Record Gold: The Real Journey Begins

Expected Returns's picture

Those of you who have been following this blog from its humble beginnings know that I have been consistently bullish on the long-term prospects of gold, and consistently bearish on the long-term prospects for the American economy. With gold sitting at $1,232 dollars and sovereign debt concerns entering the system, my thesis is unfolding before our very eyes. This is very unfortunate. I would much rather be wrong and lose money investing than be right when it entails hard times for Americans.

Over the past year or so, gold has erupted to inconceivable levels against a backdrop of a "recovering economy." I have been trying to expose the putrid stench of propaganda pushed by vested public officials. With unemployment pushing 10% two and a half years into this "recession" (Depression), the economic recovery thesis clearly carries no weight. If you still can't read the writing on the wall for our economy, then you are part of the 20% of people who give the truism "fool some of the people all the time" credence.

Gold serves as the canary in the coal mine, period. This is something I've often alluded to in my posts. The rise in gold is evidencing a collapse of confidence in government. Just take a look at the approval ratings of President Obama and Congress; this isn't some highbrow theory without basis- I simply follow the rhythm of history. Confidence in government will ebb and flow cyclically no matter what I say. The wise investor rides the wave; the inexperienced investor fights it.

To a lesser extent, gold is signaling higher inflation and a restructuring of the global currency system. This is very clear to me. A free-floating system with artificial cross-pegs is prone to chaotic upheavals from time to time. In the past, currency crises were relegated to closed regions; in the future, contagions will likely be global. Again, gold is signaling this to me loud and clear.

I believe gold is going to make a multi-month push to test $1,500 dollars. Then it is time to reevaluate. If the printing presses are still running, I will hold my position. Given the tendency of humans to "paper over" problems, this is the most likely scenario. A loss of the AAA-rating of U.S. denominated debt will likely occur in a 3-5 year timeframe. The mass bailout of bankrupt states will also occur in a 3-5 year timeframe. If you think this is dollar bullish, then I invite you to go long the dollar and short gold.

Now these are just probabilities; nothing is guaranteed. If you are worth your salt as an investor, you will hedge your long gold positions with long-dated puts as call options become expensive relative to puts. You will have many, many opportunities to do so between now and $1,500 dollars. I strongly urge people to do so.

Social Implications

Let me just say people won't be skipping down the street if and when gold hits $2,000 dollars. It won't be the end of the world either, although it will appear that way to many people. It is rarely ever that black and white in life.

Leading up to $2,000 dollar gold, you will likely see protests emanating from college campuses as the youth realize Art History degrees just don't offer the security they used to. Regular citizens will start to protest onerous levels of taxation, especially effective tax rates. The most obvious example of rising effective tax rates are property taxes that don't reflect depressed home values.

The American social model isn't meaningfully different from the Greek social model. Pensions are underfunded by trillions of dollars. Phony accounting that pushes fiscal obligations forward are rife. These are just facts, not my opinion. If the government recognized liabilities according to GAAP standards, we would already be bankrupt.

This is nothing more than "extend and pretend." Fundamentals always assert themselves in the long run. Debt levels unheard of in modern history will negatively impact our economy. A revaluation of debt is certain. Trillion dollar obligations will be inflationary. Again, just reading the tea leaves here.

Disbelief Fuels Rallies

If I could give you one tried and true indicator that will predict the extent of this gold rally, it would be the "disbelief" indicator. As long as Joe Six Pack watching TV all day thinks gold is "expensive", we have room to run. Trust me, you will see lines at gold shops when all is said and done.

The smart money (John Paulson, George Soros, David Einhorn, Paul Tudor Jones) is already positioned for what is going to shock the average person. This is a game changer. The arrogance of average people sticking up their nose to gold will turn to fear in a heartbeat. This I guarantee.


Taken from Expected Returns Blog

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Hammer59's picture

If you didnt purchase your physical AU prior to the $600./oz price---and God knows most of you did are just another sheep following the herd.


But I do thank you all for allowing me to retire 20 years ahead of schedule. As you sow, you shall also reap.

jp's picture

I buy gold and silver to save for a future house not to make a ton of money on. It just so happens that I also believe that silver is highly undervalued and gold is undervalued. It isn't a play to make money, it never is, and never was. It is and always will be about retaining value.

