Dykes

Will Gold Break Out?

Gold has usually made its most massive moves with RISING interest rates as it did in 1978-1980 rising from $100 or so to $850 at 17% interest rates at that time.This is because long-term rates start rising with increasing inflation which is what is happening now, and as long as there is still a NEGATIVE real rate of return on money people will turn to gold. Only when the likes of Paul Volcker intervene and raise interest rates to create POSITIVE return can gold be threatened. In 1980 the positive return was more than 7%. To achieve this at the present time you would need to raise interest rates to 15% or more, as inflation is not 4% as reported but more like 10% and I am sure you don't need me to tell you this ( also see shadowstats.com ).

If rates were raised to 15% can you imagine what would happen to the stock market and the housing market? I think not somehow.

At present gold is being manipulated by the authorities through surrogates to make the picture look less terrible than it actually is and prop up the ludicrous dollar, and every time it falls those shorting it come in at lower levels, and well infromed cognoscenti come in to buy physical for long-term protection. This range trading is soldifying gold and it is poised to make an enormous run towards the end of summer.

Intervention will soon become futile as people want gold at any cost, as the banking and derivative crisis unfolds over ensuing months, and it becomes quite evident that nothing can be done to contain it.