Friday, March 23, 2012

Gold Prices to Soar?

So, here we are in a time when gold an silver are a little confusing. Gold climbed to $1920 in September, 2011 and has now corrected to $1640. A 15% drop.

It's dark, depressing and cold. Your money in gold and silver is lost, will there ever be an end to this pain of no gain.


Dawn is a lovely time of day. The freshness of the air and beauty of the sky as the sun makes it's mark on the horizon. In New Zealand it is particularly clear and bright.

For gold and silver, dawn will come, prices will rise.

How can I be so sure? Debt.

Mr Bernanke has signalled there will be no QE3. The economy must rise by itself and begin to heal itself, he pontificates.

In my humble view, right now, this is simply impossible. The latest hit to this fallacy of growth is the China story. Every market is adjusting to the recent news that China's economy is drooping. Stock indexes down, commodities down, dragging gold with it, and GDP figures being revised. New Zealand is no exception. Dairy prices down 4%, and GDP barely above flat at 0.3% growth. A mere statistical error away from recession.

So as this global downturn plays out in slow burning motion, where will the new growth come from to pay back these absolutely horrendous levels of debt? Even if this debt stays stagnant, and it can't, it will be an enormous drag on economic growth, even is there is any growth to be had.

Make no mistake, with the history of Central Banks as your teacher, there will be money printing coming that will make you blush. The debt must be dealt with, and the only way forward, in Central Bank policy, is to print and devalue what they can before it all goes hyper on us and destroys the money you know so well; and perhaps still trust.

In this environment, gold and silver prices will soar as the sun comes over the hill.

Gold in New Zealand dollars: $2032.64 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $38.93 per oz
Previous all-time high: $59.19
per oz (30 Apr, 2011)

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