Buy low, sell High. is R.E. Low now? Is Gold High now?

The question always comes back to this. Where is cash flow?

Is Their Cash flow Rigged? You be the judge

While you, me, and every American, must work to make our cash flow come in day after day, week after week, somehow, these guys just can't manage to be beat.

The price of Gold is a direct reflection of THE LACK OF TRUST

Run Bankster!!!!!! Run!!!!!!!

pooplagrande's picture

Can someone clarify something for me here? Paulson, Einhorn, Soros, etc. are all buying a ton of gold...and they are also buying a bunch of stocks like BAC and C. Is the thought that the government is so stupid that they are going to make stocks go up regardless of the consequences (e.g. as described in this article), so the consequences are hedged or perhaps accentuated by the gold trade?

Who thinks this is a reasonable outcome?

Rogerwilco's picture

Buffett and Soros dwell in a different plane of reality, with friends in high places, favors owed by the same, and different rules and laws apply. When they "load up" on a commodity like gold, or buy a buttload of BAC, it's usually just a small fraction of their holdings, and the actual reason for the investment may be quite different than what us in-duh-vidual investors assume.

Panafrican Funktron Robot's picture

If I were wanting to execute the mother of all bond vigilante plays, I'd want as much leverage as humanly possible.  Gold = leverage.  Soros is about to ensure his name will be in history books for the next several centuries. 

Johnny Bravo's picture

Soros has less than 2% holdings in gold.

The person you responded to is correct.

Argos's picture

Aren't there any Russians reading this site to post a response?  They just went through a pretty fine  collapse recently.  What happened to life expectancy?  What happened to medicine?  How many intelligent, accomplished Russian men killed themselves with booze?


The math always wins in the end.  There are too many people living too high on the hog for this poor old Earth to take on more.  I don't "believe" in gold as some kind of religion, nor am I in the paper camp.  But I do know I'd much rather have more gold than less.

masterinchancery's picture

Voltaire once wrote that fiat money always returns to its intrinsic value, which is zero.

cocoablini's picture

If all fiats explode in our face, the governments are all going to have to adopt a fiscally prudent standard using gold, silver and maybe a basket of commodities and such.
If you own gold, it's probably going to be extracted from your lockboxes because its threatening the legitimacy of the dipshits in Washington and NY and other western ding dong capitals.
Gold funds(like Sprott,CEF,GoldMoney) are going to get raided anyway-I suspect you will get US,CAN treasuries in exchange.
Maybe hotshots like Buffet and Soros can house their bullion somewhere in Zurich.
If you have coins, ingots etc. you are lucky. Just don't tell a soul.
In the meantime, those junior mining stocks are hauling kiester...

Gold...Bitches's picture

nationalization of mines is more likely than individuals gold.  If still worried then buy pre 1933 coins that have smallish premiums over spot.  majority of value is in the bullion but counts as a collectible coin.  Collectible coins (those whose value is more than spot and would have realized a loss) were excluded from confiscation as well as $100 each individual was able to keep.  See item B in section two of the act.


Section 2. All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion, and gold certificates now owned by them or coming into their ownership on or before April 28, 1933, except the following:

(a) Such amount of gold as may be required for legitimate and customary use in industry, profession or art within a reasonable time, including gold prior to refining and stocks of gold in reasonable amounts for the usual trade requirements of owners mining and refining such gold.

(b) Gold coin and gold certificates in an amount not exceeding in the aggregate $100.00 belonging to any one person; and gold coins having recognized special value to collectors of rare and unusual coins.

(c) Gold coin and bullion earmarked or held in trust for a recognized foreign government or foreign central bank or the Bank for International Settlements.

(d) Gold coin and bullion licensed for the other proper transactions (not involving hoarding) including gold coin and gold bullion imported for the re-export or held pending action on applications for export license.

