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Some begin to see a gold bubble
Dominant Social Theme: Beware of bubbles. Free-Market Analysis: This is more economic misinformation, insofar as we are concerned - though admittedly the Bell has a hard-money orientation and is anti-fiat (as regular readers may have noticed). Because we are pro gold and silver (hard money or honest money) we have a hard time believing that gold and silver have reached their tops, unlike Mr. Nadler. For one thing, gold and silver are not yet near the levels (accounting for inflation) that they reached in the 1970s and early 1980s. For another thing, this economic downturn is far more severe than the economic downturn of the 1970s. Central banks have dumped trillions into the economy worldwide, an inflationary enterprise that in our opinion is bound to be reflected in upwards price movements of gold and silver. We don't see anything ridiculous about US$2,000 or US$3,000 gold and a related price for silver, as silver tends to travel in a ratio to gold. Even at US$2,000, one would be seeing prices that were not a lot higher than gold was at its previous high of US$850 or so, accounting for inflation. And, as we have pointed out, the economic distortions are so much worse this time around that we think gold and silver will have commensurately deeper reactions to what is yet to come. Another factor driving the price of gold and silver is the Internet itself. Millions have discovered hard-money economics in the past few years, and this knowledge will likely sweep the world over the next few decades. That is why we are confident about predicting that eventually some sort of gold and silver standard will be pro-offered by monetary elites desperate to control or "manage" the new economic ideology before it swamps their control totally. The monetary elite is not stupid by any means. The monetary elite in our opinion is comprised, in part, of amazingly wealthy families that have helped control the levers of finance for generations and think generationally as well. These families will beat a tactical retreat as they have before in the face of an informational technology that is crushing the dominant social themes they have worked so hard to erect and threatens to sweep away the entire central banking establishment that has controlled money for close to the 300 years. We can see the signs of the retreat of the monetary elite already. The various enterprises of a warlike West are to be moderated and increased socialism and leveling is to be implemented in its wake. It is here that the great initiatives will begin to founder and the Hegelian approach, in our humble opinion, will begin to founder. Conclusion: The retreat will be graceful of course, and tactical in nature, but by the time it has fully occurred, the parameters of the new world will hardly be recognizable. Gold and silver will be far more important than they are now and the political processes that generate increased regulation, increased taxes and increased inflation will be diminished. Authoritarianism will be less forceful and public discourse less constrained. It can hardly be otherwise in an Internet era. Trends do not grow to the sky and the inevitable counter-cycle is already underway. |
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Gold to $3,000? Maybe $5,000? Considering the flood of paper money the Fed has made available to halt the Great Recession and save Wall Street from itself, it's not hard to find folks who will to tell you that gold is destined to bust all records on its way to becoming the only store of value left in a debased world. Of course, ridiculous price forecasts often presage a bubble (remember the dot-com days?). And, some market watchers say the fundamentals for gold - regardless of the headlines - simply don't support such lofty numbers. Gold mines have responded to high prices with heavy investment, a sure sign that supply will rise, reports Fortune. Miners have dumped $40 billion into new projects since 2001, the magazine notes. Output is up 7 percent in just the first six months of the year. Meanwhile, industrial demand is falling on a weak economy. Simultaneously, retail investors have dropped billions into gold via ETFs in hopes of a big payday ahead. As a result, gold now has "some of the poorest fundamentals I've seen in the market for a long time," Kitco analyst Jon Nadler told the magazine. Kitco is a bullion dealer in Montreal. - Money News