Best of the Week
Most Popular
1.Stock Market Crash and Recession Indicator Warning: Extreme Danger Ahead - Harry_Dent
2. Is This How World War III Begins, In Almost Complete Silence? - Jeff_Berwick
3.Trump Wins 2nd Presidential Debate, Betfair Betting Markets Odds Bounce - Nadeem_Walayat
4.Why Krugman, Roubini, Rogoff And Buffett Dislike Gold - GoldCore
5.End of SPX Stock Market Correction Nears - Tony_Caldaro
6.Get Ready for the Future - Exponential Machine Intelligence Mega-trend towards Singularity - Nadeem_Walayat
7.US Housing Market Bubble II – It’s Happening Again! - Andy_Sutton
8.FTSE BrExit Stock Market Panic Crash Resolves towards New All Time Highs - Nadeem_Walayat
9.Can Trump Still Win Despite Opinion Polls, Bookmakers and Pundits all Saying Hillary has Won? - Nadeem_Walayat
10.Gold’s, Miners’ Stops Run - Zeal_LLC
Last 7 days
Stock Market Investment Success Through the “Investment Rule of 72” - 21st Oct 16
The Final Bottom in Gold - WHEN - 21st Oct 16
Gold Green Lights Upleg - 21st Oct 16
Demand for US Mints Silver Eagles has ‘Returned with a Vengeance’ - 21st Oct 16
Central Bankers Can't Stop The Death Blow Of The Post US Election Recession - 21st Oct 16
The Fortune at the Bottom of the Pyramid: Golden Opportunity for Frontier Asia - 21st Oct 16
Have You Taken These 4 Simple Steps to Improve Your Trading? - 21st Oct 16
The Stock Market is an Accident Waiting to Happen - 20th Oct 16
It's Rally Time for Gold and Silver Equities - 20th Oct 16
Cashless Society – Risks Posed By The War On Cash - 20th Oct 16
China's Insanely Leveraged Housing Market Will Enter Its Secular Bull Market In 2017 - 20th Oct 16
Donald Trump Bounces Going into 3rd and Final US Presidential Election Debate - 20th Oct 16
Attention Please: Phase Two of the Gold and Silver Train Now leaving the Station. All Aboard? - 19th Oct 16
How to Successfully Trade a Stock Market Crash - Black Monday October 19th 1987 - 19th Oct 16
Tesla, Apple and Uber Push Lithium Prices Even Higher - 18th Oct 16
Silver, Debt, and Deficits – From an Election Year Perspective - 18th Oct 16
UK Property Market: Slow Growth Does Not Equate To Decline - 18th Oct 16
Trump Election Victory is in Your Power - 18th Oct 16
Stock Market More to Come! - 18th Oct 16
This Past Week in Gold and Silver - 17th Oct 16
A Falling Stock Market Cannot Be Allowed - Financial Repression Is Now “In-Play”! - 17th Oct 16
Commodities, Forex and Stock Market Trend Forecasts - 17th Oct 16
Stock Market Crash..or No Crash? - 17th Oct 16
A perspective on risk rally – Risks abound but Stock Market is Confident - 17th Oct 16
Bank of England Blames Brexit for Sterling Drop Inflation, Masks QE Money Printing Cause - 17th Oct 16
From Piety to Pride to Pity, America's Racial Divide - 17th Oct 16
Is Obama Juicing US Government Spending To Get Hillary Clinton Elected? - 16th Oct 16
Seek Your Independence: Anything Else Will Destroy You - 16th Oct 16
SNL - US Presidential Debates, 1st, 2nd, VP - Like You've Never Seen them Before! - 16th Oct 16
End of Economic Growth Sparks Wide Discontent - 16th Oct 16
Donald Trump on Life Support, May Abandon Election Campaign and War on Republican Party - 15th Oct 16
The Gold Manipulators Not Only Will Be Punished, They Have Been Punished - 15th Oct 16
Black Votes Matter - Is the US on the Verge of Mass Race Riots? - 15th Oct 16
Gold Stocks Screaming Buy - 14th Oct 16
Brace Yourself for the Quadrillion-Dollar Reckoning - 14th Oct 16
The Next Recession Will Blow Out the Budget - 14th Oct 16
John Mauldin: My Infrastructure Plan to Save the US Economy - 14th Oct 16
World War III On The Brink: War Will Continue Until It Triggers Economic Collapse - 14th Oct 16
US T-Bill Rejection At Ports In Progress - 14th Oct 16
These 2 Debt Instruments Pose Peril to Millions of Investors - 14th Oct 16
China’s Rocketing Housing Market Real Estate Bubble - 14th Oct 16
DIY Winter Home Maintenance Money Saving 22 Point Checklist to Get Ready for Winter/Fall - 14th Oct 16
US Stock Market, Big Picture View - 13th Oct 16
Stock Buybacks Main Force Driving Bull Market; Rewards Investors and Starves Innovation - 13th Oct 16
SPX Gapping Down... - 13th Oct 16
Syria - Obama Stepped Back From Brink, Will Hillary? - 13th Oct 16
The Structure and Future of Gold in the Investment and Monetary World - 13th Oct 16
Can Trump Still Win Despite Opinion Polls, Bookmakers and Pundits all Saying Hillary has Won? - 12th Oct 16
Gold and Crude Oil - General Stock Market Links - 12th Oct 16
Samsung's Galaxy Battery Just The Tip Of The Iceberg - 12th Oct 16
Hillary: Deceit, Debt, Delusions (Part Two) - 12th Oct 16
Gold and Silver Metals Show Strength Relative to the USD Index - 12th Oct 16
Announcing Trader Education Week -- a Free Event to Help You Learn to Spot Trading Opportunities - 12th Oct 16
Confirmed Stock Market Sell Signals - 11th Oct 16
Hillary Deceit, Debt, Delusions - 11th Oct 16
Trump Support Crashes to New Low of 6.4 on Betfair Odds Betting Market - 11th Oct 16
The World Is Turning Dangerously Insular - 11th Oct 16
An American Tragedy: Trump Won Big - 11th Oct 16

