For 95% of the world’s population, the price of gold has already begun an explosive rally. “But gold is only $150 off the November lows” you say? Well yes, gold in terms of dollars is not yet up 20% from mid November …but, in terms of yen, pounds, euros, (especially rubles) you name it, gold has launched in price!
This of course is a function of the dollar strengthening an average of over 10% versus foreign currencies in just the past several months. My question is this, are dollars “up” as a function of them being a “safe haven” or is the strength “synthetic” so to speak? Another way to put this would be, have foreigners sold their currencies to move into dollars for “safety” or has the dollar risen because commodities have been sold?
You see, because commodities (oil in particular) had been purchased as a speculation on the reflation trade, these trades are being reversed as the real demand diminishes because of a weak global economy. Many of these long position have been blown up and forced via margin calls into being sold. This “unwinding” means that as the commodities are sold, the original loans (margin) for purchase have to be paid off …with dollars…and thus the recent demand for dollars causing the dollar to inflate versus foreign currencies.
The big argument by the deflationists has been the dollar would emerge as the “King” currency as safe haven buying entered the equation. This has been true versus other paper currencies (now with the exception of the Swiss franc), but not versus gold. The world is definitely experiencing a sharp slowdown economically, this is exactly why we very probably will hear from the ECB this coming week. As I have said all along, it is either “inflate or die” and Europe’s economy is definitely dying. In my opinion, we are standing directly in front of a fork in the road. Please don’t mistake this, I am not saying a “decision” has to be made because there is no “two way” decision available. The only decision is whether to do nothing, or to engage in further monetization.
In my opinion, QE, or more printing must and will occur. The fork in the road is how markets react to further easing. Do markets reflate? Or, do they throw a party for 24-48 hours and then just collapse? In my mind, this is really the only question because we have already seen that QE does not work in the real economy. At best, QE merely slowed or halted the economic decline, never did we see a real “recovery” of the real economy. This fork in the road is a big one, I believe it will be highlighted by both a currency crisis and a credit seizure. This is THE environment where gold shines and shows its true colors because it is the ultimate money.
The recent strength of the dollar versus foreign currencies AND gold strengthening versus the dollar means further “demand” for the front runner. Foreigners are being forced to find a safe haven because of the local “inflation” created by their weak currencies. This is happening at a time where demand for gold and silver were already far outstripping global mine supply. Where will the metal come from? The answer to this is simple, “it won’t”. Added supply will not come to market at current prices, the price must and will rise in order to coax the new supply to meet the demand, Mother Nature at her finest if you will. Another way to explain this is that because gold has been the best performing currency, holders of these foreign currencies are being “shown the way”. The market prices of gold in local currencies is illuminating their path to safety.
Going one step further than the current “deflation” the world is experiencing will be the default phase. This past week’s announcement by the Swiss was the catalyzing event. Many firms were bankrupted and margin calls galore were issued to an over leveraged financial system. My guess is we only have a week or two before some very important dead body(s), somewhere, floats to the surface which causes further panic, further margin calls and more breaks in the derivatives chain.
THE most basic reason to own gold is because “it cannot go broke”. It is in this very environment, in this very scenario that gold will perform best. The deflationists argue “gold will go down in a deflation and can only do well during inflation”. This is pure fallacy. THE best environment for gold is when even the best credits are defaulting. When default is in the air and behind every door you open, capital will flow into the only place where default is not possible, gold.
I remind you, the “door” to gold is a very small and definitely finite one. There is only so much of it. There is only so much of it “willing” to be sold. Another aspect is the newfangled “fractional reserve” position of gold. In order to suppress price (the truth), 100 paper ounces have been sold for every one and single real ounce. We will see not only panicked investors looking for safety trying to get through the golden door, we will also see those who previously “thought” they owned gold jamming the entrance.
For several years I have spoken of the necessity for a “re set”, the Swiss have now begun this process officially or by decree if you will. Many have laughed as I have written the scenario of going to bed with $1,500 gold and waking up to a bid of $4,000 gold and none offered. This is exactly what happened to a smaller degree with the franc/euro cross. It only took 5 minutes for a 30% move to occur. Why do question this cannot happen with gold? Did the Swiss not artificially depress the value of their currency by implementing the peg? Have we not shown you time and time again, evidence of gold price suppression? Is there any difference?
