Rise Of The New Gold Rush
Giordano Bruno

They called us "kooks" and "crackpots". They said our ideas were outdated and incompatible with modern finance. They said it wouldn't last. Oh yes, Gold, they said, was a silly investment with no inherent value, and soon, precious metals investors would be "wiped out" by the "inevitable implosion of the gold bubble" (gold bubble....?). Mainstream establishment economists and Keynesians have been yipping and snarling like overanxious Chihuahuas for the past two years against gold and silver, most specifically their use as a hedge against collapse in stocks and currencies.

The vitriol they have aimed at PM's and PM enthusiasts, though, borders on the obsessive. If we are all "crazy survivalists" and Y2K'ers, then why bother with us? Wouldn't the folly of our financial strategy be blindingly evident to the majority of investors if we really are all madmen waiting for the seas to boil? If there is no chance of monetary implosion, why bother to plead and beg with the average American NOT to buy gold? Why invent wild generalizations and stereotypes of precious metals investors to dissuade the public from examining our model for economic security? Wouldn't the mere passage of time prove us inaccurate? What is it about gold that frightens them so.....?

As it turns out (and just as we expected), gold and silver have held strong and even made record gains. Gold is one of the top performing investments of the decade, rising over 277% in value from 1999 to 2009:


All while the media published assassination attempt after assassination attempt, lashing out at gold in a vain effort to dissuade the masses from even considering any option outside stocks and the dollar. Their dismay at gold's meteoric rise is evident, and there are many reasons why they were unable to predict it. One; establishment economists are used to a particular status quo, a certain narrow way of looking at the ebb and flow of the economy. They have lost all ability to imagine or comprehend unique scenarios. When confronted with a problem or environment that is new, or beyond the scope of their experience, they lose objective footing, and simply deny that the situation exists at all. Two; gold is the bane of any system based on fiat money creation and centralized financial control. Precious metals represent competition to paper currencies as well as an alternative that protects against the hidden tax of inflation. Possession of gold allows one to be independent, or "off-grid", in the fiscal sense. Establishment analysts are commonly taught during their formative years in university to ignore or even despise the idea of a gold standard, producing an army of talking head economists who parrot the global elitist ideology. Three; for years, naked short selling of PM's, and the overselling of metals securities (paper stocks representing gold and silver that the banks don't actually have), has been used by the banking elite to suppress gold and silver prices. Recent exposure by whistleblowers, with the help of organizations like GATA, are beginning to lay open this fraud, while foreign central banks have been stockpiling gold unabated for the past year-and-a-half at least. Demand for physical is beginning to overwhelm the big banks and their ability to manipulate paper securities. The dynamic of the market is changing, and mainstream investment forecasters are falling far behind.

We believe that the fundamentals today show that this is just the beginning for precious metals and that they may soon play an essential role in events to come...

Gold And Silver Break Into The Mainstream

Precious metals are making waves in mainstream investment lately, and this has establishment cronies and apologists on the war path, making wild and unsupported statements about gold and silver. This segment from CNBC's ‘Closing Bell Exchange' hosted by Maria Bartiromo is a prime example of anti-gold propaganda, in this case aimed at Ron Paul, of course:


The man making the attacks on Paul in the video above is Ron Insana, who ironically, tried to start a hedge fund company in 2006 after leaving CNBC, only to run it into the ground less than two years later. Investors who sunk money into Insana's company received a -5% return. Insana charged his investors "management fees" during his fund's operation, which means, not only did he lose their money, he also charged them for the opportunity to lose their money! And now, we are supposed to take the advice of this financial hack over the advice of Ron Paul, who predicted the subprime collapse years in advance as well as the subsequent recession, and the skyrocketing price of gold? How would you have fared if you had invested on Ron Insana's advice vs. Ron Paul's advice? Read more here:


CNBC's Maria Bartiromo has since run with the anti-gold rhetoric on her show, accusing Ron Paul of a "conflict of interest" in his quest for a gold standard because he also owns gold (Ron follows his own advice. This should be respected, not ridiculed). Bartiromo, as far as I can tell, knows little to nothing about real economics, but the mainstream media, especially in the field of finance, is commonly overrun with incompetent people who are willing to tow the global corporate line for a paycheck. CNBC's ratings, by the way, have suffered record declines in the past couple years. It won't be long before these people are only talking to themselves:


