Saturday, October 23, 2010

Gold At $1,750 -- But When?

In 36 months three huge events are likely to happen which will drive the price of gold to $1,750. The first to pop will be the Australia housing bubble (see here: http://www.heraldsun.com.au/money/aus... -- this will lay bare the Australian economy. The second event is the fall of Japan (see here: http://blogs.wsj.com/source/2010/07/1... into bankruptcy, which will not only bring devastation to the Japanese but implode the world's second safe-haven currency, the Yen. The third event will be the Canadian housing bubble (see here: http://www.nationalpost.com/opinion/c... and debt bubble (see here: http://www.theglobeandmail.com/report... collapse. Furthermore, gold's price is unlikely to significantly fall, because America's total credit market debt as a percent of GDP is at its highest ever (360%) (see here: http://www.pimco.com/LeftNav/Featured... only meaning prolonged stagnation in the world's biggest economy, especially, if the U.S. government insists on creating debt as the private sector tries to pay it off. But that's only part of the 'gold-is-up' argument, because Germany is engaged per quarter in a $1 trillion-plus de-leveraging from the U.S. economy (cash that has helped to finance our domestic investment and economic activity for the last decade), and without it, further Treasury bond market manipulation by the Federal Reserve will occur to fill "the German liquidity gap". That means a broken and contracting U.S. credit system (see here: http://blog.rebeltraders.net/2010/07/... is a given for the future, only meaning a continually sustained strong gold price -- as a broken U.S. credit system means a blinkered U.S. economy with low foreign and corporate investment with concurrent diversification into gold. We would also be remiss to ignore that the London Bullion Market Association's (LBMA) statistics for May show that (see here: http://www.gata.org/node/8858) "*the average net daily trading in gold by LBMA member banks jumped a massive 50 percent from the month before to 24 million ounces each day from 16 million ounces each day. That translates to $7.5 trillion annually. If an operation is running on a razor-thin fractional reserve basis, such step changes are often fatal. It appears that a run on the bullion banks has commenced [which is why the LBMA and BIS is trying to conceal gold swaps information].*" Indeed, and do not be mistaken into seeing pass why the dollar is strong right now -- a falling dollar is unlikely as there are too many global debts denominated in dollars (i.e. too many people who want to unwind their debts and have to get dollars to do so, keeping the price high) but that cannot last forever and that's not a vote in confidence in the greenback. Gold is going to $1,750 in three years -- the only other choices are the Swiss franc (see here: http://www.telegraph.co.uk/finance/co... or emerging markets (see here: http://www.ft.com/cms/s/0/8c6ca37e-96...

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