When it becomes no longer desirable, tenable or even possible to suppress gold, what do you think will happen to price? You have already seen your answer from the Swiss. It is for this reason I have harped that “trading” in and out of gold is very dangerous. You can make 100 trades, 99 of them profitable (good luck with this percentage!) and be “out” on just one… the wrong one!
When the re set of gold’s price takes place, you will either be in, or you’re out. If you are out, you will not be allowed back in until whatever “clearing” level is found. My guess is this clearing level will be multiples of current price! By the way, no one will tap you on the shoulder and tell you “when” this will happen but rest assured, the price of everything will be re set versus gold.
To finish, I believe the deflationists are 99.9% correct, the credit markets will in fact implode and be followed by outright economic depression while central banks throw a kitchen sink of printing at the debacle. The only thing they are missing is the fact that dollars are “part” of the credit structure. In fact, dollars are what is holding the entire credit structure up. History shows us that “liquid cash” is the very best place to be in a credit contraction. The only caveat to this is your “liquid cash” must be of the sort which does not and cannot “default”. Gold is the only liquid cash that is no one’s liability and thus can never default. Yes, we have an historic deflation dead ahead …this deflation will be in terms of gold, not dollars!
You have now seen and been warned of what a re set looks like by the Swiss. If you have not yet purchased all the gold and silver you desire or have the ability to, do it NOW at Miles Franklin! The coming credit unwinding will occur with no prior notice and at lightning speed!
Regards, Bill Holter
One question Bill : why in your opinion, a ECB QE “must and will” occur ?
Indeed, speculators have so much front running the ECB into buying long term european sovereign bonds (except Greece for now), why the ECB will have to step in ?
Thanks.
have been following you guys since the beginning of the collapse of the debt and death paradigm in 07’…
your words and work are greatly appreciated…
keep it up and thanks for this sanctuary…
during our “GATA” days.
We are certainly living in “interesting times.”
It is inflate or die, inflate and die.
My other favorite financial commentator, Yogi Berra, of course said, “When you come to a fork in the road, take it.”
Sounds like this fork is a doozy.
Got gold?
yes, the die part is cast in stone mathematically.
TOUCHDOWN!! Great job, Bill!
Thanks Bing, more like “shoots…scores!”. I am a hockey player by trade.
“shoots…scores!”, I’m guessing you’re not a goalie, right wing perhaps? I played mostly center while growing up.
BTW, aren’t you in Texas, how the heck (and where the heck) does a Texan learn to play the great game of hockey?
I grew up in Connecticut and played varsity at UCONN (defense). I wasn’t born in Texas and didn’t grow up here but once I got some smarts I moved here as fast as I could!
A hockey player from deep in the heart of Texas who wears a big cowboy hat. That is too cool Bill. haha
Aw, okay. UCONN then Texas. Still cool you are now a Texan who plays/played hockey.
yes, got here a quick as I could!
what is really cool is this, my wife Kathy is finishing her 5th portrait. We have asked over a dozen people if the photo on her cell phone is a photo or a painting, only one person guessed painting. The coolest part is her next piece will be of Principe’ raring up in really good light which shows muscle structure and even veins close up (with yours truly on him)… I can’t wait until this is done, she is now entering international competitions! It will be called “Raring to go!” …should be Hi Ho Silver! in my opinion but she’s the boss.
Bill:
Thanks for another good article. Anyone who cannot, by now, see the writing that is on the wall and pick up some sound-money insurance (i.e., gold/silver) deserves the financial ass-kicking that they’re going to get when the re-set hits full stride. By the way, I just called Miles Franklin and traded a pile of fiat for 20 gold eagles. I still can’t believe people exchange gold for paper. You and Andy keep up the good work!!!
Thanks GB, we appreciate your business!
