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Record Gold: The Real Journey Begins
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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Gold 3-4k is possible .Gold 10k means confiscation.
Just this second Dennis Kneale says that "...gold is for fraidy cats".
When are they going to fire that idiot? I'd love to see him tin-cupping on The Street.
I am convinced there will come a day, soon, where no one will trade their gold for fiatcos. "Price" will be meaningless.
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.
the three amegios jury master Band whathis name lol
names lost in the sands of time mouths quited by the very base of truth , pimples on the face of a pocketed zit ... draining , now popped
Yeah I'm not sure you want to be positioned in gold. What will you do with it? Who will you sell it to? How will you price it? You can use it as an asset to borrow against, but how will that work when the society has complete debt saturation and garbage price signals?
Michael Covel is very good on this.
Then we'll beat it into a fking cow and worship it.
What do YOU recommend? I cannot stockpile oil; my backyard isn't big enough.
Ain't no fever like gold fever...
MJ,
Yes sir, going to be one hell of a show WHEN IT STARTS....................
It ain't gonna start.
You have to be a hitter financially to even have the spare scratch to get ONE fucking ounce these days.
Imagine a bunch of sheeple trying to participate in gold fever. LOL...wtf are they gonna do, most people don't have the spare loot to pick up a 1/10 oz eagle. Imagine this shit getting pushed to what, 2, 3, 4000 an oz? You honestly believe that little folks are going to run into a coin shop and have the $ to plunk 3 or 400 on a dime-sized goldpiece?
HI HO!!!! SILVER!
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Trust me, it is the most fortunate thing to be happening to the human race in a long time.
With Gold, it actually IS guaranteed. The shenanigans that the US Government has engaged in pretty much ensures that. No need to waste money buying anything else including puts. Just go all in 100% physical Gold. Trust me, it will be the best decision you ever made.
If a rising Gold price means that, then we should all welcome it with open arms. Its about goddamn time people realized the worthlessness of today's government controlled "education system" and stopped the THEFT at gunpoint which is what taxes are.
the only sector avoiding layoffs so far is the federal government. they are still hiring. soon we will all be working for the government. we will pretend to work and they will pretend to pay us. just pick a lineup , any lineup will do . ... unless you pay in gold or silver. no lineups for you.
running to gold is going to prove to be a wildly losing proposition.
if the central banks don't return to a gold standard, do any of you really think those who own gold can form their own gold standard? That's pretty funny if you think about it.
In my opinion, goldbugs are just one more slice of the investment community who think they've discovered the magical "store of value."
Gold is no different than any other commodity and it's price will be adjusted accordingly. It is forming quite a bubble now and may zoom seriously higher, but have no doubt, it's tulip-mania all over again.
All the gold bugs will ride it all the way up and then all the way down.
It makes for about 15 to 20 years of constantly feeling intellectually superior to everyone who is not 100% in their camp all the time.
Not a bad deal.
Once gold is back to (year) 2001 levels, they dig it up from their backyard and donate it to the local jewelry store (which will be picky as to what to take and what not to take). By then it will have served its purpose of making them feel morally and intellectually superior for a good few years.
It is the ultimate shoo-in silver bullet to solve all problems of the world. Pun intended.
This is the dumbest fucking thing I've ever heard.
I can walk into any country in the world with gold and translate it into paper to translate into real goods and services.
WTF can you do with USSR Rubles or Cruzeiro Reais or any of a number of other superseded paper currencies???
poorold,
NO ONE knows how this PARADIGIM SHIFT will turn out.( we have idea's, from History, not pleasant one's), and we see our Republic being totally destroyed, by a Gv't that ignores the whole thing...........they see it as a Living Document...it's NOT.
We just know it will be really bad.
Bottom line, people are fearful, always are of the unknown............
So, since Gold has been money for 6000yrs, and is no one's liablity, and no one's debt, never varies in purchasing power, never loses it.........
Where else do you invest that which WE know is worthless?.
agreed we don't know, suspect the TPTB always find a way to screw us...that's why I prefer to store up non-paper assets, just handy, practical consumer goods...
a friend who plays too many video games said "guns and cigarettes"
Gold is to tulips what the greenback is to grass.
gold is not the only "standard" these corrupt and failing governments continue to ignore. Doesn't mean it will last
Gold = any other commodity?
Gold = the Tulip scam?
LOL!
Should we just shut up and invest our "money" in the stock market?
Should we just accept that there is nothing we can do?
You go ahead.
Fiat Cur = Tulip
As long as there are fools left bashing gold, it is not too late to buy.
Nadler says gold is going to 800.
BUY, buy, buy
Nadler is one of most intelligent dumb-asses around.
Thoreau,
Could you clue me in WHY Kitco, keeps this dude on the payroll?.
He hurt's their business.........damned if I get it.
Never seen a company hire someone to cost them sales.
'cause Kitco doesn't have physical.
Perhaps sales resulting in delivery of the physical.
But, they also run a 'gold pool' that is, unallocated and probably fractionally reserved, for a fee.
I see Knadler's job is to keep people in the pool and not taking delivery.
Nadler, the Baghdad Bob of the gold markets.
Production cost of gold is around $800/oz. So even if you think it's massively overpriced, and a bubble waiting to burst, just keep in mind that it wont halve in value.
Escape,
There are lot's of mines that have cost's in the $400.00oz. range.......
The reason for Golds substantial increase, is simple..........Fiat is worthless, and Fear.
They cannot control you, until your flat on your ass, and dependent on the SYSTEM.
Perhaps, but gold does have the benefit of being the store of value with the longest history of usage. In this case, where nearly all major country currencies seem to be crumbling, a reversion to the mean could very well mean a run to gold as the least worst alternative and perhaps the most transportable store of value, recognised and accepted in more locations than VISA, Mastercard, and AMEX, and the USD and Euro.
If you believe that, try to take your ingots to Walmart and buy a TV, or try to get Broncos tickets.
Visa and Mastercard are accepted much more readily.
Yeah Baits! Save up for bananas and coconuts.
Won't need an ingot to buy a TV !
Will need a tenth of an oz...max !
Besides, TVs are not rare enough to cost that much now !
Bananas... now there you might want to save your ingots for... for fruit...
Being the whacko survivalist that I am, I will disagree. As things get worse, the underground economy (yes there is one craigslist is a great example) will pick up steam. I have seen many purchases at 'farmers markets', swamp meets etc. involving gold, silver and good old fashioned barter. With ~$50 Trillion in on/off books debt the dollar is worthless...just the average person doesn't know it and world markets won't admit it since the system would collapse.
During 2001-2002 in Argentina the underground economy became more mainstream than the real one. With barter included. And that (barter) failed miserably. Hundreds of years of economic theory and we have to go back millennias to barter again? Don't think it's the best answer (and experience in AR proved it to be a disaster).
While the big fall in quality of life came from all those who had become employees of big companies (which during the 90's rose in prominence over all small business) when those companies fled the country. In the end, much of the street visible recovery came from people who started their own business (change between beying an employee - which even Lincoln considered a form of slavery - to being owners). When small family shops beat the supermarket, that's when things work out again.
could't technology help out...maybe not well suited for high volume everyday things...but barter sites with their own "currency" could prove to be popular...I don't have any money, or a job, you don't have any money or a job, but if we all aggregate what goods and services we can provide each other on a website...we could have half of an economy...if food is n high demand and can get you lots of credit barters...then everyone will be producing food within a year, I suspect we could be more efficient at producing food than we realize....just like anything, when you can get it from a place with super cheap labor, we don't get smart or efficient...high priced labor in US lead to farm equipment revolution...
Where will the food come from? I mean, I know it sounds like a mundane question. Even the question of a troll, but really, where will the food be shipped from without a credit system and commonly accepted currency? Will truck drivers drive without the hope of a paycheck? Where will the gasoline come from if you are enroute to Pensacola and the company cc doesn't work anymore? Do you walk home? What if home is 200 miles away? Should have brought your bicycle - roads will be parking lots.
Will police and medical personnel show up for work when citywide riots threaten the safety of their own family? How and when will they be paid - and with what? What effect will a devaluation have on your average paycheck-to-paycheck American slave? Will everyone remain calm instead of demanding to know where the guvment is? Even without diapers and baby formula? What will the welfare recipients do? There are 40,000,000 of them. That's a lot of hungry people! What in God's name will crack addicts DO!!
Exactly. What hyperinflationists seem to not acknowledge (or have an answer to) is that when gas is $500/gallon and bread is $375/loaf, civil society will cease to exist.
I don't even pretend to know that answer as it can not be known until SHTF.
At least the Ivy League traders. I think most of the crowd here is getting ready for WCS.
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Wait, it's the Ivy Leaguers that are bringing about hyperinflation. Sorry about that.
Local, state-wide or regional scrips will have to come into being if the FRN drops out.
Also, martial law and some form of nationalization of the food supply would have to come in a big crash. Really can't have 400 million people starving for lack of a medium of exchange...
But how will we purchase oil to make this happen? Do we have enough domestic production to keep us fed?
There are a lot of unknowns here.
Good point about the scrips. At least some way to pass on value so you don't have to haul a barter kit with tampons and chunks of coal everywhere you go - I plan on letting slip silver when I absolutely cannot do otherwise. And even let them bring it up. More important to know what they want and work with it.
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"But we produce plenty of food here in the USA, dummy."
Yeah, but how do we transport it. You can have Florida oranges if you *live* in Florida!
Oh, the unknowns. Like my primary unknown - whether or not I'll be able to make it out to Fs and Fy come a crash. The distance I have to cover is unwise by my standards. Very unwise. I would tell someone else they are suicidal.
You just nailed my biggest concern with physical gold, we don't have a system that embraces it as anything but a curiosity to barter. Chevron, Exxon and Whole Foods won't take it, and even if the odd farmer in a farmers market does, will it be at anything like its real value? And fakes, they'll be everywhere. I can see the mess we are heading towards, but I can't see how gold can be our 'life raft'.
Silver certificates? Real copper pennies? A nickel made of.... nickel ?
Dollars back by gold?
And, gardening - indoor, local, hydroponic?
Local exchange, then regional, then larger as needs be. Unique items become sought after?
Shorten the supply line: localize and thus local jobs...?
First just-in-time has to explode though... then back to the future the way it was before de basement was hit.
Same as it ever was.
"Diversify your [survival] portfolio." :-)
they are not going back to the gold standard. that is whu we arw buying gold and silver.
precisely.
+1000
Gordon, not being a trader I have what might appear to be a naive question: Concerning the "double top" now forming in gold, if it pulls back there was a double top? If it does not pull back there was not a double top? So, what the hell good is technical analysis if it doesn't work except in hindsight?
Its much closer to a Cup and handle pattern then any double top, if you want double top look at Shang Hai.