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

LEARN to Trade

Gold Real Money in a World of Fiat Currency

Commodities / Gold and Silver 2011 Apr 02, 2011 - 10:02 AM GMT

By: Clive_Maund


Best Financial Markets Analysis ArticleSince the Masters of the System have decided to arbitrarily "move the goalposts" to suit themselves by printing money in unlimited quantities, fixing interest rates at artificially low levels, and backstopping the bond market etc, it is incumbent on us as investors to find a fixed point of reference and safe anchorage, the better to weather the financial storms that their crassly irresponsible policies are bringing upon us. That fixed point of reference is gold. As gold is real money it is aloof from the mess and mayhem that now exists in the world of fiat and which is rapidly getting worse - and here it is necessary to make a crucially important point, which is that at this time in world history you have to completely reorder your thinking with respect with gold.

STOP nervously going online or picking up the newspaper to check the price of gold against fiat - it is IRRELEVANT. The question you have to ask yourself is this - do you want to preserve your real wealth or not? - because if you do you are going to have to transfer your assets out of fiat and into tangibles, the King of which is gold. If gold is the King then silver may fairly be called the Queen - these two precious metals are like the sun and the moon, and are rapidly becoming the two leading lights in the investment firmament, which is a fair analogy - and you will recall that the Incas, who worshipped the sun, were big fans of gold.

The situation is gravely serious, for we talking about more than speculative gain here, although we will obviously go for that. Much more seriously we are talking about financial survival and possibly even physical survival. You will all have read the ridiculous predictions about the world population ballooning to about 11 billion people by 2040 or so. That is not going to happen because the life support systems and resource supplies of this planet will buckle and fail long before the population can reach such horrifying levels, leading to mass famine, wars and widespread panic and desperation, and we are already seeing signs of it with rapidly rising food prices leading to social unrest and revolutions. If you thought that the last century was bad what with 2 World Wars, the Cold War and nukes being used on cities etc, wait till you see what happens during this century - which will probably end up being known as the "Century of The Cull" - compared to what is coming the last century will seem like a golden age. From an evolutionary standpoint this is of course necessary, as the bloated human population, which is wrecking the planet, needs to be dramatically cut back into line with what is sustainable. As mankind has shown no mercy whatsoever in its ever increasing exploitation of the natural world by doing such things as chopping down the rainforests and fishing out the seas and and is bringing global ecosystems to the verge of collapse, it can likewise expect no mercy from either God or gaia.

