Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Bitcoin, Crypto Market Black Swans from Google to Obsolescence - 1st Aug 21
Gold Stocks Autumn Rally - 1st Aug 21
Earn Upto 6% Interest Rate on USD Cash Deposits with Binance Crypto Exchange USDC amd BUSD - 1st Aug 21
Vuze XR VR 3D Camera Takes Near 2 Minutes to Turn On, Buggy Firmware - 1st Aug 21
Sun EXPLODES! Goes SuperNova! Will Any planets Survive? Jupiter? Pluto? - 1st Aug 21
USDT is 9-11 for Central Banks the Bitcoin Black Swan - Tether Un-Stable Coin Ponzi Schemes! - 30th Jul 21
Behavior of Inflation and US Treasury Bond Yields Seems… Contradictory - 30th Jul 21
Gold and Silver Precious Metals Technical Analysis - 30th Jul 21
The Inadvertent Debt/Inflation Trap – Is It Time for the Stock Market To Face The Music? - 30th Jul 21
Fed Stocks Nothingburger, Dollar Lower, Focus on GDP, PCE - 30th Jul 21
Reverse REPO Market Brewing Financial Crisis Black Swan Danger - 29th Jul 21
Next Time You See "4 Times as Many Stock Market Bulls as There Are Bears," Remember This - 29th Jul 21
USDX: More Sideways Trading Ahead? - 29th Jul 21
Waiting On Silver - 29th Jul 21
Showdown: Paper vs. Physical Markets - 29th Jul 21
New set of Priorities needed for Unstoppable Global Warming - 29th Jul 21
The US Dollar is the Driver of the Gold & Silver Sectors - 28th Jul 21
Fed: Murderer of Markets and the Middle Class - 28th Jul 21
Gold And Silver – Which Will Have An Explosive Price Rally And Which Will Have A Sustained One? - 28th Jul 21
I Guess The Stock Market Does Not Fear Covid - So Should You? - 28th Jul 21
Eight Do’s and Don’ts For Options Traders - 28th Jul 21
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Is Europe Warming Up Gold for its Final Act?

Commodities / Gold and Silver 2011 Nov 05, 2011 - 02:53 AM GMT

By: Eric_McWhinnie


On Tuesday, Greek Prime Minister George Papandreou surprised European leaders when he called for a referendum on the new aid package for Greece.  Since then, the referendum has already been cancelled.  It was the latest drop in the roller coaster ride that’s called Europe.  Concerns continue to mount on how Europe to fix Greece, and after that Italy.  Unfortunately, between all the headlines and rumors concerning Europe, nothing has really changed.  Europe is in a world of hurt that will lead to either a total overhaul of the financial system, or more money printing.  Considering gold futures hit a six-week high at $1,765 on Thursday, precious metal investors are preparing for the latter.

Currently, it appears that officials are content with a temporary solution that will extend the status quo.  This will result in more bailouts and money printing.  The EFSF, which was hailed as the solution to fix the sovereign debt crisis, still remains unfunded.  German Chancellor Merkel says hardly any countries in the G20 have said they will participate in the EFSF.  In addition to more interest rate cuts from the ECB, Europe will turn to money printing to fund their so-called solution because no one is willing to cough up the money.  Even if the ECB does not print, it appears that the IMF is standing on call.  Dow Jones reports, “World leaders may mandate the International Monetary Policy to print more of its special currency to help solve the euro zone crisis, according to several people familiar with the matter.  Asking the IMF to print more of its Special Drawing rights, essentially an IOU that countries can exchange for cash, is one of the ways the Group 20 industrialized and developing countries is considering supplementing European efforts to stem a debt crisis threatening to spark a global financial meltdown and another recession.”  In the absence of aggressive debt write downs and restructuring for several countries, all roads lead to money printing.

Gold is viewed as a hedge against inflation, deflation, and any other monetary skeletons hiding in the economic closet.  Although gold is off its all-time record nominal high of $1,924, the case for higher gold prices almost seems bullet proof.  When the Federal Reserve first announced its QE1 program in late 2008, gold was near $800 per ounce.  Since then, gold has been pushed sharply higher by the Fed’s QE2, a record-low interest rate guarantee until at least mid-2013, and Operation Twist.  The Bank of England has also launched QE programs of their own.  When the euro zone receives a major bailout from the printing presses, it is likely to send gold prices well north of $2,000, and that’s just a baseline scenario.

The better scenario from the global debt crisis for gold investors is a worldwide race to devalue currencies, all in the name of sparking growth.  This is already playing out, as seen by the recent Japanese yen and Swiss franc intervention.  Another QE program from the Fed would also add fuel to the fire.  Considering the potential to have a world of fiat currencies devalue and lose confidence at a record pace, the upside potential in gold almost seems unlimited.  However, even the bull run of gold will eventually come to an end.  Jim Rogers explains, “Gold will move into a bubble eventually.  All long-term bull markets in every asset wind up in a bubble.”  Although he predicts a coming bubble, it could be years away.  “I fully expect a bubble.  Not for a few years but all bubbles look the same.  And I hope I’ll be smart enough to recognize the bubble when it comes,” he says.  According to John Williams, economist and editor of, for gold to reach its previous real inflation adjusted high, it would have to climb to about $7,000.  Mr. Williams measures inflation using the same formula from 1980, as opposed to the current Boskin Commision revised CPI formula.  Given that gold is now available on a global scale, and countries such as China and India are buying up the metal, gold may even overshoot Mr. Williams’ figure.

Although it may seem unlikely in the near future, gold investors still need to consider a worst case scenario for gold.  Such as scenario would include governments and central banks all over the world becoming responsible, which means painful spending cuts and wiping out debt.  At the current pace, this appears to be unlikely any time soon.  However, like Jim Rogers explained, gold will eventually end with a bubble.  Investors should prepare accordingly.

For more analysis on our support levels and ranges for gold and silver, consider a free 14-day trial to our acclaimed Gold & Silver Investment Newsletter.

By Eric_McWhinnie

Wall St. Cheat Sheet : Only days after the S&P 500 crashed to the depths of hell at 666, the Hoffman brothers launched Wall St. Cheat Sheet: one of the fastest growing financial media sites on the web. Like a samurai, our mission is to cut through the bull and bear shit with extraordinary insights, a fresh voice, and razor-sharp wit. We provide the highest quality education and information for active investors, financial professionals, and entrepreneurs.

© 2011 Copyright Eric McWhinnie - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in