Bill another excellent article and very instructional in the 3rd paragraph which explains this rise in the $ as commodities are selling off and their accompanying trades which were done in $. Also, I have read where this rising $ is killing the bond market in the Emerging Market countries. So, what we have going on now are 3 poison pills wreaking havoc in global financial markets: oil under $50; Rising $; Swissy depegging from Euro. The fireworks have Begun – There is No going back. The proverbial Rubicon has been crossed. Again great work Bill.
yes, all unintended consequences.
“yes, all unintended consequences.”
Yeah, right. “Unintended” my patootie. lol
believe it or not, some truly are unintended as the idiots who run the show don’t think down the road past tomorrow.
Bill, I like to look at the hyperinflation / deflation debate through Exter’s Pyramid. Gold is money at the bottom, everything else above it is derived from credit. Through history, we’ve had various deflationary crashes as bubbles were blew and popped, and what happened was that higher level money disappeared from the system and demand for the lower rungs of the pyramid (dollars) increased. But through all this the dollar was always solvent and a genuine safe haven (even if that was simply due to the US military enforcing it around the world). It was a safe haven because the economy could continue to grow, interest rates could always be lowered, and more dollars could always be issued on the back of genuine debt.
That is the historical environment deflationists have always based their theories on; now, the problem is that every single rung above gold is insolvent, badly insolvent. So the whole deflation / hyperinflation debate seems a bit silly to me, it’s all about people arguing over how far down the pyramid scheme the insolvency goes. But when the next uncontrolled crash happens, all the rungs will be shattered as the world all demands gold.
This is why I question if we’ll ever see a major uncontrolled deflationary crash. I am of the opinion that the recent plunge in oil and other commodities was planned, controlled and necessary. But it was still controlled. I say this because there has been recent evidence that central banks are basically buying all assets including stocks. I wouldn’t be surprised if they buy shale oil stocks to keep that pumped up. They will do everything to avoid an uncontrolled deflationary cascade. Of course they can only do this so long because fundamentals will at some point overrun their vacuous money printing, and that is when we will see the reset. Everything will be more or less controlled IMO. Sure we’ll see “deflation” but it will be tamed.
this time the dollar is insolvent.
Hi Bill,
Thank you again for another of many very insightful pieces. I have a theory and would like your take. I read an article on Silver Doctors yesterday, http://www.silverdoctors.com/did-the-swiss-just-cover-a-massively-short-gold-position , where they suspect the Swiss were massively short gold and de-pegged their currency from the euro to cover their shorts and take profits. We have no proof who is suppressing the price of gold. I think China could be the responsible party doing this by shorting gold in paper contracts. This allows them to buy up the physical gold at artificially suppressed prices. Knowing in the future when they de-peg their currency from the dollar they can cover their shorts and make a massive paper profit all the while building a massive hoard of physical gold. This could explain why the high open interest in gold and silver futures has never resulted in delivery and the contracts are always rolled out. Whoever has the longs (US Banks) know the gold is not there and could never be delivered and they don’t want to blow up the system that gives them power. I’m not an expert in futures or trading by any means, but it seems to me this could make sense. What is your take.
certainly plausible.
Just another BIG ‘OL YAWN Bill Holter article to push metals.
I guess it’s “your bad” for wasting your time reading it!
Heh, Bill… next he’ll be telling us that he was strapped to a table with his eyes taped open and “forced” to read it. It is pretty amazing what some chuckle-heads will come up with.
it is a compliment to be trolled as I must be striking a nerve somewhere.
Thanks again Bill, spot on analysis.
Someone’s trying to corner the dollar market as it’ll be the most luxurious toilet paper in the world. It’s the thread count you see.
Gold, the immortal money. Forged in stellar supernovas and scattered on the earth by the grace of God.
The reset has already begun, gold outperforming all fiats.
“Gold, the immortal money. Forged in stellar supernovas and scattered on the earth by the grace of God.”
Great line…if I owned a website that sells gold I would make that the company logo.
very welcome Shin.
yes it is!
Except that it’s incorrect.
Gold is NOT forged in stellar supernovas. Silver and palladium are formed when supernovas crush under their own weight and explode.
Both gold and platinum are formed under completely different and even rarer conditions. They are formed when 2 or more neutron stars collide with each other.
