This may seem like a trivial point to raise, but it’s actually very, very important. Remember that gold has been the de facto currency for thousands of years, and it has been the most sought after safe haven when the future is in doubt. When you wanted a safe place to put your money, you always bought gold. Always.
This principle is well understood by central bankers all over the world, which is why it would make sense for them to prop up the value of their currencies by pushing down the value of gold. I know that sounds a little bizarre, but it’s the best explanation for what I said on Monday:
When the price of something is too low, it disappears from store shelves and warehouses – assuming that there are no problems with delivery or production. That’s how the real world works. Well, the gold inventories at the COMEX and the gold ETFs have been rapidly declining over the past few months. Furthermore, countries like Russia and China have rapidly increased their gold imports. China alone officially imports over a third of the world’s gold production.
My comments on Monday were actually too conservative. Yesterday, I saw the Open Letter to the World Gold Council written by Eric Sprott. Did you know that the amount of gold being bought, around the world, is more than double the total production of gold in the world?
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Taking a Step Back and Thinking
Let’s think about this for a second. If the sale of gold is more than double the production of gold, the price of gold should go up, but it’s not. Worse, it’s actually gone down.
That makes no sense.
Well, it makes no sense if nothing is wrong, which means that something IS wrong. In fact, there’s a $150 billion a month wrong. That’s the amount the US government borrows every month ($65 billion), plus what the Federal Reserve produces in the form of Quantitative Easing ($85 billion).
This $150 billion is being ‘printed’ out of thin air. Normally, all of that would jump into the economy and turn into inflation, but the Federal Reserve has been able to suck up some of that extra cash by bribing banks with interest payments to keep it locked up – but only some of it.
Lots of cash is entering into the economy and driving up prices. They’ve been able to minimize some of the effects of this inflation by lying about it. The US government claims that inflation is less than 2%. But, if we computed it the way we did pre-1980, inflation would be close to 10%. Lying has helped, but not enough.
Enter gold manipulation. By pushing down the price of gold, the US dollar looks good. Oil producers still sell their oil for dollars. Foreign widget makers still sell us their widgets in dollars. Foreign investors buy stocks and bonds and real estate in dollars. And, they hold on to those dollars, which takes dollars out of circulation – reducing inflation. Widget imports are also cheaper, which also keeps inflation down. That’s why many economists talk about the US having exported her inflation. But, all of that is starting to unravel.
With gold artificially low, big players like China, Russia and India are buying as much as they can, which is why the COMEX and many of the gold ETFs are running low on gold – and why, according to many gold experts, there’s very little gold left at US and UK gold repositories. But, even if there is a lot of gold left for sale, there’s no way that it’s going to sit around long while it’s at such artificially low prices.
When the gold is gone, the price of gold will rise, downward pressure on the value of the dollar will increase, and a lot of ‘something wrong’ will be set loose on economies worldwide. It’s really only a matter of time.
The question is whether you are going to let this opportunity pass you by. Gold and silver are cheap, right now. When they stop being cheap, the failure of the global economy will not be far behind. When that day comes, you will wish that you had more gold and silver.
Are you ready for this?
If you find a flaw in my reasoning, or wish to offer a different explanation, leave a comment. I’d be happy to hear from you.
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