Right now the Masters of the System, driven as ever by short-term personal gain, and unable to face the consequences of their earlier actions, are steering the world towards a hyperinflationary abyss, and unfortunately the momentum in this direction has now become unstoppable. Up until quite recently it was thought that it was primarily the US that was headed in this direction, but it would appear from their actions - and from the price of gold in their currencies - that many other nations are keen to follow the example of the US, kind of like the old Tom Lehrer song We will all go together when we go. You can tell how old this song is not just from the attire and demeanour of Tom Lehrer, but from the fact that he refers to "3 billion hunks of well done steak", which would now have to be revised to 7 billion, i.e. the world population has more than doubled since he sang this song.

Given the gravity of the situation and the widespread fraud and plain theft that we can expect to follow as a matter of course, it is of the utmost importance that those investors wanting to buy gold and silver aim for physical possession of these metals or at the least have them stored with a reputable depository that is out of reach of government thieves and other brigands who are likely to call looking for it when TSHTF. Under no circumstances trust ETFs as gold and silver investments - a classic line from them in the future might be "We're awfully sorry - we really did have the gold, but we loaned it out to the Treasury". In this respect the stocks of the better gold and silver mining companies are regarded as a much safer place to park funds.

The growing appreciation by investors of the increasing worthlessness of fiat is what has caused them to pile into not just gold and silver, but commodities in general, the bullmarket in which has been energized even further by the growing leveraged dollar carry trade. Back in the 1970's when investors sought protection from the ravages of inflation they also went for collectibles such as paintings and stamps, but in the more brutal world we are headed towards such investments are going to be regarded as foppish and impractical - paintings can be slashed with a knife or a sword, stamps can be burnt and instantly become worthless - it's a lot harder to destroy gold. While the oil price will also rise, particularly if the Mid East really gets out of hand, you can't go storing barrels of oil in your back yard because of their bulk and the fire risk, so for private investors it has to be gold or silver.

Returning to our central theme in this update which is to change your thinking so that you regard gold as real money and fiat as the instrinsically worthless rubbish that it really is, you can start to view gold as a constant plus, or constant +. Constant because whatever happens in the crazy world of fiat, gold retains forever its intrinsic value. The plus refers to the all important fact that as fiat approaches its nemesis, exponentially increasing sums of money are going to be directed at buying gold by those seeking safe haven for capital. Since the supply of gold is finite, and relatively very limited compared to most other investments, it will mean that those wanting to gain possession are going to have to bid the price up and up and up. Classic principles of supply and demand dictate that in such a situation the price will go through the roof, meaning that gold should rise enormously in price compared to just about everything else - the relatively orderly advance we have seen up to now will morph into an accelerating parabolic arc. This is what we mean by constant +, and the price won't be coming down in a hurry either - not until the fiat money system blows itself to smithereens and is totally discredited, as happened in Zimbabwe. At this time we can expect some kind of gold standard to be reintroduced and the irresponsible opportunists who brought about this collapse will likely have fled to haciendas in Argentina or some other far flung place.

In the light of the accelerating global monetary crisis we are going to take a more liberal approach as we review the charts for gold, and are not going to go into paroxisms because of a slight break of a trendline, for example. Keeping in mind that gold is real money and that the currencies are essentially rubbish we will now review the charts.

Starting with the 4-year chart for gold we can see that after completing a rare high level Head-and-Shoulders continuation pattern, gold has essentially been in a steady uptrend above its rising 200-day moving average, with any approach to this average marking a buying opportunity. Some writers have tried to claim that a bearish Rising Wedge is forming in gold, but have taken the top line of the Wedge as starting from the early 2008 high. This is technically inaccurate because you cannot draw the top line of a new uptrend from the peak of a prior uptrend. If there is a bearish Wedge forming, the top line of it would be drawn from the Nov 09 peak, but similar to today you could have claimed that a bearish Wedge was forming after the price peaked in June of last year, as shown on the 2-year gold chart, but it never came to pass.

