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Gold - Never Been Soaring

The desire for gold is the most universal and deeply rooted commercial instinct of the human race !

By Gerald M. Loeb, 2002

A virtually spiritual fervor appears to go with being a gold bug. My bearish view on gold generally comes as a shock to worshipers.

Yet year after year the precious yellow metal refuses to reach for the stars like it is meant to. Why is this? The commonest belief by gold bugs appears to be that everybody will head to gold as the final hedge against inflation, world crisis, currency collapse and all other stuff apocalyptical.

The newest global liquidity crisis may be the trigger that ultimately brings about the passing of the US greenback, and when everybody eventually loses religion in paper cash, stocks, bonds, property, govts and central banking institutions, gold will be the the last haven of security. Better to get it now before the price explodes and we are talking about gold re thousands of greenbacks an ounce rather than hundreds. The Federal Agency will try and print their way out of difficulty, that may cause hyperinflation, and Uncle Sam will be ecstatic because his climbing debt will cost less to service.

The sole asset of real price will be gold, which is finite. Panic driven demand will push the price beyond anything we've even thought of. Sounds familiar? Only problem is I believe it is dead inaccurate. If you would like to pay the present cost of around $660 an oz, by all means do so. Don't misunderstand what I mean. I'm a gold bug at heart.

Yes, I can see the moment when gold will be thousands of greenbacks an oz. In my book and newsletters I have used charts to clarify the actual reason for my bearishness on gold in the short to medium term. Each 5 wave move is corrected in 3. Waves follow form, not the clock. Gold has been in a bear market for twenty-seven years since its $875 high in Jan 1980 and it's a long way from over. The $740 high in May 2006 was only wave B. Not till wave C is complete can gold enter a new bull market. Now what about the likely commercial background to the technical picture I have painted? Well, the title of my book is a way to Profit from the approaching Great Depression. So that doubtless indicates where I see the economy in the future. Each depression in history has been accompanied by DEFLATION, not INFLATION! ( Another one of my articles deals with this subject ). 

The technicals and the elementals match. Gold does not like deflation. In a deflationary period, money is king. Yes, at last import costs might rise. Except for quite a time which will be more than offset against repayments everywhere as shopkeepers try frantically to keep the doorways open. With each price drop your greenback buys more. Why would you need your money in gold, which pays no interest and is falling in value? Don't worry, when I believe the time is correct to buy gold I am going to be howling my lungs out ( well, perhaps my keyboard ). But that time isn't now. And yes, this should coincide with a rally in the States greenback. And do not forget : In 2001 I was howling out my advice to buy gold when every person and his dog had cast it to the scrap heap. The gold price rose from not too much above $250 an oz to virtually $750. I'm really not always bearish on gold. It is just that, like every other asset, there's a time to get it and there's a time to sell it.

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