…[While] governments have consistently damaged their economies ever further, the house of cards, however shaky, is still standing...If and when the markets crash and currencies collapse, however, there will be a dramatic rise in the price of gold. Here’s why.
The U.S. Dollar & Gold Relationship
…Understanding gold’s real value would be easier if Americans regarded the dollar as “rising against gold” instead of “gold declining against the dollar.” This may seem like hair-splitting, but in fact, the dollar is concurrently rising against most of the world’s currencies. The currencies of most countries are, in fact, declining against gold.[Although] the U.S. dollar is [currently] looking good worldwide…U.S. debt has placed it in a precarious position from which it will most certainly fall. As billionaire investor Jim Rogers has repeatedly stated, “I’m long on the dollar, but I hope I’m smart enough to get out in time.” Recently, he added, “If gold goes under $1,000, I hope I’m smart enough to step up and buy more gold — maybe even a lot of gold.”
The dollar is not a truly strong currency but, rather, “the best looking horse in the glue factory.” It will be the last to go, but it will indeed go. We may have a bit of time before that happens (whether it’s measured in months or years we can’t be certain) but right now (and especially if the dollar rises further against gold), gold is a bargain. It has either reached its bottom, or will do so in the foreseeable future. Any significant drop would be a sign to back up the truck and load up, as its eventual rise is inevitable. These are, in fact, the good old days, a time when gold is comparatively cheap…
The dollar promises to remain high as long as the yen and the euro hold out but, should they fall, the dollar will be exposed… There are many, many possible triggers that will cause the dollar to tank and, surely, one of them will occur, we just don’t know which one, or, more importantly, when. [For example,]
- the Chinese could start selling their U.S. debt back into the U.S. market in a bigger way, or
- the EU might default on its debt, or
- the inflation caused by QE could create commodity price spikes.
Of one thing we can be reasonably certain. If the dollar starts to head south, we will see a flood of people seeking to buy gold in an effort to preserve their wealth. However, as all the punters have already been driven out of the market and only the long-termers remain, potential buyers will find themselves making higher and higher offers, as sellers will be almost non-existent.
With any investment, when panic buying sets in, the sky is the limit. We shall therefore see a gold mania. Most economists predict a figure in the $5000-$8000 range, but other estimates go far higher. A gold mania is not imminent, but I believe it is inevitable.[The above article*, written by Geoffrey Caveney, originally appeared on internationalman.com and is presented by the editorial team of munKNEE.com (Your Key to Making Money!) and the FREE Market Intelligence Report newsletter (see sample here – register here) in a slightly edited ([ ]) and abridged (…) format to provide a fast and easy read.]
*http://www.internationalman.com/articles/confusing-inevitable-with-imminent (© 2015 Casey Research, LLC.)
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