And, finally, that brings us to Gold.
goldversuspaper.blogspot.com
Gold won't collapse.
It had a vicious correction of 30% in the 2008 fall panic and then it was back up to $1000 a few months later during February.
A quick sell-off is possible, of course, but Gold will weather this storm VERY WELL.
How can I be so sure? Simple.
Central banks are now net buyers in the Gold market at over $1000/ounce.
When the hedgies puke,
India,
China,
Russia and
others
will step up and keep a bid under the market.
Central bank buying of Gold is a multi-year buying strategy, not a "make a quick buck by trading" strategy.
The writing is now on the wall for the current global currency system and people know that Gold can be relied upon as a currency regardless of what happens to the Dollar, Yen, Yuan, Euro or any other paper debt ticket.
For those projecting shocking drops in the Gold price and a complete deflationary wipeout (a la the 1930s scenario), I would counter that this is highly unlikely for one reason:
people don't trust the Dollar any more (as much as Americans would like to believe they do).
The Dollar can rise some relative to other counterfeited fiat paper tickets, sure, but Gold will re-emerge as the premier global currency, not the Dollar.
The Dollar has had its day in the sun and that time is past.
A heavily indebted nation rarely experiences a shocking rise in their currency's value when the poop hits the fan (ask Iceland).
I am not saying we can't have another "short squeeze" in the Dollar for a few months - we can and we very well may.
But if cash is king during deflation and you're a deflationist, look to real money (i.e. Gold), not the IOUs of an out of control debtor.
In the 1930s, we were on the Gold standard while others left it (e.g., England, Switzerland). We were also a creditor nation rather than a reckless debtor nation.
When other countries defaulted on their debts and Gold obligations/standards, money poured into the United States to hold our "good as Gold" Dollar and/or exchange their paper tickets for our Dollar so that they could then redeem those Dollars for Gold!
When we defaulted on our Gold obligation in 1971, we sewed the seeds of our currency's destruction.
Gold is the asset class at major new highs - not stocks, not commodities, not the Dollar, not real estate, not corporate bonds.
You can look at this and call Gold a bubble, or you can recognize massive relative strength and a major secular shift when you see it. The secular Gold bull is just now starting to reach critical mass in my opinion, and I believe it will keep right on going regardless of what the stock market does until the Dow to Gold ratio reaches 2 (and it may well go below 1 this cycle).
goldversuspaper.blogspot.com |
