For the week commencing January 26th, there are some key developments which could create volatility in the precious metals complex. First, the results of the Greek elections are going to impact the Euro, and, consequently, also gold. Next, several economic data will be released, including GDP in the U.S. and CPI in Europe. Most importantly, however, is the U.S. Fed announcement on Wednesday in which some clues about future monetary policy and, in particular, a potential interest hike are expected.
Tag: currency crisis
The key take-away of this article is that gold has not lost its luster, contrary to what mainstream media and pundits have been explaining in the last two years. Despite the big decline in the price of gold in the first half of 2013, gold has been holding up very well since then, and is clearly acting as a safe haven of late.
The first one of the QE Central Banks that attempts to exit QE will be flooded with capital inflows with the accompanying strong currency appreciation. Indeed, such currency appreciation will crush the economy via the export sector, whilst it will import price disinflation. This falling inflation will in turn give the central bank the cover to renew again any QE policies. This is the so-called boom and boost inflation-deflation cycle that central bankers create with their bias towards expansionary policies.
With the distortion created by central planners it is unlikely that a long term rise in any asset is able to hold. The global currency war will undoubtedly result in cracks in the monetary system and in several currencies in particular. Do not exclude the landscape to change with a political decision; in a matter of seconds the world could look different. In the same respect, the probability of a monetary event shocking the landscape of currencies is very high. In case gold is remonetized with the aim to alleviate the world’s debt burden, a sudden spike in the price of gold could realistically be expected.
The chart shows how the Hryvnia has been devalued significantly against the USD in 2008, from 0.22 to 0.12. It remained rather stable until this year, when the currency collapsed from 0.12 to 0.08. At the same time, the price of gold in Hryvnia went from 4,000 to 8,000 in 2008. Since the beginning of this year, Hryvnian gold exploded from 10,000 to 17,444 last week.
What matters is the instability of the system. What you need to study is the instability of the system. If you get that right, you will be able to see the collapse coming. The trigger is really irrelevant. A trigger could be the failure of a firm, the failure of an exchange, some kind of panic, a natural disaster, suicide of a prominent person. It really doesn’t matter what it is; what matters is your system is instable and it is going to collapse.
The interesting part for us, gold enthusiasts, is the price of gold in the slaughtered currencies. Gold in Argentine’s Peso is up 30% in the last 30 days; it is trading at all time highs.
Gold in Turkish Lira’s is up 17% in the last 30 days; it is trading just 10% below its all time highs of September 2011.
This article presents a first insight in the sequel to Currency Wars, the best selling book written by Jim Rickards. The new book is titled “The Death of Money, The Coming Collapse of the International Monetary System.” The book confirms the predictions made in “Currency Wars” and goes deeper in the matter by explaing how the international monetary system might collapse and how the new monetary system could look like.
In a major US dollar devaluation crisis, which would occur if the US would fail to raise the debt ceiling on Thursday October 17th, there should be a significant impact on the gold price. Jim Rickards wrote about this in his bookin which he envisages a series of ‘black swan’ events that trigger a loss of confidence in the US dollar precipitating a rush to get out of the greenback. In such a scenario, the market would question the Fed’s staying power. A dollar collapse would ensue and gold could double in price overnight.
In this article, author GE Christenson compares the timely character of gold and silver. They have served humanity as a store of value and wealth for over 3,000 years. This is in sharp contrast to the values an habits associated with the (economic and political) establishment. In that respect, think of paper money, unfunded liabilities, pension plans, exponentially increasing debt, massive budget deficits, “too-big-to-fail” banks.
The following paragraphs, quotes and charts paint a picture of a country desperately trying to save its economy and currency. The victims of this situation are of course the citizens. In their attempt to run to gold, they are stopped by their own government. How ironic is this situation when looking as an outsider. Did you ask yourself: am I prepared if this situation hits my country? In this global currency war, that just started two years ago and is expected to last till at least 2020, every country will be hit sooner or later. Are you prepared?
While currencies are all relative to each another, strategic currency investing can generate positive real returns over time. While the Fed and the Bank of England have been cranking the proverbial printing presses, the European Central Bank has been mopping up liquidity. And the Japanese may be just getting started with their balance sheet expansion.
During a recent webinar by TheStreet.com a gold expert panel discussed the question if gold is still in a bull market. The outcome of the discussion was that gold being in a bull or bear market is somehow irrelevant. The gold price does matter, of course; owners of physical gold have a hard time stomaching the recent price decline. But the key point is that gold is a currency. So owners of PHYSICAL gold are holding the metal as an insurance policy against a currency crisis. Obviously that is not the trader’s perspective.
We essentially have three options with regard to this eventuality. If we are in a large country that is in decline. We can: (1) Choose to go down with ship. (2) Keep an eye on developments and hope to jump ship at some opportune point. (3) Do a bit of homework and see if we can identify those jurisdictions that may be safer havens for our wealth (and, very possibly, ourselves) and make a move early.