"The key to this market is to understand that a price collapse is coming – but not for gold. Instead, the market for US dollars and dollar-denominated debt is headed off a cliff, which will send the price of precious metals soaring."
August 3, 2012
Priced for Collapse
by Peter Schiff
Where is the gold price today? If you're like many Americans, you have no idea whether it went up, down, or sideways. Fortunately, I know my readers to be more informed – you likely know that after falling from almost $1900, gold has been trapped around $1600 since early May. But you may still be curious why despite continued money-printing and abysmal US economic reports, gold hasn't been able to hit new highs.
Here's the truth: gold is currently priced for collapse. Many investors believe the yellow metal has topped out and are selling into every rally.
Nerves of Tin
Being a gold investor is tough business. The last thing any government or corrupt big bank wants is to have a bunch of people putting their savings into hard assets – and gold is one of the hardest of all. So we're constantly up against tides of propaganda saying that gold has no value or is the refuge of doomsayers.
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A couple of years ago, I predicted gold would cross $1500 and even my own staff thought the call was too risky, too extreme. But I knew then, as I know now, that at the end of the day the gold price is not a mystery – it's a proxy for dollar weakness.
Since most investors do not truly understand gold's economic role, they assume the 10-year bull market must be a mania. But manias show parabolic growth detached from any fundamental driver. The definition of a mania is the bidding up of an asset quickly and beyond all long-term justification.
Gold, however, has grown steadily in inverse correlation with real interest rates, as explained by Jeff Clark and Mark Motive in past issues of this newsletter. As a reminder, here's a chart detailing the correlation:
More: http://lewrockwell.com/schiff/schiff173.html
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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