Egon von Greyerz, founder
of Goldswitzerland.com (Matterhorn Asset Management AG) and member
of the board of directors of Goldbroker.com published an article
headlined "What catalyst will trigger Gold’s
parabolic rise"
:
Seldom in history are
investment decisions self-evident. But today we have such a situation.
Gold is the only real and the
only honest money. Gold reflects governments’ deceitful actions in destroying
the value of paper money. For the last 100 years since the creation of the
Fed and especially since 1971 when the US dollar was no longer backed by
gold, paper currencies have been on a road to destruction. They have lost
97-99% since 1913 and around 80% since 1999.
In 2013 we will enter the
final phase which eventually will lead to the total destruction of most paper
currencies. The two principal factors leading to this are:
• Exponential rise in
government deficits
• Unlimited money printing
There is absolutely no chance
that governments can or will stop the deficit spending. Any government even
mentioning the word austerity will be thrown out very quickly. And even if
serious austerity measures were attempted, they would just lead to a
spiraling downturn of the economy creating even bigger deficits.
The consequences of the
massive money printing that the world will experience will be:
• Collapsing currencies
• Hyperinflationary depression
• Social unrest
• Wars
So will these events happen in
a long drawn-out fashion or will it all happen abruptly? Both the technical
and fundamental setup we are seeing now makes it more likely that events will
unravel quickly. The fragility of the world economy is greater than any time
in history. Major nations such as Japan, USA, UK and most EU countries are
bankrupt and living on borrowed time. And the banking system is only
surviving due to false valuation of toxic assets. The situation is like an
avalanche being triggered with that last snowflake being enough to set the
whole thing off. The trigger could be anything from a dollar collapse, to
Japan imploding or Greece exiting the EU. It doesn’t even have to be a major
event due to the total instability of the world economy and financial system.
No one has any possibility to
influence these inevitable consequences, neither governments or central banks
nor individuals. The only measures that individuals can take are to protect
their own assets and their family. For investors who are fortunate enough to
have savings, the absolutely best way to protect wealth is to own physical
gold (and possibly some silver) and to store it outside the banking system.
The case for gold as the
ultimate wealth preservation investment is irrefutable. Whilst paper money
and all assets that were financed by the credit bubble will collapse in real
terms, gold will continue to represent stable purchasing power as it has done
during 5,000 years.
For anyone who doubts what
will happen to gold as government deficits surge and money printing
accelerates, just look at the graph below. This shows US government debt
against the price of gold. A chart of world central bank balance sheets
exploding gives the same picture. And the picture tells us that a parabolic
rise of debt and gold is likely to be next. This fits also with Alf Field’s
technical projection that the next target is $4,500-$5,000 for gold. We could
see that target already in 2013.
For anyone who believes that
gold is overbought and overvalued – DON’T! As I have already said, gold
just reflects the other side of paper currency destruction and will continue
to do so. We recommended up to 50% allocation to physical gold in 2002 at
$300. Today we would see 50% as an absolute minimum. No other asset will give
the same protection as gold.
So 2013 could be an Annus
Horribilis for the world economy, the financial system, as well as socially
and geopolitically. Everyone will be affected but being prepared and
protected will make it easier to deal with.