MnMark's picture

I don't think the social/political environment is going to look noticeably different when gold is $2000 than it does now.  I say that because I've been in gold for over ten years, buying in at $271, and I remember thinking that if gold ever actually broke the old all-time high in the $800s or - hard to imagine at the time - actually went to $1,000, it would surely mean that society would have crumbled by then and it would be Weimar Republic in the streets.

Yet here we are at $1230 and when I walk down the street or watch the news, it doesn't look any different than it did in 1998.  Same stuff.  Prices higher, more people unemployed, but no big meltdown.

I remember a PBS show a few years ago that posited a world where oil had risen to $100/barrel and forecast how the world economy would grind to halt.  We've seen $140 oil and nothing serious happened, and now oil is routinely around $80 and I can't see any panic at the pumps or anything else obviously different.

So I don't think $2000 gold is drastic enough that we would see much different from it is now.  $20,000 gold or $200,000 gold, yes.  But even then, until things get to the Weimar/Zimbabwe level I'm not so sure that everyday life would really look that much different.

I remember reading "The Great Depression of 1990" back in the 1980s and being sure there'd be "Road Warrior"-style civilizational collapse in the 1990s.  Then Y2K was going to bring us to collapse.  And in the 1980s they were so sure that the big deficits of the time would bring financial collapse that they actually passed the Gramm-Rudman-Hollings law to try to mandate balanced budgets (which was then ignored). 

What I take from all this, and from twelve years of watching gold rise with regular big drops, is that forecasts of civilizational collapse are almost always overblown.  And that the bad stuff unfolds a lot slower than you might think.  I bet that even in the Weimar Republic, which is the only real Western example of serious financial collapse we can study in the last century, everday life looked a lot like it did before the crisis.

moneymutt's picture

don't know why someone flagged you as junk..that's just rude...unless we do it to Leo to have some fun now and then...I like your perspective...although I do think things can collapse unexpectedly quickly, and as bad as things got in Weimar and was temporary...they passed thru it, had their debt jubilees and moved fact Nazi Germany did a smart one a created a pseudo currency that the govt printed from thin air that was used to employ people, build Autobahn etc and having no credit cred with other nation,bartered for import goods...Zimbabwe to has recovered nicely and does not owe the next 30 years of GDP to the IMF.

My biggest fear is not the temporary pain of a reset of our economy wiping out wealth/debt but rather we are all debt slaves in one form or another and all countries join the ranks of third world with a very few rich and the rest of us serfs for decades...I'd rather face a s##t storm now and get it over with than be a debt slave and I'd rather have that for the next generation than impoverishing them to put things off for a few years

Real Wealth's picture
by moneymutt
Zimbabwe to has recovered nicely
     This was last year:        The reporting I've seen from real people  living in Zimbabwe suggest things have only gotten worse.   Are you just accepting Zimbabwe's government's numbers? 
Anton LaVey's picture

I bet that even in the Weimar Republic, which is the only real Western example of serious financial collapse we can study in the last century, everday life looked a lot like it did before the crisis.

... Until you woke up, looked around, saw people carting around paper money in wheelbarrows and thought: "wait a minute, what the heck happened?".

The boiling frog analogy comes to mind: put a frog in boiling water and it will jump out. Put a frog in nice, warm water, raise the temperature a tiny little bit every 15 minutes and... Voilà! A nicely boiled frog!

People will adapt to their new circumstances. Kids will go to school. Parents will go to work (if they still have one), factories will continue operating, the Internet will still be there, etc... etc... But you will need to queue for hours even for the most basic necessities, you will wear your old clothes a lot longer, and a night out will no longer mean going to the movies and a nice restaurant - just walking around the block... If you still want to go out, given the streets are filled with beggars and/or gang members.

Sure, fear of civilization collapse are often overblown - but I'll still keep my gold just in case, thank you very much.

Hulk's picture

"It was horrible. Horrible! Like lightning it struck. No one was prepared. You cannot imagine the rapidity with which the whole thing happened. The shelves in the grocery stores were empty. You could buy nothing with your paper money."

