Gold prices peaked in January 1996 and then fell for 3.5 years into a multi-decade low. It was the age of stocks, debt, leverage, and good times; nobody needed or wanted gold.
Since the peak in gold prices in 2011 the Federal Reserve has “generously” supplied the world with trillions of dollars of newly created digital and paper debt, all backed by nothing but faith and credit. Bonds have rallied and the S&P is higher by 50% or so. The Japanese Central Bank has similarly produced trillions of yen, bought stocks and bonds, and extended their recession several more years.
Yes, the past four years have been a repeat of the age of stocks, debt, and leverage, but only the financial and political elite experienced good times. Debt is massively higher and gold is still bumping around a bottom.
The US national debt has steadily increased. Examine the following two graphs regarding gold and the national debt.
WHAT THESE GRAPHS SHOW
Examine the 25 year log scale graph of gold and note points 1 – 4 on the graph.
Gold prices could (I doubt it) fall further in the short term, since High Frequency Trading dominates trading action, and central banks need to hide the fact that their policies and currencies are failing, which usually means they suppress gold prices. Gold was formerly the “canary in the coal mine” indicating the failure of monetary and fiscal policies. But active suppression of gold prices has replaced the “canary” with a plastic look-alike that disguises the warning signal which tells us that something is very wrong with our monetary policies.
However, it is only a matter of time, whether it is days or months, before the consequences of massive debt and uncontrolled “printing” of unbacked debt based fiat currencies sink more of the world into “Venezuela conditions.”
Paper currencies, central banks and delusional paper promises will fail. We need something better. Gold and silver come to mind…
Courtesy: Gary Christenson | The Deviant Investor
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