Why Gold Is Set To Move Higher
from Gold Silver Worlds >
December 1987 to March 1993: Gold fell 36% in 5.3 years (in US dollars)
February 1996 to July 1999: Gold fell 40% in 3.4 years (in US dollars)
August 2011 to November 2014: Gold fell 40% in 3.3 years (in US dollars)
Governments, confidence, and prices rise and fall. The current collapse in gold prices from August 2011 to November 2014 has been typical for a once-per-decade gold price decline.
What changed? Let’s look at the usual suspect:
- The US Dollar was strong during the 1996 – 1999 gold price collapse.
- The US Dollar was strong during the 2011 – 2014 gold price collapse.
- Gold bottomed in early November 2014 and has risen 13% (January 23 close) since then, even though the dollar index has also increased another 9% since the gold bottom.
There is more that will explain the rally in gold prices. By the way, gold is close to all-time highs in several other currencies, even though it is not in US dollar terms.
- The Swiss National Bank assured the world that their “peg” to the Euro was solid, but soon thereafter they abandoned the “peg” and assisted with billions in losses (still counting) globally. The Swiss just reconfirmed what has been evident for decades – central banks often lie to protect themselves as well as the political and financial elite. The Swiss traded their gold for a huge loss on euros while Asians have wisely been trading currencies for gold. Expect the Asian demand for more physical gold bars to continue.
- Crude oil prices have collapsed over 55% in six months. Certainly some oil companies were hedged against an oil price collapse, but not all of them. What happens when the hedges expire or the counter-parties can’t pay off on the hedges? How large are the derivatives that are at risk? Collateral damage to several oil exporting countries seems inevitable. Perhaps the elite see the negative consequences and are buying physical gold for protection.
- War is escalating in the Ukraine. Kissinger and Gorbachev have both warned this could lead to resumption of the US – Russian cold war and potentially a hot or nuclear war. War encourages massive debts, inflation, and purchases of gold.
- Gold has strengthened as a consequence of the delusion that “money printing” will help anyone but the political and financial elite. The Bank of Japan has been printing Yen like there is “no tomorrow,” which unfortunately may describe the rather bleak future of the Japanese economy. Perhaps the Japanese and other westerners are buying gold for protection from their central bank “money printing” policies.