 Friedrich Kessler, a law professor at Harvard and University of California    Berkeley, who experienced the Weimar Republic hyperinflation

As interviewed by Ralph T Foster in his book "a history of fiat currencies"

i.knoknot's picture

german weimar survivor told me that within days of the new deutch-mark release, the stores started having stuff on the shelves again, and life got amazingly stable amazingly quickly.

most folks don't know this.

this fact is more of a worry for me than a consolation, because it makes such a revaluation palatable for governments.

for me, this 'adjustment' is not an 'if', it's a 'when'

i think they've (treserve) been trying desparetely to inflate since 2007, and that's clearly failing - at least at the levels they need it to work (see japan). what options exist? default - not. revalue - why not?

masterinchancery's picture

Indeed calculations suggest that the US could go on the gold standard at around $7,000/oz, which would provide great stability.

tony bonn's picture

very well is in severe and permanent backwardation.....the window of opportunity and safety is closing.....get on the ark or drown...

Panafrican Funktron Robot's picture

Sorry to repeat myself, but in impending SHTF scenarios, why should I be stocking up on gold over, say, mid-priced vodka in a glass bottle?

Even in scenarios where it's only partial SHTF and merely inflationary?

And in a deflationary trend, wouldn't I be a lot happier at least knowing I can drink away my lost bet?

I actually mean these questions seriously. 

Henry Chinaski's picture

Vodka is a fine investment! But, it takes up more space than gold.  Nobody knows how or when this will all shake out.  Dollar average and diversify, gold, silver, vodka, lead, brass...  Hang on to your truck with the ring mount, but it may not a bad idea to pick up a gas sipping rollerskate.

Hulk's picture

Problem with vodka is I can drink it! Can't eat gold, or so I am told..

RockyRacoon's picture

There are plenty of ways to store your wealth.  Booze is a fine one.  So is tobacco.

Prison life, as well as any other closed system, takes on a currency of its own.  I have nicotine polacrilex in some bulk as well.  You can get the generic nicotine gum at Sam's pretty cheap.  It stores well and would be in demand in a pinch.  I don't smoke so it's a good second choice.  You can store medical supplies like iodine, anti-fungal, anti-diarrhea, neosporin, benadryl (generic), and many others.  Just be the go-to guy (gal) for a particular item and you'll do fine. 

Final point:  In all this discussion about precious metals it should be kept in mind that only the really weird would advocate a complete abandonment of other stores of value.  Guns/ammo, seeds, food, and the rest ARE stores of value.  Gold and silver are only a part of the big picture.

DaveyJones's picture

"Prison life, as well as any other closed system, takes on a currency of its own" - yeah but working off your debt is "a bitch"

RockyRacoon's picture

Smoke coming from all the wrong orifices?  Yep.

Rogerwilco's picture

Good and reasonable questions. Now follow the logic -- buy gold and when it gets reeeaaally expensive, sell it before all those other folks sell theirs. Then take the money and rush down to the liquor store to buy vodka in glass bottles. What? They're all gone!!? OK I'll take the cheap stuff in the plastic bottle. What? It costs $300!

Now wasn't that easy? This is why we should load up on gold, right damn now.


In 1929 an ounce of gold bought a nice men's suit. It still does today. Trying to get rich as a small-time hoarder is not a sure thing.

Burnbright's picture

Yes but not losing everything you own because its all in paper assets (fiat money or stocks) is a sure thing if you have either gold or silver.


But to be serious buy what you need first, then buy gold and silver to save if you don't want to be a day trader. I buy gold and silver to save for a future house not to make a ton of money on. It just so happens that I also believe that silver is highly undervalued and gold is undervalued. It isn't a play to make money, it never is, and never was. It is and always will be about retaining value.


WaterWings's picture

+1 and to RogerWilco.

Consider the scenario:

You have a glass, not plastic, bottle of vodka. That's heavier, and more prone to breakage. People aren't going to really care if it tastes like gasoline because they can always chase it (your added value for custormers) and they are drinking it for effect anyway. However,anyone trying to acquire alcohol instead of necessity items is trouble: "How much a that you got back there? I want some more. Can I get a discount? House credit? I want more dammit!"

But you sure can fit a lot of silver and gold in your pockets! If you have to evacuate (enough belligerent, hungry locals discovered you have a "stash" ("rotten hoarder, kill him")) it will be unlikely that you can haul liquid valuables.