Gold and platinum are extremely rare not only on our planet, but in the entire universe. If you ever decide to travel to other galaxies, they’ll make for good money. Because statistically the chances are, they’re rare in other parts of the universe as well.
alien currency?
I see Trader Dan recently slamming gold bugs but not explaining how it is that gold has gone up while the dollar has strengthened. Also, I’ve never seen him explain paper sales at low volume times hitting every bid down $20 on gold.
he denies paper sales are THE reason for diluted prices. I would ask him this, if someone sold 100 billion counterfeit shares (I think they have something like 1 billion real shares outstanding), what would happen to the price of IBM? I would love to see his or any other apologists answer to this question!
By the way, this is a flight to quality moving into a currency crisis.
I think most people who trade and make money in a rigged system never look down the road too far. This makes people like trader Dan delusional. When people are busy making money, they never admit to the wrong in anything because they themselves profit from it. I saw the same this last night with the SOTU address. Obama said two sodomite marrying and the way America has embraced this is for the greater good(paraphrased). Right then I knew JUDGEMENT is coming to America. The CHOSEN ONE has just spoken the key words and ended his speech with let’s start the World. There is no way we can get anything good out of a totally corrupt way of living or thinking. What we get is destruction and people are slaughtered in the wake. History proves this many times!
we will reap what we have sown.
Isa_5:20 Woe unto them that call evil good, and good evil; that put darkness for light, and light for darkness; that put bitter for sweet, and sweet for bitter!
Black is white.
The Swiss, and by extension, their Central Bank, are no longer some financial powerhouse completely independent of the BIS, which is located, for heavens sake, in Basel, Switzerland. Therefore, I don’t think the SNB unpegged based solely on their own internal decisions. The unpegging and the timing of the unpegging was “approved” by someone higher than Mr. Jordan of the SNB. It would be nice to know who and how that person or persons profited from the move.
We should probably be cautious about assuming that PM prices will only move north from here. The powers of manipulation is still strong. However, better to buy now than to never buy while waiting for the dip.
Bill, keep up the good work. Your articles help us stay focused.
Bill,
Another valuable and timely article. Thank you.
Me and my family, as well as many other readers in the world, are blessed to have you to tell us the truth so we can be prepared as much as possible for what is about to come forth (hell on earth).
As to “Tony V” above, I just laugh when I read such comments. Maybe he is part of the Central Banking System, or possibly just loves putting his family at great risk and peril. The Bible warns us of false prophets!
thanks Farrell, I am not concerned about trolls, it is a compliment.
Oh man this is tingle time stuff, better yet its right on.
To finish, I believe the deflationists are 99.9% correct, the credit markets will in fact implode and be followed by outright economic depression while central banks throw a kitchen sink of printing at the debacle. The only thing they are missing is the fact that dollars are “part” of the credit structure. In fact, dollars are what is holding the entire credit structure up. History shows us that “liquid cash” is the very best place to be in a credit contraction. The only caveat to this is your “liquid cash” must be of the sort which does not and cannot “default”. Gold is the only liquid cash that is no one’s liability and thus can never default. Yes, we have an historic deflation dead ahead …this deflation will be in terms of gold, not dollars!
thank you Kansas.
Okay this is slightly off topic but I wanted to share this here and on 2 others sites….i.e. USAWatchdog and BuyGoldco……
Some of you may have noticed my asking about what to do with all those mining shares I bought into LONG in 2010 via a brokerage account. They dropped like 70%, but are now coming back and are now down 35%.
So last year, i was asking around about what I should do because i did not want to sell at a loss. I was concerned about a bank bail in and thats why I asked. The advice i was given was to get the stock certificates in case of a bail in effecting the brokerages themselves. I had contacted my broker and they instructed me how to get the the certs last July I think, and it was a lot of work. I was too busy to do it at the time. Now I have requested that info again from my brokerage firm on how to do it and this is the response I now have. I am only posting this because i see it as a potential red flag that something may be coming…. So read into this what you will but it is somewhat telling when a privatly owned Brokerage firm no longer offers this when they were offering it just mid-last year. They may know something or are apparently being ordered to not offer stock certs anymore. I do not see my brokerage firm at fault here but they appear to be forced into no longer providing this. Here is what i was told when I asked what I need to do to get the actual stock certs for the equities I have bought…
Reply Date: 1/20/2015 6:51:39 PM
Subject: RE: WebsiteBrokerage/ContactUsOther <>
Dear Richard:
We no longer offer physical stock certificates. This change was made in response to an initiative by the Depository Trust & Clearing Corporation (DTCC) to eliminate physical certificates.
