Commodity Trade Mantra

This Time Central Banks Will Need A Bailout: Make Sure You Buy Gold

This Time Central Banks Will Need A Bailout: Make Sure You Buy Gold

This Time Central Banks Will Need A Bailout: Make Sure You Buy Gold

Last week, James Rickards explained to CNBC why he is a long-term holder of gold bullion. He pointed to the pattern of financial collapses that threatened the global economy over the past two decades.

In the late ‘90s, Wall Street bailed out a hedge fund. In 2008, the Federal Reserve bailed out Wall Street. But in 2018, it’s the central banks that will need a bailout. And what will happen to the dollar when the Fed loses international credibility?

Scott Nations jumped in to interrogate Rickards and took the opportunity to remind Rickards of his long-running debate with Peter Schiff, who shares Rickards’ long-term prediction of gold reaching $5,000 an ounce or more. Rickards patiently gave Nations a lesson in history, and reminded him that he’s not buying gold as a trading commodity for growing his wealth – he owns gold as one of the best means of wealth preservation.

Don’t think of gold as a commodity. I don’t think of gold as a commodity. I don’t think of gold as an investment. It’s money. But it’ll be a kind of money that people have confidence in. You say you can’t eat gold. Well, take a dollar bill out of your wallet, Scott. Are you going to eat it? You’re not going to eat the dollar. It’s a medium of exchange; it’s a store of value…”

Highlights from the interview:

“What’s driving gold right now is what you were just talking about, which is the dollar. I think of gold by weight – so many ounces, so many kilos. If you have $50 million, then you can get a ton. But a lot of people think in dollars; the dollar price of gold… If you think of it in dollars, the dollar price of gold is just the inverse of the dollar. So weak dollar, higher dollar price for gold. Strong dollar, lower dollar price for gold. So all you have to say, if you want to know what gold is going to do in dollars, ask yourself what’s going to happen to the dollar? It’s going to go a lot lower, so the dollar price of gold is going to go higher. That’s the trend of the next 6 months to a year…

“The Fed’s been tightening for 3 years. There’s a global dollar shortage. BIS came out with a very good study… The Fed’s got to ease up. There’s no way they’re going to raise. At least for the rest of the year…

“[$10K gold] will come in the next global financial panic. Which we should expect soon. Remember, we had one in 1998. We were hours away from every market in world the closing. That was long-term capital management. I did that bail-out. We had one in 2008. We were days away from the sequential failure of every bank in America. Again, the Fed bailed it out. Come forward 10 years, let’s say 2018. The next time there’s a crisis, the central banks are not going to be able to bail it out, because they haven’t normalized their balance sheets. So the bailout money is going to come from the IMF. They have the only clean balance sheet left. They’ll use SDRs. That’ll cause a loss of confidence in the dollar.

“$10,000 is not a made-up number. That’s the implied non-deflationary price. You’ll still get global M1 with 40% gold backing. Look at the official gold in the world – about 35,000 tons. It’s 8th grade math. It comes out to $10,000 an ounce to use gold to bring confidence in the dollar…

“[The global economy] almost imploded twice in the last 18 years. 1998 – hours away from a complete collapse. 2008 – maybe a few days away from the failure of every bank. So we have imploded twice in the last 16 years. So get ready for the 3rd one. The difference is that in ’98, Wall Street bailed out a hedge fund. In 2008, central banks bailed out Wall Street. In 2018, who’s going to bail out the central banks? It’s going to be the IMF…

“It’s money. Don’t think of gold as a commodity. I don’t think of gold as a commodity. I don’t think of gold as an investment. It’s money. But it’ll be a kind of money that people have confidence in. You say you can’t eat gold. Well, take a dollar bill out of your wallet, Scott. Are you going to eat it? You’re not going to eat the dollar. It’s a medium of exchange; it’s a store of value…

I buy and hold gold to preserve wealth. I worked hard for my money, and I want to preserve it. I don’t want to see it wiped out. I don’t want to see a 30% decline in the stock market. I don’t want to see inflation in the dollar. Gold will preserve my wealth, so that’s why I have it.”

 

 

Courtesy: Samuel Bryan

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