03:00 AM GMT

By: David_Vaughn


Best Financial Markets Analysis ArticleWow!  What can you say about gold?!

It’s amazing how quickly now things are developing.  The dollar is falling faster than anyone guessed and the rise of inflation will be just around the corner. What we are entering now is equivalent to falling into a black hole.  We have gone too far with the mindless money creation.  Now the rest of the world realizes that any investment in the dollar is guaranteed simply to depreciate.  Even light does not escape from the depths of a black hole.  The US dollar sure isn’t going to do any better.

And now the US dollar has begun its voyage down its own black hole.  We are entering an era that will in the future be referred to as “the death spiral of the US dollar.”  I suppose the blind and stupid are not noticing any of these present events occurring with the dollar.  And why should any one really care.  The United States is invulnerable, right?  Well, the country is convinced the “recession” is over because the Dow went above 10,000.  The last three months have shown the greatest number of foreclosures so far.  And did you know it is now against the law in California to purchase a flat screen TV if the government has determined it uses too much energy?

What happens when the world’s central banks and foreign investors quit buying the US dollar?  To sum up… the interest rates will have to change direction.  Not a real good thing.  Do not pay attention to the day to day changes in the price of precious metals.  Keep your eyes on the long term. 

According to the highly acclaimed “The Economist” “a fundamental change is coming.”  And it is happening now right before our eyes.  When something begins to fall it is generally gradual, but over time the fall builds up steam and the slow fall becomes a rush.   As the US dollar is little by little abandoned where will the investment currency go?  Hard assets that are worth something.  We continue to forget that Japan is still fighting deflation for about 20 years now.  What has kept Japans head above water all these years is the fact that the Japanese had low debt.

And now we see gold soaring.  Did you hear?  Gold is soaring.  Did you catch that?  Maybe not.  You were busy spellbound watching “Dr. House.”  Well, I’ll repeat it again for those not paying attention.  Gold is rising in value. Gold's duel role as both a currency and an asset grow as financial risk increases.

Frank McGhee, Precious Metals Trader Integrated Brokerage Services – “[Gold] turned higher predominantly on the perception of a weakening dollar…”   “Gold's upswing was also due to the potential for increased inflation…”

And why is it soaring so?  Because the United States dollar is crumbling under its own weight. George Soros, said the American recovery would be "very slow" because consumers were "overdebted" and the banks were "basically bankrupt”.

China is holding on to their mined gold and selling to no one outside China.  The Chinese government is also stressing to their citizens that they should be buying gold.  The Chinese government is well aware of further economic madness and they want their citizens to be prepared.  Asians generally do not trust paper money.  Even the Chinese banks are gold buyers.   1.3 billion people in China being told by their government to buy gold.

What keeps the US working class so busy it does not recognize the dollar slipping down the golf hole?  Lotteries, cheap beer, television, computer games.  It seems that the general population no longer thinks, except when thinking about the weekend or Dr. Cuddy. Will the world end when the dollar crashes?  I don’t think so.  Will things change and be different?  Yes.

The American consumer still is totally in the dark concerning the coming dollar fender-bender. Inflation is here now no matter what our government tells us. The 2009 deficit will run to 1.5 trillion.   About 3 times what it was in 2008.  Unemployment is estimated around 10%.  Its amazing how so many other countries are very aware of a continuing financial catastrophe, but not the US.  Can we imagine what the 2010 deficit will be?  If we are even still here.

 “…investors remain concerned that a bout of inflation is on the horizon.”  “Analysts expect the streak to continue…”  “Gold is also being supported by persistent concerns that government efforts to stimulate the economy will cause inflation to rise in the future. Precious metals are seen as a hedge against rising prices because they store value better than other types assets.” "Though inflation is not an issue now, it's going to come back with force," said Kathy Lien, director of currency research at Global Forex Trading. " “The things that the Treasury and the Fed are doing to the U.S. financial system are setting gold up to be supported for some time…”

How can we prepare ourselves in these deteriorating times?  Acquire hard assets, prepare for volatility and it is very possible that your rewards will be worth your while (seriously) over the next few years.  Prepare for the coming crisis by purchasing physical gold and physical silver.  Buy the real stuff…. buy solid silver and gold in the flesh and look at mining stocks as secondary speculative investments.  The paper traded ETF’s many have never totally trusted.  Own the real thing and bury it in your back yard.  Do NOT put any of your holdings in your deposit box at the bank.  Below from an email reader.

“Your article in XXXXX, "You Lie", is outstanding--I read every article that you write for XXXXX--Don't let up-- Ron W.”

Prosper from the coming devaluation of the dollar…own gold and silver.  We are moving very quickly to a calculated devaluation in the dollar.  We live in historical and interesting times. Jim Sinclair, gold guru, is offering a 1 million dollar bet that gold will reach $1,650 by the first month of 2011.