And that's the other dilemma of barter: trust. I would save gold for big transactions with individuals that have more than you do (at least think they do): land, multiple farm animals, quality firearms, etc. Arouse suspicion of thieves and, well, FAILED.

Tripps's picture

gold has no p/e, its not a stock. there is no way to judge that its a bubble. in fact, fiat currencies are the bubble that are bursting. they are worth zero


gold is worth infinity if currencies collapse

Rogerwilco's picture

The allure of gold -- Rod Serling had a take on it back in 1961:

You all do remember that gold is only "worth" what a buyer will pay or trade for it?

trav7777's picture

No shit?!?!

WOW...I did not know that.  Do you have a BETTER suggestion for something of value I might procure that others will trade for?

Rogerwilco's picture

That stack of magazines on the floor next to the Game Cube might get you through hard times, but the pages are all stuck together. I guess you could wipe your ass with them, but then nobody would take them for barter. Don't lose that silver dollar your mom left you.

tim73's picture

The same old tired line, year after year after year. Once the societies collapse, gold will be GOD, right? You want societies collapse? Just set up a nice Golden Temple and you do not need civil engineers taking care of the infrastucture, fire departments, police, kindergartens, schools or even health care. We just walk around in our golden togas, ask continuosly "got gold?" and be happy!

i.knoknot's picture

speaking of tired...

it's all black or white for the trolls, isn't it?


virtually all good investment history talks about diversification in case any particular asset-class goes south, yet you (tim73) will spout off about gold togas as if that's all we'll have left.

i understand your point (infrastructure, but when it's clear to see that all paper investment schemes that are based entirely on trust - either of the counterparty, or the police to enforce the counterparty contract... are breaking... as we watch... you don't think having a 'hard-money hedge' is rational? ask my german in-laws how well that worked for them - they got millions for their family home... millions. wheelbarrows full.

so you write this entire theory off in a flippant comment with no productive counter-solution?

i hope somebody else is teaching your kids.


poorold's picture

gold-tulips-gold-tulips???  right now they look about the same to me.


the extend and pretend can go on a lot longer than people think it can.  So far, very little money has been "injected" in  a manner that will cause inflation.


Most money that has been "injected" has gone into holding assets long-term.  Assets purchased at what used to be "market value."


There need not be a decisive crash into chaos and it is almost a certainty there will not be.  The world does not move at HFT speeds. Not even close.


What is more likely is an evolving world with increasing government controls and a lower standard of living in the developed world.  However, that standard of living will far exceed the standard of living in the undeveloped world.


My father was born at home in a house that one walked out back to the outhouse to take a crap and there was no hot running water.


My how perspectives have changed.


Gold???  The world is not going to return to a gold standard so the constant screeching on these threads by goldbugs is irritating.


They are living in the past and hoping that somehow that little shiny metal is going to be their salvation.




Not a chance.

trav7777's picture

What is YOUR SUGGESTION, dumbfuck?

All I ever hear from you paper bulls is how gold sucks.  WTF is YOUR SUGGESTION?

Because if you think FRNs are going to hold their value, you're a goddamned idiot.  They haven't and they won't.

Anton LaVey's picture

the extend and pretend can go on a lot longer than people think it can.  So far, very little money has been "injected" in  a manner that will cause inflation.

That is correct. However, we now have three very distinct possibilities (a) inflation, or hyper-inflation, (b) stagflation, (c) deflation.

In scenarios (a) and (b), gold will be extremely good to have - . Even in (c), gold should be liquid enough to provide some help, even if its value goes down. I am still undecided on which scenario will come to pass, but, with the recent EU bail-out, (a) or (b) look more and more probable. However (full disclosure) I have both modest amounts of Gold and Silver, and large amounts of cash, just in case it's Deflation that comes a'knocking.

There need not be a decisive crash into chaos and it is almost a certainty there will not be.  The world does not move at HFT speeds. Not even close.

You'd be surprised. The world moves a lot faster than you think. Take a look back at the events of 1989, the fall of the Berlin Wall - everyone was so surprised by the speed at which it happened, after decades of communist rule.

