Tag: currency devaluation
Exchanging some of your “paper promises” (currency) for the physical financial reality of gold and silver on a regular basis makes more than just good business sense. It helps make sure that come what may in your financial life, your “financial insurance policy” will be there to help you out, when, not if, the chickens from so many years of unsound government policies come home to roost. Look toward Argentina, Venezuela, Russia and others as harbingers. Even now, the U.S. inflation rate is arguably several percent higher than the “official” figure. You would do well to pay attention and plan accordingly.
A truly interesting trend is visible on the following chart. With the Euro being hit hard today, the U.S. Dollar was on the rise, as indicated with the blue line on the chart below. As readers can see, in the last 4 weeks Dollar gold has been rising along with the U.S. Dollar. Historically, both assets have been negatively correlated. If gold can continue climbing higher during a Dollar bull market, it indicates great strength for the metal. In our opinion, it also confirms gold’s safe haven nature, something the market has denied consistently in the last 2.5 years.
Gold and gold stocks are on the move after the surprise move from the Swiss National bank to remove its currency cap versus the euro this week. This highlights gold’s valuable role as a store of value when currency volatility destroys purchasing power as it has in many parts of the world over the past year. There is a rule of thumb which says that, if gold is rising in at least 3 major currencies, there is a bullish environment. Well, here are the facts and the figures. The charts below highlight gold in several major currencies. The yellow metal has rocketed higher, not only in all of those currencies, but in literally every currency worldwide.
Given the data points discussed in this article, it is fair to say that Japan is on track for a devastating bust at some point in the future. The unknown factor is timing. When the inevitable will take place is anyone’s guess. The fate of countries like Japan is really in the hands of central bankers. However, central planners are not able to manipulate markets infinitely. At a certain point, something has to give. That is when the markets will give up and disbelief will replace trust. Readers should remember that in such a bust scenario, people flee down the Golden Pyramid of asset classes to their safe haven, being gold.
Are Russia and Europe buying more gold? Will the Swiss vote ‘yes’ in its gold referendum? Is there a chance for QE4? Peter Schiff is on Kitco News to comment on some of the most recent headlines surrounding the gold market and also to share his thoughts on the U.S. economy. The Euro Pacific CEO says the U.S. recovery isn’t real and adds that the dollar is only strong because all other currencies are weak.
With credit markets in Europe and the US taking a bit of a pause for profit-taking or reassessment, it is notable that currencies have not. The euro finally broke free of what looked like a steady range, though unfortunately to the downside. While that may be celebrated by orthodox economists in Brussels and elsewhere, it should not as such devaluation has led to no place good in the recent past. Curiously, however, the ultimate indicator of such risk, gold, has remained in its rut while these other pieces notoriously shed such contented framing.
While the major central banks continue to flood the global financial markets with their fiat currencies and as geopolitical tensions around the world look set to increase, the price of gold is likely to rise.
People should not think that the role of gold is only to move from one central bank to another (say from the US to the Chinese). That is gold’s use for currencies by the central bankers. YOUR use of gold is to preserve the purchasing power of yourself and your family through a variety of circumstances in some mechanism other than fiat currency.
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.
One of the consequences of Japan’s currency debasement is now starting to show its ugly head: the cheaper Yen may be intended to stimulate exports but it simultaneously makes imports more expensive.
The ZIRP and QE are causing the retirement funds for many governments and corporations to be more underfunded each year. If your retirement comes from a government pension, it is less secure each year. It can’t remain underfunded forever. Corporate pension systems invest similarly. If your retirement comes from a corporate pension, it is less secure each year.
Politicians and bankers work together to benefit themselves at the expense of the people actually producing something of value. Politicians increase their power and influence by spending ever-increasing amounts of paper currencies. The bankers enable the process by creating paper currencies (from nothing), loaning out this money. This process succeeds until the debts must be paid.
Argentina is a prime example of currency depreciation and capital controls. Casey Research reported this week how Argentines are doing everything they can to circumvent a new dollar clamp which is imposed by the Uruguayan government. They take risks traveling to Uruguay to extract US dollars from their peso-based Argentine credit cards.
The Wall Street Journal recently published two separate articles discussing the bull and bear arguments for gold. The elephant in the room remains unexposed. Today’s world is dominated by neverseen liquidity, monetary easing, and financial repression. The EFFECT of these measures (i.e. currency devaluations) are simply negated in the bull vs bear arguments. It is the single biggest threat to the 99% of the people which seems to remain unexposed.