Gold is in a hurry and is unlikely to wait for investors
to acquire it at anywhere near these prices. We could now see a quick move to
$1,400 and if gold doesn’t stay too long at that level, the acceleration is
likely to continue towards the previous high of $1,900.
Desperate measures by the ECB
The ECB confirmed yesterday that they are extremely
concerned about the European economy as well as the fragile banking system.
They lowered the negative rate to 0.4% and increased Q.E. or money printing
by more than the market expected. I am quite certain that this is still just
the beginning of the stimulus required to “save” Europe. But however many
trillions that Draghi throws at the bankrupt banks and European economies it
will make no difference. It is just not possible to solve a problem by the
same means that caused it in the first place. So adding debt to excessive
debt will just make the final collapse that much bigger.
But the ECB is not the only bank which will print money.
All major central banks, including the Fed, will join the ECB in more Q.E.
and more negative rates until the world drowns in worthless money.
Technical picture for gold
There are now many who believe that the technical picture
for gold is bearish, especially due to the big net short position of the
commercial traders. Conventional wisdom says that the commercials are never
wrong. Well, maybe this time it is only conventional without the wisdom
because the likelihood is that the commercials will soon have to bail out of
their shorts. And if that is the case, gold will surge even faster.
Based on what we see, the fundamental and technical
factors for gold are now more bullish than they have been during the whole of
this bull market which started in 1999. Since the beginning of the year gold
has moved up 20-25% in most currencies. In some of the weaker currencies the
move has been even faster like in Argentine Pesos where we have seen a 40%
move in 2016 and 9,000% in this century. We are likely to see bigger moves
than that also in all western currencies including the dollar. As currencies
continue to weaken, gold will accelerate until we reach global money printing
on a massive scale and hyperinflation. Desperate governments and central
bankers are guaranteed to make a final attempt to save the world by printing
unlimited amounts of money. They will of course fail which means that after
the hyperinflationary period there will be an implosion of most assets
fuelled by the credit bubbles as well as of major parts of the financial
system.
Gold Silver ratio bullish for metals
Conventional technical indicators might look slightly
overbought for gold and silver short term. But the next move will not be
guided by what is normal. It will happen a lot faster than anyone could
expect. The Gold/Silver ratio gives us a very clear indication that the real
move in gold and especially silver has not started yet. According to our
proprietary cycle indicators this ratio peaked in Feb 2016 at around 83.5.
This means that the gold price is 83.5 the silver price. With this ratio just
having completed a long term cycle top and being very overbought on daily
weekly and monthly indicators, it has a long way to go before it is oversold
on any time period. The next major stop for the ratio is 30 which is where it
was in 2011 when silver was $50. Eventually the ratio should reach down to 15
like in 1980.
What this means is that both gold and silver will soon
start a very fast move. Silver will lead and move twice as fast as gold. I
would not exclude to see gold at around $2,000 and silver at $50 in 2016. To
reach these levels would clearly involve some major geopolitical or financial
problems in the world. Anyone who has followed my writings and interviews
will know that I see the risks in the financial system as totally
unprecedented in history. In a fragile system resting on a foundation of
debt, any catalyst can cause irreparable damage and a domino reaction that no
central bank can stop.
Gold and Silver as insurance
Physical gold and silver, stored outside the banking
system, represent the most unique opportunity to insure your wealth against
the total wealth destruction that is coming.
I expect all bubble assets like stocks, bonds and
property to go down by at least 75-90% against gold in the next few years. A
10-25% holding in gold and silver would insure such a fall since the precious
metals are likely to go up at least 5 times but more likely 10 times in real
terms in the next few years.
The beauty of gold and silver as insurance is that, as
opposed to conventional insurance, the precious metals have an intrinsic
value that never expires like an insurance premium. Gold and silver have been
money for thousands of years whilst no fiat or paper currency has ever
survived. To buy an insurance that both protects your assets and appreciates
in value is clearly an offer which is difficult to refuse.
