jayson888

The End of Gold, Part Two

Once again we see a misunderstanding of the terms deflation and inflation. These terms refer to the shrinking or growth of the money supply, not prices. Prices trends are affected by changes in the money supply, not the other way around.

All statistics show that the money supply growth remains high and is accelerating. Velocity of money has slowed as consumers and business and banks save cash out of fear, but this can quickly change if confidence is lost in banks and/or a currency. Hyperinflation is a potential result

Why Gold Will Decline More than the Markets

Gold is a long term play. Any snapshot over a period of a few months is meaningless. In 1966 is took 44 ounces to buy the Dow, by 1980 the ratio was 1:1.

In 2000 it was over 40:1 again, today it is down to 11:1. In the long term since 2000 gold has performed 4x better than the DJIA.

I expect the ratio will approach 1:1 again

The Rebirth of Gold and Silver Stocks

Lehman, Bear, AIG, Freddie, Fannie. These are inflationary because the govt is bailing out most of the losers with money it does not have (essentially printing it), and taking low quality debt collateral from these companies (and others) onto its balance sheet. With junk-bond quality securities making up most of the Feds reserves, which are what back the dollar, the dollar is bound to resume its decline as foreigners begin to bail out of dollars and US securities. A declining dollar will cause oil, food, Chinese products and many other prices to rise in the US, while wages stay flat. Fiat dollars will be exchanged for hard assets.

Housing was a massive bubble driven by underpriced Fed money. It will not be a safe haven this time around, especially as interest rates climb.

The Disconnect Between Supply and Demand in Gold & Silver Markets

So far not mentioned here is the "supply chain" theory. COMEX trades in 1000oz bars, but retail investors want coins or at most 100oz bars. Soaring retail demand has cleaned out the retail supply chain, and it will take time and some expense to convert more 1000oz bars into coins.

This can explain short term shortages in coin shops, however, it does not explain the disparity between retail demand and COMEX prices...