A Global Race To Zero In Fiat Currencies…

…ushers in the restoration of price discovery in the precious metals market. The price of gold is at or near an all-time in most currencies except the dollar. This summer, however, it would appear that the dollar-based valuation of gold is starting to break the “shackles” of official intervention and is beginning reflect the underlying fundamentals. Gold priced in dollars is up over 14% since mid-November 2018 and over 44% since it bottomed at $1050 in December 2015. But those RORs for gold are inconvenient truths you won’t hear in the mainstream financial media.

The movement in gold from 2008-2011 reflected the fundamental problems that caused the great financial crisis. The gold price also anticipated the inherent devaluation of the U.S. dollar from the enormous amount of money and credit that was to be created in order to keep the U.S. financial/economic system from collapsing. But those “remedies” only  treated the symptoms – not the underlying problems.

Once the economic/financial system was stabilized, the price of gold – which had become
technically extremely over-extended – entered a 5-year period of correction/consolidation.
This of course was helped along with official intervention. Gold bottomed out vs. the dollar in late 2015. As you can see, the gold price is significantly undervalued relative to the rising level of Treasury debt:

This is just one measuring stick by which to assess a “fundamental” dollar price for gold. But clearly just using this variable, gold is significantly under-priced in U.S. dollars.

As mentioned above, the underlying problems that led to the systemic de facto collapse in 2008 were allowed to persist. In fact, these problems have become worse despite the  efforts of the policy-makers and insider elitists to cover them up. But gold is starting to sniff the truth.  I’ve been expecting an aggressive effort by the banks to push the price of gold below $1400 – at least temporarily. But every attempt at this endeavor has failed quickly.  This is the ”invisible hand” of the market that ”sees” the ensuing currency devaluation race, which has shifted from a marathon to a track meet.

Though the politicians and Wall Street snake-oil salesmen will blame the fomenting economic contraction on the “trade war,”  the system was heading into a tail-spin anyway – the trade war is simply hastening the process. As such, the only conclusion I can draw is that there’s big big money globally – over and above the well publicized Central Bank buying – that is moving into gold and silver for wealth preservation. In short, bona fide price discovery in U.S. dollar terms is being reintroduced to the precious metals market.

The Mining Stock Journal  covers several mining stocks that I believe are extraordinarily undervalued relative to their upside potential. I also present opportunistic recommendations on select mid-tier and large-cap miners that should outperform their peers.  You can learn more about this newsletter here:   Mining Stock Journal information.

2 thoughts on “A Global Race To Zero In Fiat Currencies…

  1. So, here we are: As each big Central Bank in the world is either at Zero interest rates or on the path to Zero interest rates or to Negative rates, this cheapens all of their currencies.

    We are in the final throws of total complete fiat currency destruction in the world where they are all really worthless since they are backed only by the huge unpayable debt attached to each of those currencies.

    The question is: how does this all play out in the markets. Scenarios follow:

    1) a hyperinflation first followed by an implosion in the bond and stock markets
    2) your government robbing your bank accounts and 401(k) accounts
    3) U.S. stock market been in a topping process and ready to crash anytime this year

    A 1929 stock market crash and 90 years later in 2019 seems about right for another one.

Leave a Reply

Your email address will not be published. Required fields are marked *

Time limit is exhausted. Please reload CAPTCHA.