Despite the yammering of media clowns, many in the general public are turning towards gold as a viable option for protection of savings. The World Gold Council has predicted according to current trends that gold demand will be very strong for 2010, not just by central banks, but by private investors as well:


China's gold demand is projected to increase by 50% in the next ten years (a conservative figure in my opinion). Last year, China alone accounted for 11% of global gold demand:


Since around 2007, gold bullion (physical gold) is now outperforming gold stocks (paper gold). There is now a very discernable divergence between the values of paper gold stocks and the physical metal:


There are many reasons for this decoupling, but I believe the main cause is the fact that more and more people are demanding physical delivery of their gold instead of allowing their investments to remain as abstract ‘securities' which exist in writing only. More investors are beginning to dump their holdings of paper traded gold and mining stocks and are now buying coins and bars, which is why the price of physical is dominating over stocks. This is supported by reports of gold shortages across the world.

In the UK, dealers are struggling to meet gold coin demand:


And German dealers are snapping up disappearing gold Krugerrands as fast as possible in light of the EU's sovereign debt crisis and the falling euro:


Gold bullion demand has led to increased need for storage. Vault operators world wide are now straining to meet the new requirements for protected storage space:


Total announced gold ETF holdings now exceed total world production, while global mining output of gold is falling rapidly (ETFs are supposed to stockpile gold bullion, as opposed to ETNs, which use derivatives, however, there is evidence to suggest that some ETFs claim to hold gold reserves they don't actually have) . South African mines have seen output drop by 50% or more over the past ten years. What this means is that by a simple function of supply and demand, gold should leap in value over the next year. The Swiss asset management firm UBS has now predicted gold will rise to $1500 an ounce in the next six months:


Of course, this prediction would be correct only if current economic instability remains steady, and does not accelerate. If the situation becomes even more untenable (which is likely), gold and silver could jump to levels never before seen by modern markets. The current fervor for precious metals and the protection they provide is only the beginning...

Inflation Or Deflation?

Ever since the recession/depression took hold of the U.S., economists and analysts from around the world have predicted that one of three possibilities would result. Some have forecast a V-shaped recovery, or even a "jobless recovery". It is obvious now that a V-shaped recovery is a pipe-dream, and there is no such thing as a recovery without job creation to provide support. The other group (those who realize that we have only seen the onset of this collapse) is split into two camps; Inflationists and Deflationists.

Traditionally, those who believe inflation is imminent pull away from Dollar based investments and turn to PM's as a hedge against currency devaluation. Deflationists on the other hand, usually believe that the Dollar will maintain or increase its value and that commodities like gold will fall in value along with everything else. Problems arise though in this dynamic because there are many variations of "deflationary theory" and "inflationary theory", not to mention about as many definitions for inflation as there are economists. Even those who agree that there will be inflation often disagree on the form that inflation will take.

This confusion has arisen, I believe, because we are confronted with a fiscal conundrum no one has ever faced before, composed of elements that have occurred in the past, but never occurred together in the same event. We are seeing functions of both deflation and inflation working in tandem during the same crisis, and unfortunately, they do not cancel each other out! We are seeing capital destroyed by malfunctioning and toxic debt securities, which have caused deflation in jobs and markets, yet prices on goods including food and energy have increased 18.7% from March 2009 to March 2010:


This shows that while deflationary elements are in play, we are not seeing an event similar to the Great Depression of the 1930's. We are seeing something much worse. This may be partly due to the fact that America is far more financially interdependent with the economies of other nations today. In the 1930's, America was an independent manufacturing powerhouse with a mostly closed system. Now, we are a 70% consumer based society with little manufacturing capability on our own soil and trapped in unsustainable debt to nations like China who do not necessarily have our best interests at heart.

