First off, my belief in gold as a monetary asset has not wavered. Japan basically admitted that it is bankrupt with its intention to aggressively debase its currency. Normally such actions would invoke, and may still, a race to the bottom as each country engages in economic warfare to deal with its debt issues. At this juncture the fear of global deflation among the G7 crowd remains its worst nightmare, especially as additional stimulus by the Federal Reserve is showing diminishing returns. With high debt levels in both the private and public sectors around the world, stimulating economic growth is proving elusive. These alarming events are setting the stage for the next leg up in the dollar gold price, in my opinion. The fiscal and monetary crisis is ongoing and underscores the necessity of owning gold assets.
Though agonizing, the past 18 months have been nothing more than a consolidation for gold from the September 2011 highs of $1,900/ounce ($1,900/oz). The recent decline in gold prices below $1,500/oz is not the end of the bull market in gold, despite the barrage of negative commentary by those wanting to dance on gold's grave. The destruction of currencies is in full bloom, but it is not a straight line. The problem for many gold investors is that they can see the endgame. Gold prices rise in a straight line at the end of a monetary system, but we are not there yet. It takes some patience to hold the course while the establishment fights tooth and nail to keep the dollar system from failing. ...
The rationale for owning gold assets remains simple: global deterioration of sovereign credit and a growing need to debase currencies in order to meet future obligations, whether it's here in the U.S., Europe or Japan. The policy of socializing risk with monetary and fiscal policy has destroyed the balance sheets of the Western world. We are in a phase of experimental central banking, which I believe is going to end badly due to the dislocations of capital it has caused through prolonged periods of negative rates.
In the event economic growth were to take hold, an unleashing of built up reserves in the system would set off inflation with a corresponding rise in rates. Just imagine the effect of a change in the direction of interest rates and the collateral damage that will create in the bond markets and the interest rate derivative markets after all of these years of managing a zero interest rate policy. The cost of funding the U.S. deficit will rise exponentially. More quantitative easing begets more quantitative easing. Investors need to have some type of asset to balance their portfolios. Policymakers who got us into this mess are unlikely to navigate us out of it. History tells us that only gold is a good place to be.
Though agonizing, the past 18 months have been nothing more than a consolidation for gold from the September 2011 highs of $1,900/ounce ($1,900/oz). The recent decline in gold prices below $1,500/oz is not the end of the bull market in gold, despite the barrage of negative commentary by those wanting to dance on gold's grave. The destruction of currencies is in full bloom, but it is not a straight line. The problem for many gold investors is that they can see the endgame. Gold prices rise in a straight line at the end of a monetary system, but we are not there yet. It takes some patience to hold the course while the establishment fights tooth and nail to keep the dollar system from failing. ...
The rationale for owning gold assets remains simple: global deterioration of sovereign credit and a growing need to debase currencies in order to meet future obligations, whether it's here in the U.S., Europe or Japan. The policy of socializing risk with monetary and fiscal policy has destroyed the balance sheets of the Western world. We are in a phase of experimental central banking, which I believe is going to end badly due to the dislocations of capital it has caused through prolonged periods of negative rates.
In the event economic growth were to take hold, an unleashing of built up reserves in the system would set off inflation with a corresponding rise in rates. Just imagine the effect of a change in the direction of interest rates and the collateral damage that will create in the bond markets and the interest rate derivative markets after all of these years of managing a zero interest rate policy. The cost of funding the U.S. deficit will rise exponentially. More quantitative easing begets more quantitative easing. Investors need to have some type of asset to balance their portfolios. Policymakers who got us into this mess are unlikely to navigate us out of it. History tells us that only gold is a good place to be.
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