DTCC discontinued the issuance of physical certificates for most securities on Jan. 9, 2009 and the remaining stocks were discontinued in Jul. 2009. This is a Securities and Exchange Commission (SEC) approved, industry-wide change that will affect all investors regardless of the brokerage firm issuing the certificates.
If you still wish to receive a physical stock certificate, and the security is eligible to transfer through the Direct Registration System (DRS), you can have your shares transferred to an account with the company’s transfer agent at no cost. You will need to complete a Direct Registration System Request – Outgoing form and submit it to your local Scottrade team for processing. This form is available online through our Forms Center. Please contact your local Scottrade team for assistance in determining whether your security is eligible for transfer through the DRS system.
Please keep in mind that not all securities are eligible to be issued by the transfer agent in physical certificate form. As such, you may want to contact the transfer agent of the company first to verify that a physical stock certificate can be issued and to determine the fee(s) they may charge.
Thank you for choosing Scottrade. Please let us know if we may be of further assistance.
Sincerely,
Jon S.
National Service Center | Scottrade, Inc.
WOW, Like I said, this JUST came into effect and to me is a red flag. What do you all think?
don’t take no for an answer.
Bill, care to hazard a guess as to what might happen to the Au/Ag ratio in this kind of scenario?
Maybe an article explaining why it has been so volatile. Good God, 80:1 or whatever it is now is freakin ridiculous.
I’m ready for Mother nature to return it back to it rightful, earthly place.
15 to 1, maybe much less.
Enjoy your articles greatly. I concur 100%. I have a question that I cannot figure out. Owning gold is a must, and acquiring more is absolute. But, for those of us with low interest fixed rate mortgages, what happens to that mortgage during the collapse of the dollar. My thought is with a fixed mortgage, and gold as our cash reserve, the mortgage will be minimal when inflation ultimately occurs which it must at some point.
Thanks
I believe the mortgage will shrink versus gold but be remarked to whatever new currency arises.
Dear Bill, BC Bernie here again reading and helping spread the truth speak you write, up in the Great White North of Kanata! With the Value of the Canadian Loony Plummeting compared to the Green Back for the Time being. Do you know the Approximate price of the Can silver and Gold Maples at the moment? as when i bought the day of the unprecedented eagle sell out at the end of last year. the can dollar was stronger back then, and with silver going up a few dollars since then, i must go stock up on whats left of what i can spare into pms! and am truly wondering the can dollar difference per ounce now.
But now for 2 more relevant questions that could be of more service to the rest of your audience as well brother!
1) is there much difference in over all value or differences in buying between the different (if) available ounces. eg, Canadian maple, american eagle, Mexican liberties, and generic ounce and multiple ounce bars of silver and gold?
2) and after watching the market pricing, and the beyond manipulated price fixing through massive paper sell off,s
(aka, most blatantly retarded obvious manipulation… no one greedy enough to “accumulate” the value of shares sold at a single time, would ever take the monetary loss incurred by such single shot sales!)
one could view that the prices of gold and silver were never “allowed” to raise for more than two straight days in a row. as we all remember how big of a deal that it had become around the turn of the new year! So here lays my Question! how many days in a row of gold or silver rising in a row has happened so far this year? but more importantly, how many days over all have the prices of gold and silver risen now this year, compared to days that they have been driven down so far in 2015? and at what point does it become a “trend”?
silver is silver no matter what coin form as long as purity is the same. I believe it is already a trend, I called bottom Nov. 17 and believe this to be true.
During a world wide “reset” it is quiet possible the dollar, as well as most other currencies, will become virtually worthless.
Could this be part of a greater plan to cripple those factions abroad that wish to do America harm?
It’s said that power is where the gold is. I wonder how much physical gold is held by the radical factions who are trying to over take the world?