In fact, China's recent announcement that the Yuan will now depeg from the Dollar signals trouble for U.S. Treasury Bonds. With a stronger Yuan and a shrinking trade deficit with the U.S., they will no longer need or want to continue purchases in American debt:


As the Chinese currency appreciates in value, it is likely they will dump their holdings of our T-bills in response. This would cause severe devaluation of the dollar, and it is a development we have been warning about for years. The only question now is, how quickly will China get rid of U.S. Treasuries?

When the Great Depression hit, markets, jobs, and wages fell, but so did prices on goods. We did not turn up the printing presses and monetize our debt unabated during the depression, which is what the private Federal Reserve IS doing today. So far, it seems the Fed has no plans of ending this printing anytime soon, and without a full audit of the central bank, there is absolutely no way of knowing exactly how many Dollars are circulating in the world. We can only estimate, and hope.

I feel it is likely that as the collapse progresses, we will have to deal with a combination of obstacles. We could see deflation in stocks, jobs, wages, real estate, and capital, while at the same time face a falling Dollar and rising prices on goods. The EU is suffering from the symptoms of this new brand of financial anarchy, with falling markets and real estate, but without the advantage of falling prices on goods because of the weakening Euro. Consumer prices in Greece and Spain continue to rise even though they are in the midst of a deflationary spiral:



But where does gold fall in all of this? Gold has flexed its muscles during this implosion, proving it can withstand both deflationary and inflationary factors. PM's are sought after in the EU, Asia, and the U.S. and are breaking free of their traditional relationship to markets and paper currencies. Basically, gold and silver are acting like currency again, as they did less than a hundred years ago, instead of just commodities, as they have in the past few decades.

Will gold suffer drops in the near future? Of course. But one has to look beyond the next quarter and examine the long term trend of an investment. For gold, that trend has been phenomenal the past ten years and shows no signs of abating. How many people foolishly claimed that gold would never top $500, $600, $700 an ounce, etc.? Regardless of inflation or deflation, no one in their right mind can deny that precious metals have been sound protection.

Why Buy Gold And Silver?

Buying a stack of gold coins is more than an act of wealth protection. It's more than just an investment. It is a social and philosophical statement. When you buy precious metals, you defy the restrictive nature of central banking and fiat currency. Paper money has never been OUR money, it is the establishment's money, and always will be. Gold offers us an opportunity to hold our own money, on our own terms. The more widely used gold and silver become, the less dependent we are on Federal Reserve paper, and the less power they have over our financial life. If everyone used PM's, the elitist central banking system could conceivably disintegrate. Buying gold is an act of monetary revolution, a revolution that is necessary if we are to save this country.

I have heard the argument in the past that during social catastrophe, gold and silver are meaningless compared to bullets and bread. This is partly true. No currency should ever take precedence over survival. However, no modern economy can grow on barter alone. A return to the village square would be an admirable start in the process of wrestling power from global banks, but for the economic maintenance of an entire nation of people, a stable common currency grounded in tangible wealth is also absolutely vital. Gold and silver have been and probably always will be the best way for us to decentralize economic control yet still preserve a national financial structure that lends itself to progress. At the height of a collapse, PM's can provide a stop gap for purchasing of goods when paper money has lost all allure. Their use may decline after a meltdown, but collapses heal over time, and rebuilding always requires the induction of a new and solid currency, usually made of PM's or backed by PM's.

Gold is now in the international view and is liable to stay there for years to come. The next step would be to begin trading gold and silver as currency again in a new liberty based economy free from the one we are forced to live in now. Such an endeavor would require men with some financial clout, ingenuity, honesty, and the courage to defy the globalist system. It would also require today's investors to STOP buying paper gold stocks and derivatives like ETFs, ETNs, and CEFs. Until all investors demand physical delivery of their metals, the manipulation of the gold and silver markets by banks such as JP Morgan will never end. In this way, we could preempt the engineered collapse of the fake globalist economy with the formation of our own internal economy, and perhaps even soften the terrible crash to come.

I have said it before and I'll say it again; a truly free man seeks to provide for himself and provide for the people what the system does not. Eventually, the system will have to try to stop him. If the system cannot stop him, it will have to conform to him, or find itself obsolete in the minds of the masses. Precious metals offer us a valuable avenue in making our existing oppressive system of fiat and debt obsolete.


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