The Case Behind Gold.....
This month sees gold continue to make new highs against the world's developed nations and their worthless currencies which includes my country of Canada. The price is banging up against the 1607 area for the US Dollar and I think it will breakthrough. Something is going on with the precious metal or it wouldn't be where it is. No, I am not talking about all those conspiracy theories out there but something is up. Central banks are allowing it to rise in price.
Why is anyone's guess but my own guess is that we may see a gold-backed cryptocurrency such as Fed coin for example or something like that which will make it easier for central banks to do transactions and will allow them to progress to a cashless society? I think that this is the unspoken goal of central banks around the world. If they do peg the crypto to gold (which doesn't really seem practical) then the price of gold would have to be much, higher.
How much higher?
I honestly don't know?
Some say 3000, some say 10,000, some say 50,000?
They all present compelling cases for gold to be at that level in resetting the global economy with some sort of SDR (special drawing rights) format.
I think that debt and deflationary pressure will keep gold from going too high. Yes, that is right I said deflationary pressure. I say this because the pressures that are being exerted on the global economy at the moment are deflationary, not inflationary. With people unable to save and spending slowing with the repo market problems, this is not inflationary. Debt slows the velocity of money as people become more encumbered not the other way around. This is where we are at this point in time. You see delinquent auto loans, student loans, credit card loans and now to a degree subprime mortgage loans all serve to slow down what the consumer can spend on. What the Fed was trying to do and generally succeeded was to prevent debt contagion from spreading. By recapitalizing the big banks they, in turn, keep their books in good standing and continue to make loans. However, that does not alleviate the debt problem. The only thing that can do that is inflation where you swallow up the debt. However to allow inflationary pressure to do that you must have adequate wages and this is a problem area too. The question one asks is how many jobs can a person have to ward off default?
Good question?
You have to be careful here because if you allow gold to rise too quickly people desert their paper money or digital money for gold. So my own case for gold is it might make new highs against the US Dollar but I do not think it will be allowed to rise too fast. I hope that helps you with physical gold.
As for the miners, they are still at bargain prices but they may stay that way too so don't be too quick to jump into them as I have already told you what I think about a new commodity boom cycle. Cheers!
Why is anyone's guess but my own guess is that we may see a gold-backed cryptocurrency such as Fed coin for example or something like that which will make it easier for central banks to do transactions and will allow them to progress to a cashless society? I think that this is the unspoken goal of central banks around the world. If they do peg the crypto to gold (which doesn't really seem practical) then the price of gold would have to be much, higher.
How much higher?
I honestly don't know?
Some say 3000, some say 10,000, some say 50,000?
They all present compelling cases for gold to be at that level in resetting the global economy with some sort of SDR (special drawing rights) format.
I think that debt and deflationary pressure will keep gold from going too high. Yes, that is right I said deflationary pressure. I say this because the pressures that are being exerted on the global economy at the moment are deflationary, not inflationary. With people unable to save and spending slowing with the repo market problems, this is not inflationary. Debt slows the velocity of money as people become more encumbered not the other way around. This is where we are at this point in time. You see delinquent auto loans, student loans, credit card loans and now to a degree subprime mortgage loans all serve to slow down what the consumer can spend on. What the Fed was trying to do and generally succeeded was to prevent debt contagion from spreading. By recapitalizing the big banks they, in turn, keep their books in good standing and continue to make loans. However, that does not alleviate the debt problem. The only thing that can do that is inflation where you swallow up the debt. However to allow inflationary pressure to do that you must have adequate wages and this is a problem area too. The question one asks is how many jobs can a person have to ward off default?
Good question?
You have to be careful here because if you allow gold to rise too quickly people desert their paper money or digital money for gold. So my own case for gold is it might make new highs against the US Dollar but I do not think it will be allowed to rise too fast. I hope that helps you with physical gold.
As for the miners, they are still at bargain prices but they may stay that way too so don't be too quick to jump into them as I have already told you what I think about a new commodity boom cycle. Cheers!
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