Wednesday, August 3, 2011

The Gold Price: Hold Onto Your Hats!

Gold is up around $40.00 an ounce today.

Jim Sinclair suggested a few years ago that volatility in the gold market will increase damatically as the market becomes more chaotic. He suggested that $100 up and down days are likely to be common. At the time this didn't seem possible. Gold moved a couple of dollars a day at most. Houses were still going up, we felt rich and we believed John Keynes definition of gold as being a 'barbarous relic'.

But maybe Jim is correct and we are now entering a period of great disruption and volatility.

The system is seriously broken and the market is clearly fearful of where it will end. US Treasurys can now only be seen as an unsure investment at best. The latest debt ceiling drama in the US, combined with Euro zone woes, may have sucked the last vestige of confidence out of the bond market.

Bonds used to be seen as the best, most liquid way of parking huge amounts of money. Where now will these capital flows go? This will be the factor that drives gold and silver going forward. The period between now and the end of this year may be marked by fear and volatility. All aspects of trading in financial paper assets may be about to change forever.

This graph that is floating around the internet is quite telling of how the gold price closely correlates with the US debt ceiling.


According to this we are likely to see the gold price move up again. The main reason; to cover this new US debt, money simply has to be printed. This time though, they won't call it 'Quantitative Easing'. They will probably do it surreptitiously or give it a legitimate sounding unintelligible name like, "The Employment and Manufacturing Stabilization Facility".

The Chinese are angry and are selling US treasurys, the Europeans will have to print money to buy them and everyone else is too small to make an impact on the $2,000,000,000,000 required.

Look for volatility and fear in the next six months. Hold onto your hats. The Greater Depression is beginning.

Gold in New Zealand dollars: $1921.41 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $47.28 per oz
Previous all time high: $59.19
per oz

Articles of interest:

Uptrending Channel is beginning to steepen for Gold

See article here


The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001

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