SP:
IMO, the CB's can, in the short term, hold gold down via a coordinated effort, similar to what we've seen the past few months and they will continue to try. How long they can succeed is questionable. Historically, the CB's have never been right about gold. They have been a good contrary indicator regarding the prospects for gold. Virtually all the CB's are making a point to trash it. Gold is "the bottom of the pile" as one CB member said yesterday. We may see $280 short term, but recent events in the Asian currencies and yesterday and today in Japan are a stark reminder of why gold will always be the ultimate refuge. Right now, all the CB's are making a very determined effort to convince the world that gold is worthless; thereby, leaving paper currencies as the only "safe" refuge from instability. THEE currency of choice is the dollar. When the Asian problems come home to roost via the $600 billion in T-Bonds they hold, the dollar is doomed and gold will be the only refuge left. I believe we will see massive selling of US government securities by Japan, Hong Kong, and possibly China to prop up the Asian currencies so all the Asian countries can continue to export goods, which is all they can do to keep their economies alive. The only way the US can prevent that is to provide massive loans using the Asian countries US bonds as collateral, thus freezing them and preventing their sale OR buying the bonds outright rather than letting them be sold in the open market and driving the bond market into the tank and interest rates through the roof. Whichever way the Fed chooses, it must print massive amounts of dollars to monetize the US debt held by the Asian countries. This is exactly what we have done for years, exported our inflation via the hundreds of billions of dollars in US debt held by foreign central banks and private banks. At some point there will be so many dollars sloshing throughout the world monetary system, the dollar must fall. Anytime you increase the supply of something on a massive scale, the value will fall. IMO, the US dollar is no different. When that happens the dollar will fall, big time, and gold will shine again.
The problems in Japan and the Asian countries are the 'canary in the mine shaft' for the world monetary system, IMO. The Euro will be much weaker than other currencies, IMO, so that won't help at all when and if it comes into existence next year. The dollar is the linchpin of the world monetary system. If that goes, and given the massive foreign debt we have and the huge ongoing trade deficits, its fall is inevitable. When that happens, gold will be back big time. Looking at the scenes on my TV of lines of Japanese trying to get their money out of Yamaichi and another bank that went under today, that could be sooner than anyone thinks.
Terry |