 “The US is too dependent on Japan and China buying up the country's debt and could face severe economic problems if that stops, Tiger Management founder and chairman Julian Robertson told CNBC.”  “If the Chinese and Japanese stop buying our bonds, we could easily see inflation go to 15 to 20 percent…” he said. “We're in for some real rough sledding…” Julian Robertson

Hold your physical gold and physical silver and do not place any thing of value in your bank deposit box.  Already across the nation deposit boxes are being opened and the contents auctioned off by the banks to raise money.  Bank of America being one of these banks.  Again, do not place any thing of value in your bank deposit box. 

And where will investors put their money when the dollar is crashed?  Gold and silver will be the only viable options as a safe haven. Peter Schiff believes we will yet see gold at $5,000 an ounce. Foreign creditors need ever more assurances that the U.S. will be able to address its substantial deficit, Roubini has stated. Is gold becoming scarcer?

“The increasing scarcity of gold deposits is forcing mining companies to search in more politically risky countries…” “There were only two gold discoveries in 2008 of more than two million ounces each, compared to four in 2007 and about 20 in 1999…” "Printing money will clearly lead to inflation, it is just when…” - XAVIER LA CANNA

Get your savings out of banks, US government debt and anything connected with US stock or bond markets. Most American banks today are already broke.  And of course the FDIC is broke.  Maybe you will be able to get 30 cents on the dollar when the entire system collapses.  Even simple money market funds are not safe.  Only gold or silver related assets offer real security. And as the dollar crashes and the middle class is wiped out who will be left holding the reigns of power?

"The lands of Italy, which had been originally divided among the families of free and indigent proprietors, were purchased or usurped by the avarice of the nobles; and in the age which proceeded the fall of the republic, it was computed only two thousand citizens were possessed of any independent substance."  Edward Gibbon, Decline…

There is no question that the powers that be are now sacrificing the US dollar. There is no reasonable way that the federal debt will ever be paid down for real.  What is it?  Around 100 trillion total?  That’s a lot of debt. At least over 13 trillion bucks have been thrown at the financial crises.  How much more yet is to be spent?  Oh, I forgot.  We are spending our way into prosperity. 

Yes, with simple paper certificates backed by nothing we are going to bring wealth back into the economy of the United States.  My head is spinning.  Don’t know about yours.  Doomsday is not quite here but the constant new debt to consider is horrifying to think about. 

The US made massive guarantees to US banks and foreign banks to hold this financial mess together these past couple of years.  And with all this looming new massive debt over our heads we want to create a government financed health care system for all?  Could be they are right.  Maybe money does grow on trees. 

”But one thing is for certain: With the price of gold jumping to $1,048.20 per ounce, traders who moved early enough stood to make millions.” “And over the past several months there has been a steady drumbeat of Chinese, Russian and other officials who have talked openly about finding a replacement for the dollar as the global economy’s default currency.”

Eamon Javers,

Lenin once said so many years ago, “The best way to destroy the capitalist system is to debase the currency.”  As the time passes our nation is beginning to look like a banana republic third world county.  The number of foreclosures is growing.  Just the past 3 months have broken a record for homes foreclosed. And the Feds only response and silver bullet is to print more and more paper money. 

Never before has the United States been so divided.  In every way.  Are we one nation and one people any more?  A nation exists only when there is a commonality that binds the people together.  Where is that cohesion today? The division of class is widening more than ever.  Today, we are divided by classes, culture, those with money and those who are struggling from week to week. There is nothing really that holds us together as a nation apart from a shared desire to go into debt over and over again.  Diversity is fine, but shouldn’t we also see harmony as a unified US?

Will a dollar flop drive our nation closer together or will we continue down the path to a country that is at odds with one another?  Maybe a great depression will bind us together again as all of us find ourselves sharing the same box to live in.  In time sharing the same government provided dirty blanket may bind us together.  A national emergency often pulls a nation together as did World War 2.

"I think the moves to the upside will be far quicker in their velocity, hitting $1,100 very shortly and then far higher over the next few years…"  Peter McGuire, Commodity Warrants, Australia.

Our birth rate is declining.  Much of those would be births are exterminated and tossed in biological waste dumps.  The moral code that once held us all together is dead as it can be.  Nationalism continues to be replaced by globalism.    We will in due course see what does happen as our country folds and the dollar dies. Can’t even comprehend how high inflation will be then.  Anyone holding cash will be wiped out.  Anything is really possible with gold as this collapse continues on.  Invest in gold mining stocks for leveraged gains in a rising gold environment.

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“I know not what course others may take, but as for me, give me liberty or give me death.”  Mr. Henry

David Vaughn

The future legacy of the United States will be the refined art of financial leverage.

© Copyright 2009, Gold Letter Inc.

“The Worldwatch Institute, an organization that focuses on environmental, social and economic trends, says the current rate of global demand for resources is unsustainable.”  

The publisher and its affiliates, officers, directors and owner may actively trade in investments discussed in this newsletter. They may have positions in the securities recommended and may increase or decrease such positions without notice. The publisher is not a registered investment advisor. Subscribers should not view this publication as offering personalized legal, tax, accounting or investment-related advice. The news and editorial viewpoints, and other information on the investments discussed herein are obtained from sources deemed reliable, but their accuracy is not guaranteed. © Copyright 2009, Gold Letter Inc.

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