Few people believed me when I repeatedly warned that gold
was still in a bear market and had not yet bottomed. They said European Central
Bank (ECB) money printing would surely light a fuse under gold and propel it
higher. They said the rising tides of terrorism and war around the world would
surely send it higher. They said inflation would come roaring back, and gold
would soar.
They even claimed China was aggressively accumulating
massive amounts of gold, cornering the market to make its currency, the Yuan,
the strongest in the world. Some even said it will soon be known to all that
our own Fort Knox doesn't really have any gold and that our government got rid
of it all years ago.
While others claimed the dollar was going to crash, and
hence, gold would shoot the moon. To each and every one of these and more
stories and conspiracy theories I said, "BALONEY." They are all
merely theories put out there by analysts who either don't have a clue what
they are talking about, or have gross conflicts of interest, pretend analysts
who are really gold dealers in disguise.
Instead, I said, the main facts are these ...
A. The world is awash in deflation and cash is king. You'll
be hard pressed to find inflation anywhere. And certainly not in the two
biggest economies in the world, Europe and the United States.
Moreover, as I have said all along, hair-brained policies enacted
by inept politicians in Europe and the United States have sent money largely
into hoarding cash, which by default is bullish for the U.S. dollar and
deflation, and bearish for most asset prices.
True, some money is going into alternative assets like
diamonds, artwork and jewelry — but that's big savvy money that largely wants
to get off the grid. After all, you can
hop on a plane with $10 million worth of jewelry or even a Picasso, but try
doing that with gold bars or coins and you'll likely have it confiscated and
possibly even end up in jail.
B. $10 trillion of money printing can't do anything when
global debts are as high as $500 trillion. How can $10 trillion of printed
money by the world's central banks possibly make a dent in the global debt monster
of nearly $500 trillion of official and unofficial government debt?! It can't.
Which is why all the money printing has done absolutely nothing to prevent
deflation from taking hold.
C. Terrorism and war will not be immediately bullish for
gold. One day — in the not-too-distant future — the majority of investors will
wake up and smell the coffee: That Western governments of the world are going
broke, and as a distraction, are engaging in policies that provoke both civil
and international unrest and even war. When that time comes, then gold will
start to explode higher, with or without inflation. But for now, the majority
of investors don't know what's going on. So with almost every bounce in gold,
they buy more. And then they get chewed up and spit out as gold plummets still
lower. This is a necessary process in the bottoming of any market, not just
gold. The majority of investors cling to the wrong side of the market, almost
all the way down.
D. China is not looking to corner the gold market. I've said
this before and I'll say it again until I'm blue in the face.
A gold standard, in any currency, is ultimately
contractionary and deflationary. It has never once worked, despite what anyone
tells you.
It can't work. Why? Because authorities in charge of setting
the official exchange rate between gold and paper money can change it at will.
And because it subjects an economy to the nuances of new supplies of gold, or
the lack thereof.
If China were to impose a gold standard, its economy would
implode. It's that simple and Beijing knows it.
Moreover, as I have also stated many times before ...
1. China has never had a gold standard. Not once in its
5,000 year history.
2. China invented paper money. During the Tang dynasty
(618–907). Known as "flying cash" that was backed by copper-based
hard money, the paper notes were soon replaced by paper money with bank seals.
China's “flying cash” — first known paper money, developed
by the Tang Dynasty (618–907).
China's paper money invention traveled westward with the
Mongols, and by 1661, Marco Polo brought the paper money concept to Europe.
E. Western central banks have zero interest in gold. They
too have no interest in a gold standard. Period.
In addition, as I have also stated before, many Western
central banks will end up selling gold. Why? Two simple reasons:
1. Many are flat broke and need the cash. Greece will be
among the first to dump gold (or be forced to). Portugal, Spain, even Italy and
France will ultimately sell gold. As will other bankrupt European countries.
2. Neither the ECB or our own Federal Reserve want gold to
be a part of today's monetary system. They don't even want paper money to be a
part of it.
Instead, they are actively pursuing electronic currencies —
so they can track and tax you and even shut down the banking system at the
press of a button.
So what's next for gold? How low can it go before it finally
bottoms?
Subscribers to my Real Wealth Report and my premium trading
services have my more specific targets, as they should. So all I can tell you
right now is ...
A. Gold will likely soon bounce higher. That in turn will
get many analysts and investors excited, proclaiming the bottom is in. But ...
B. Once that bounce is over, gold will cascade lower to well
below $1,000 before bottoming.
So don't be fooled. Gold will go still lower. And so will
silver, platinum and palladium.
If you own inverse ETFs on any of the precious metals that I
have suggested in the past, hold them. I'll let you know when precious metals
have bottomed so you can grab your profits.
Source: moneyandmarkets.com
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