At this point there is one scenario we should note where gold could drop sharply against the dollar over an intermediate timeframe. We know that public opinion on the dollar is very bearish and also that dollar carry trade speculators are highly leveraged at this time - if they were to become unsettled at the prospect of rising rates in the US, which at some point is likely to be forced on the Fed, they might scramble to close out their positions and drive a temporary dollar spike, kind of like 2008, but this time round PM stocks are unlikely to get dumped as in 2008 because the hedge funds are now short the sector, instead of heavily long as they were in 2008. The key point to note here though is that even if speculators switch back into the dollar temporarily and drive it higher, that won't stop gold rising in other currencies - on the contrary it could rise even faster - and it won't stop the relentless global expansion of the money supply.

Even against the Swiss Franc, considered to be the "Rolls Royce" of fiat, gold has been marching steadily higher and looks to be a buy after the recent consolidation, and it has of course been rising even more strongly against most other major currencies, a dramatic example being that of the shoddy British Pound.

This collection of charts by the National Inflation Association of the US is required reading for all of you - don't just skim read this - TAKE THE TIME to really take this on board. Not only do these startling charts reveal the groundwork that has been laid in the US for hyperinflation, but they also strip out the intentional distortions of the massaged CPI figures to reveal the true upside potential for gold and silver (and other commodities).

So there you have it. Buy as much physical gold as you can lay your hands on, make sure it's safely stashed out of reach of bandits. Avoid paper gold and silver and ETF scams. Gold shares in the better producers or near producers should do really well and be good investments. In general get out of fiat of all kinds, especially currencies and bonds/Treasuries etc which are garbage - and when you've done that, QUIT WORRYING and get on with your life.

Readers in California are advised to remain on a heightened state of alert and preparedness for a possible major earthquake, as set out in the article An important message for readers in California. Tectonic plates in 3 of the 4 quadrants of the Pacific Basin have made major moves over the past year, Chile, then New Zealand and most recently Japan, which is increasing the chances that the 4th quadrant, the NE quadrant, will move soon.

While this Gold Market update may appear to be gloomy and negative (not about gold but about the world in general), it is only intended to be realistic. Remember that by hoping for the best and being prepared for the worst, you will be much better placed to ride out rough times than the "ignorance is bliss" crowd, which happens to comprise the majority of the population. Furthermore, being prepared for the worst does not imply sinking into a state of negative apathy. No matter how bad it gets there are always things you can do to improve the lives and circumstances of the community around you and those who are prepared to face things as they are and take the necessary steps to protect themselves and those closest to them will have the strength and resolve to do just that.

By Clive Maund

For billing & subscription questions:

© 2011 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund Archive

© 2005-2016 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


04 Apr 11, 13:27
oil prices

Since the beginning of 2009, oil prices have almost tripled, gasoline prices are up about 50 percent, and basic food prices, such as corn, soybeans, and wheat, have almost doubled around the world. Cotton and copper prices have reached all time highs; major rises in sugar, spice, and wheat prices have been creating food riots in poor countries, where basic goods inflation is rampant. That inflation is in part financed by the flood abroad of excess dollars created over the last couple of years by the Federal Reserve.

Those dollars also made possible the emerging market equity boom of 2009-2010. But foreign authorities are now raising interest rates as growth shifts to the United States and Europe. The years 2011-2012 will witness a Fed-fueled expansion in the United States. Unless there is a major oil spike from here, growth for 2011 in the United States will be above the new consensus of 3.5 percent—perhaps as high as 5 percent this year, with about 8 percent unemployment at year-end.



I would check out the full article, its pretty relevant to what youre discussing above.

06 Apr 11, 10:40
Fiat Money

I have been finding money interesting for a long time. If anyone wants i found this link the other day when I was searching some things. It seems to be very interesting and there is a lot of information on the website as well.

Does anyone have any information like this that I would be able to look into?

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife