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Not Owning Gold Bullion Shows “Ignorance of Monetary History”

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Not Owning Gold Bullion Shows “Ignorance of Monetary History”

- “Gold remains in secular bull market”
- System is addicted to unsustainable debt
- Persistent deflationary forces threaten system 
- Monetary authorities to take increasingly risky measures to engender inflation
- Debt based monetary system is crux of problem
- “All available means” deployed to prevent global government bond bubble from bursting
- Aversion to owning any gold whatsoever displays “ignorance of monetary history”
- Gold’s qualities as store of value and medium of exchange to be “rediscovered” 
- Have “gold price target of USD 2,300” in three years

The bull market in gold remains intact and may soon reassert itself according to Asset Managers Incremental in their must read yearly “In Gold We Trust” report.

“We are firmly convinced that gold remains in a secular bull market that is close to making a comeback” the report states.

goldcore_chart5_26-06-15

Incrementum list the most important arguments in favor of diversifying into gold

  • ?  Global debt levels are currently 40% higher than in 2007
  • ?  The systemic desire for rising price inflation is increasing
  • ?  Opacity of the financial system – volume of outstanding derivatives
  • by now at USD 700 trillion, the bulk of which consists of interest rate
  • derivatives
  • ?  Concentration risk – “too big to fail” risks are significantly higher than
  • in 2008
  • ?  Gold benefits from periods of deflation, rising rates of price inflation
  • and systemic instability
  • ?  Gold is a financial asset that has no counterparty risk

The persistent deflationary pressures we have witnessed since 2011 caused by “widespread, chronic over-indebtedness” threaten the system which requires ever more borrowing to bring cash into being to pay down interest on existing debt.

Relative to the monetary base, the gold price is currently at an all time low. In our opinion, this is a temporary anomaly, which we believe provides an extraordinarily favorable buying opportunity.

Gold’s position is assured because of the total reliance of our debt-based monetary system on unsustainable inflation. The report states that “we have all become guinea pigs of an unprecedented attempt at re-inflation.” QE and negative interest rates “are a direct consequence of a systemic addiction to inflation.”

goldcore_chart6_26-06-15

Low interest rates, the only conventional weapon available to central banks to tackle deflation are no longer adequate as individuals and businesses simply cannot afford to take on more debt.

Therefore, “ever more dubious” measures are being taken – beginning with QE and then negative interests but which Incremental see as possibly leading to financial repression and even a ban on cash.

Incremental point out that it is our current “uncovered debt” monetary system which is at the heart of the problem. “This system requires exponential inflation of the supply of money and credit”. However, given the problem outlined above “the financial system finds itself in an increasingly unstable situation.”

goldcore_chart7_26-06-15

Government bonds are at the heart of this system. The majority of assets held by central banks and institutions are government bonds and therefore the political commitment to prevent the bursting of the enormous bubble in those bonds and the unwinding of the system is unbreakable.

Incremental believes “all available means” will be deployed to prevent a crash.

The report states that gold bullion’s time honoured qualities as a store of value and medium of exchange will be “re-discovered” in coming years.

“Lengthy periods of rising price inflation and negative real interest rates are the main catalyst” for a loss of confidence in paper currencies among the wider public and this is what we can expect in the coming years.

People will then seek something tangible as a store of value.

“Gold is quite cheap relative to stocks and bonds, but also relative to a number of hard assets. As a result, widespread assertions that gold continues to be exorbitantly overvalued are not tenable.”

“Even if one does not share our bullish assessment, an overly critical attitude towards any gold investment whatsoever in our opinion displays ignorance of monetary history.”

Conclusion

The report does an excellent job of bringing together all the empirical data and distilling and crystallizing the bullish case for gold today. Not surprisingly, we share the views of Ronald Stoeferle and Mark Valek and have in recent months highlighted many of the angles they bring together so well.

We also are very close to their price target and have long held the view that gold prices would rise to over $2,400 per ounce, the real, inflation adjusted high from 1980, before this secular bull market is over.

As ever, the report is well worth taking the time to read. It includes many excellent charts that are well worth taking the time to look at in order to better understand the excellent fundamentals of the gold market.

Any open and fair minded individual would have to concede that the report makes an extremely compelling case for a diversification into gold today.

Must-read guide: Gold Is a Safe Haven Asset
Must-read guide: In Gold We Trust (2015)

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Sun, 06/28/2015 - 08:00 | 6243700 meterman
meterman's picture

As long as TPTB can print money, your gold(and silver) are not much more than garbage. When will people catch on to the PM hucksters and their "the end is near" - "PM are in short supply"  crap? All they really sell is fear.

Sun, 06/28/2015 - 08:52 | 6243777 truth serum
truth serum's picture

The only time paper (fiat trash) beats rocks (gold) is in the childs game " rocks-sizzors-paper, and you, in your child like fooliskness will soon find this out.

Sun, 06/28/2015 - 09:29 | 6243740 Bendromeda Strain
Bendromeda Strain's picture

"Print - MoneyNice oxy, moron...

As long as they can keep the debt ponzi going they can maintain the illusion that worthless chits are a store of value. Math works against them and you are the fool arguing that "math doesn't matter" and "we'll all just pretend". Obviously, you bring nothing of value to the table and so actually benefit from such a unicorn fart arrangement. It is always instructive to hear from the temple prostitutes though, so, you know, carry on.

Sat, 06/27/2015 - 20:03 | 6242856 Hongcha
Hongcha's picture

Before that Gold sub-$1,000 after king dollah rallies hard with euro turmoil.  One should already be positioned but have plenty of dry powder because those au and ag support lines are gonna get busted to the downside with gusto.

Sat, 06/27/2015 - 19:27 | 6242745 honestann
honestann's picture

$2300 in three years?  Are you kidding?

Try $4600+ in three years?  That's closer.

And if the fiat system goes haywire, $23000 is entirely possible.

-----

In an attempt to provide a balanaced opinion, it is possible that gold will not soar as high as it should... when virtually ALL fiat is confiscated by banks and governments, leaving nothing to buy gold with.

Sun, 06/28/2015 - 05:48 | 6243625 CHX
CHX's picture

" when virtually ALL fiat is confiscated by banks and governments, leaving nothing to buy gold with"

 

I know what you mean, but relative to all the fiat they have already created (as well as +1 Q in derivatives, and +200 T in debt) the little currency that is left in the hands of of the 99% is really nothing and the world economy runs on that and the artificially cheap credit. They have already won and are now picking up the last crumbs. Once fizzical gold starts soaring (Shanghai, CONeX/LBMA default...), the 99% will be left behind and when new gold backed currencies are issued, they will have nothing left while all the old debt will have gone back into gold as renewed purchasing power. Good luck to all, hope to meet ya'll on the other side...

 


Sat, 06/27/2015 - 14:43 | 6241937 Clesthenes
Clesthenes's picture

Gold at $2,300?

That’s quite a modest number; especially since gold is the backing – that is, “collateral” – for some $15-$18 trillion in paper and computer money units, or, paper currency and bank reserves.

When gold is priced to equal “cash equivalent” issued against it, what will that price be?

It helps to understand this by an examination of consequences of the governments’ attempts to guarantee bank deposits, on a global scale.

By these guarantees, when a bank failed, or was seized by the government, all deposits less than $250,000, for example, would be protected; all amounts over that limit would be lost.

This immediately created massive problems for depositors with accounts larger than the limit (wealthy individuals, companies and corporations).

It would, for example, be a disaster for a corporation with a “cash” position of $500,000,000 to be caught in such a bank failure.  (By “cash” a “bank account” is meant.)

This policy of guarantee set in motion mad scrambles by large depositors to protect their “cash”.  It led to the creation of so-called zero-balance accounts (which go by many names).  By these accounts, positive balances in large checking accounts were swept into US Treasuries at end of each day.  Thus, if the bank failed/was-seized after closing that day, the account holder had nothing to lose.

But there was a limit to this remedy: very quickly, there were not enough Treasuries to satisfy demand.  This gave rise to the demand for Mortgage Backed Securities (MBS) as a substitute for Treasuries.  This demand was world-wide.  Now, there are probably $6 to $15 trillion MBS serving as so-called “cash equivalents” on corporate balance sheets world-wide.  (Beginning about 15 years ago, corporations began replacing the term “cash” on their asset statements with “cash equivalents”.)

And now all these “cash equivalents” are collateralized by US Treasuries (directly or indirectly): that is, American taxpayers.

Other “cash equivalents” include all US Treasuries; dollar instruments owned by foreign private or central banks; all MBS owned by the Federal Reserve; all currency issued by the Federal Reserve (the scrip we carry in our pockets); and a whole plethora of fruit-cake debt (such as defaulted-SBA loans, defaulted-car-lot loans, defaulted-student loans, defaulted-credit-card debt et cetera).

Few people realize the enormity of collateralizing the world’s reserve currency with such financial trash as enumerated in the above paragraph.

When we trace all these “cash equivalents” to their collateral, we arrive at the gold that may or may not be at “Fort Knox.”

What then will be the price(?)... ah, you wouldn't believe it.

Sat, 06/27/2015 - 16:05 | 6242151 Marco
Marco's picture

The real collateral is the functioning economy. The only way we go back to a gold standard is in a complete economic collapse, the collateral disappears as well.

What will happen to the price of gold denominated in rolls of toilet paper, that is more interesting to know if shit hits the fan. I think gold will lose a massive amount of value, not as much as dollars of course which as far as they are physical will simply become very poor quality toilet paper.

Sat, 06/27/2015 - 16:10 | 6242168 Model T
Model T's picture

Thing about that "Ignorance of History" is--- there's a lot of that going around. just sayin'.

Sat, 06/27/2015 - 10:17 | 6241057 Fukushima Fricassee
Fukushima Fricassee's picture

The world has gone crazy and Amerikans are beyond stupid. Now , go marry same sex ass holes and get treated for STDs with your fucking Obama care you ignorant enslaved fuckers.

Sat, 06/27/2015 - 09:53 | 6240995 Kina
Kina's picture

Unfortunately people aint going to believe you until gold is $2,500/oz then they all pile in to make it $4,000 /oz

 

The benefits of being in first..lol

Sat, 06/27/2015 - 10:16 | 6241056 thecondor
thecondor's picture

And then we sell a little and buy moar back at a lower price.

Sat, 06/27/2015 - 16:12 | 6242172 Model T
Model T's picture

Yep.

Sat, 06/27/2015 - 12:23 | 6241528 crazytechnician
crazytechnician's picture

The smart financial commentators are only advising that because they are loading up at low prices , same with bitcoin , once they have filled their boots their stories will go into reverse.

Sat, 06/27/2015 - 13:02 | 6241644 Captain Debtcrash
Captain Debtcrash's picture

You are certainly right with some, but many actually believe that nonsense.

I'm not sure if I showed you this, but you have won me over, a bitcoin skeptic. It does makes sense for even those who have doubts about bitcoin to allocate a very small portion of their portfolio.  I still contend there are many reasons to be cautious with bitcoin but an allocation of zero would be foolish considering how the bitcoin has reacted to even small economic turmoil. If the big one hits, it could be a great beneficiary.  Considering its small market cap, compared to gold or even silver at current prices, an allocation of far less than 1% would be sufficient to protect a prudent portfolio. Again I am not a convert but a zero allocation, that absolute assertion, doesn't make sense. 

Sat, 06/27/2015 - 14:38 | 6241924 crazytechnician
crazytechnician's picture

My advice is simple. For non technical investors who do not understand this technology just buy one bitcoin for each member of your family. It may dissapear and go to zero , then again it could be one kick-a$$ retirement plan. All things considered , what's really to lose ?

Sat, 06/27/2015 - 16:15 | 6242184 Model T
Model T's picture

It's difficult to think of anything worse, or more likely to fail, than Fiat Currency; unless you're a Computer Scientist, (which is another way of spelling 'knows nothing about the real world"); then you can invent Bitchcoin. Oh, and by the way; what's to lose ? The entire price you paid for the ":coins"; obviously.

Sat, 06/27/2015 - 18:40 | 6242601 crazytechnician
crazytechnician's picture

bitcoin does not have any of the attributes of a fiat currency.

Grow a brain you moron.

Sun, 06/28/2015 - 08:59 | 6243807 truth serum
truth serum's picture

Al you nedd to know about "bitch coin" is the whore of all whores, Blyth Masters is getting into it.

Sun, 06/28/2015 - 12:52 | 6244846 crazytechnician
crazytechnician's picture

You lot need to crawl back down into your damp bunkers , there are a few silver eagles that need a bit more polishing and some 40 year old prepper food needs to be eaten before it goes out of date. Don't forget to take your map of the Flat Earth with you , after armageddon you will need it to know what lake to go back to to find your stash so you can actually use it as money to buy stuff after the collapse. Fucking brain dead morons.

Sun, 06/28/2015 - 08:49 | 6243768 Bendromeda Strain
Bendromeda Strain's picture

No - bitcoin once embraced by sovereigns will be a completely different flavor of monetary slavery.

Sun, 06/28/2015 - 12:53 | 6244852 crazytechnician
crazytechnician's picture

Correction:

gold - once embraced by sovereigns will be a completely different flavor of monetary slavery.

Sat, 06/27/2015 - 16:48 | 6242270 Captain Debtcrash
Captain Debtcrash's picture

Hey I think there are several things that point to bitcoin being suspect.  That said I am humble enough to know that I don't know everything.  Bitcoin has shown to do well during the small financial hiccups and people have rushed to it during the Cyprus bail in, the Ruble crisis, and the most recent instability in Greece.  And these are just bumps in the road compared to what I, and many readers on here think is coming.  Bitcoin could be a beneficiary.  I own plenty of precious metals I have bought to protect my wealth and family during the upcoming monetary shift.  I would hate to call the monetary crash right but have bought the wrong asset to protect myself.  I think a small allocation >.5% makes sense.  I have 8% PM's, 40% cash and the rest in stocks, a little more diversification into something new is fine with me.  

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