What is more likely is an evolving world with increasing government controls and a lower standard of living in the developed world.  However, that standard of living will far exceed the standard of living in the undeveloped world.

I would not count on that. We are perched atop a house made of cards (or bad loans and CDS, if you will), and that house is looking more and more wobbly all the time. And, again, take a look at the Great Crash of 1929 - many people in the USA went back to third-world status and standard of living in just a few years.

Gold???  The world is not going to return to a gold standard so the constant screeching on these threads by goldbugs is irritating.

Of course not: going back to the gold standard today would mean risking to see your gold siphoned off to other countries. When France demanded payment in gold instead of dollars, Richard "Tricky Dick" Nixon suspended the gold standard in the USA.

On the other hand, a currency based on precious metals would be a lot more stable, and it would also bring an end to the insane printing we are seeing here and there. That would also bring about a deflation and crash a lot of TBTF, so that's not going to happen.

I would advise you to read a bit more about history - I think you may learn a thing or two.

This being said, yes, Gold will eventually become another failed investment. I have said in another trade tht, when everyone starts saying Gold is a can't-fail investment, that's when I'll sell everything. But that time is not now.

seabiscuit's picture

O would like to add to the name calling. You sir are a person to be fucking respected for taking care of your family and I applaud your efforts. I too have join a local group in an attempt to make fertilizer out of the pig shit handed to us by our wonderful leaders. GG has been correct all along, and those who think us gold bugs are shit for brains, PLEASE go long the dollar. What is right for me may not be right for you.


Johnny Bravo's picture

"go long the dollar"

Why, because it's going up?

I've been bullish on the dollar since 77-78.  Then again, I've been bearish on gold since the last 1220.

islander's picture

These companies buying gold, are just another method of confiscation. When the price goes sky high and it will, everybody and his dog will sell.  The world elite are using these corporate entities as a way to make sure that there is nothing left in the family vault when the shit hits the fan.

Fred123's picture

I hate to tell you folks but "joe sixpack" is the one buying gold, silver, guns, ammo etc. He's not sure what is happening but knows with the election of Odumbo it will not turn out well.

The 'sheeple' that this blog constantly refers to are actually the supposedly educated. Yeah, that's right. I talk to blue-collar and they get it, I talk to the 'educated' and they just laugh.

I'd sure want joe sixpack on my side when the SHTF.


Hulk's picture

Glad to hear that some areas of the country understand current events.

Here in Kalifornia, heads will forever remain in the sand.

Burnbright's picture

I got your back hulk. I live in Cali. You ever been to Arcata in Humboldt?

Hulk's picture

Yes, I do and I may already know you! Do you have over a 100 acres up there?

monkeyfaction's picture

There was a leaflet posted through my door last night from a company wanting to buy scrap gold. They will even come and collect it in person.


'Gold is at a record high, you should sell your gold'


When the leaflets start coming through my door saying that gold is a good investment and I should buy some. That's when I will sell.


Johnny Bravo's picture

Did you see the banner ads on Zerohedge, or the multiple, numerous commercials on television telling you it's a good investment?

Hi, I'm G Gordon Liddy here, criminal in the Watergate scandal, and I just happened to buy gold at its lowest point ever!  Buy GOLD from Rosland Capital!

Then there's Goldline, etc, etc, etc.

Just turn on your TV if you want "leaflets" saying it is a good investment and it's time to buy.

Or listen to GG on ZH.

Anton LaVey's picture

+ 100 Krugerrand to you, sir. I have reached the same conclusion a while ago.

Groucho Marx used to joke that, in 1929, he should have known something big was coming when his shoe-shine boy gave him stock tips. The same will be true in 2019 (or earlier).

jp's picture

The rise in gold is evidencing a collapse of confidence in government

More like Governments. So what is the logical next question?

Which Gov. &/or Govs. has/have the most GOLD?

It is a Zero sum game. There are winners and there are losers.

What Gov. &/or Govs. have the largest CASH FLOW?

Why does cash flow matter?

Prices in an economic crash go where? What happens to Jobs? If no Jobs, who has money to buy ANYTHING? What does that do to Demand? Does supply and demand matter?