Collapsing confidence, civil unrest, anemic growth, massive sovereign debt, a fraudulent CPI, desperate monetary policy, artificially low interest rates, lack of capital formation, a depreciating dollar and the threat of higher interest rates. To this tableau I would add intractable deficits, slowing global growth and imported inflation through higher material and commodity prices effected by the Fed and QE beneficiaries seeking higher yields in equities, emerging markets and commodities. I don't know how this will play out but I'm inclined to believe the debt crisis in Europe and stagnating economic growth will be the catalysts for larger adjustments in whatever forms they might take.
The High Probability of an Irrational Gold Bubble [View article]
But I believe gold prices are moving higher due to the public’s opposition to fiat currency, fiscal stimulus and what is generally viewed as continued “money printing”. This is highly irrational in the long-term in my opinion and the potential for gold to turn into a bubble is looking increasingly high.
In the end, however, the Euro crisis will pass. That is unlikely to occur until European leaders recognize that their single currency system is inherently flawed (just as the gold standard was) and that means we could see substantially higher gold prices as investors continue to rush into gold with the belief that gold can serve as a viable reserve currency (something that has already been tested in a global economy and also something that has already failed). All of this increasing worry in Europe is likely to increase the odds of a gold bubble.
How do I see such a scenario unfolding? I believe there is a fairly high chance of an eventual defection and default in Europe. After all, there is no good solution in the region and the debt problems will persist until something forces the EMU’s hand. If this in fact occurs, gold prices could very well reach stratospheric levels. But ultimately, paper money will survive in its current form no matter what happens to the Euro. ______________________... Given the likelihood of your thesis playing out over two years at a minimum and more likely much longer, I think you are a bit head of yourself. Never underestimate the hubris and narcissism behind the drivers and architects of the ECU and eurozone, as they will exhaust every possible option before doing the right thing.
In the meantime, gold will be viewed as a surrogate currency and a substitute to vulnerable currencies with plenty of upside. And the profit window may remain open even longer than allowed by your thesis as I believe it's only a matter of time before the US must square off between the agencies and the capital markets.
This would extend the life as gold as an investment opportunity.
Things Are About To Get Much Worse [View article]
The High Probability of an Irrational Gold Bubble [View article]
In the end, however, the Euro crisis will pass. That is unlikely to occur until European leaders recognize that their single currency system is inherently flawed (just as the gold standard was) and that means we could see substantially higher gold prices as investors continue to rush into gold with the belief that gold can serve as a viable reserve currency (something that has already been tested in a global economy and also something that has already failed). All of this increasing worry in Europe is likely to increase the odds of a gold bubble.
How do I see such a scenario unfolding? I believe there is a fairly high chance of an eventual defection and default in Europe. After all, there is no good solution in the region and the debt problems will persist until something forces the EMU’s hand. If this in fact occurs, gold prices could very well reach stratospheric levels. But ultimately, paper money will survive in its current form no matter what happens to the Euro.
______________________...
Given the likelihood of your thesis playing out over two years at a minimum and more likely much longer, I think you are a bit head of yourself. Never underestimate the hubris and narcissism behind the drivers and architects of the ECU and eurozone, as they will exhaust every possible option before doing the right thing.
In the meantime, gold will be viewed as a surrogate currency and a substitute to vulnerable currencies with plenty of upside. And the profit window may remain open even longer than allowed by your thesis as I believe it's only a matter of time before the US must square off between the agencies and the capital markets.
This would extend the life as gold as an investment opportunity.