Gold Antidote to The Most Investment Destructive Force
Commodities / Gold and Silver 2012 May 04, 2012 - 01:57 PM GMTBy: DeepCaster_LLC
“[Fed Chairman Ben] Bernanke and the Fed have zero credibility… Bernanke has never been right about anything.
“We have inflation in the U.S., and it’s going to get worse.
“They’ve printed staggering amounts of money. They’ve taken staggering amounts of debt on their balance sheet. Much of it is garbage.
“Throughout history, when governments debase their currencies, you protect yourself by owning real assets.
“I’m not selling my gold by any stretch. The surprise with oil is going to be how high it goes.”
“Bernanke Has Never Been Right, Inflation Will Get Worse”
Jim Rogers, Moneynews.com, 4/27/12
Legendary Billionaire Investor Jim Rogers is right. The inevitable result of The Feds (and ECB and other Central Banks’), Printing Money in excess of any Real increase in the value of Goods and services, is Highly Inflationary.
But it is important to realize that it usually takes a few months for that Monetary Inflation to manifest itself as Price Inflation. But in the U.S., for example, (and elsewhere) it is already showing up as Inflation in Food and Energy Prices.
Indeed, the Real Numbers (as opposed to the Bogus Official Ones) show that the U.S. is already at a Hyperinflationary Threshold of 10.28%/yr per shadowstats.com.
Shadowstats.com calculates Key Statistics the way they were calculated in the 1980s and 1990s before Official Data Manipulation began in earnest. Consider
Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported April 13, 2012
2.65% / 10.28%
U.S. Unemployment reported April 6, 2012
8.2% / 22.2%
U.S. GDP Annual Growth/Decline reported April 27, 2012
1.62% / -2.17%
U.S. M3 reported April 21, 2012 (Month of March, Y.O.Y.)
No Official Report / 3.72%
Thus it is no surprise that inflation is already reflected in Key Commodities Prices.
Consider:
Copper
Like a Sugar High, Massive Central Bank Liquidity injections are boosting Economically Sensitive Commodities like Copper Short-term.
No surprise then that Copper is now bullishly Trending above its 120 day M.A.
And even though we expect periodic pullbacks, short-term, we expect Copper to Bullishly Rally for a while (see deepcaster.com for Forecast Timing and Targets), as the Central Banks-supplied Massive Liquidity works its way into the Economy via Higher Prices.
Crude Oil
Contrary to claims that high Crude prices result from “Speculators,” the fact is that Crude Production Globally has been flat at approximately 73 to 74 million barrels per day for some 8 years now.
But for all these years, China and other Emerging Markets’ demand for Petroleum Products has continued to surge.
Indeed, Crude Price Momentum (per the MACD) continues to be UP. Not surprisingly, U.S. consumption has not dropped significantly over this 8 year period. Indeed, Distillate (gasoline, jet fuel etc.) Inventories have recently dropped, going into the Summer driving season – a sure fire formula for even Higher Prices.
In sum, Crude is an International Market, and the Emerging Markets Economies continue to demand increasing amounts.
And notwithstanding increasing amounts of “Shale” Oil being produced (with a very much lower EROI (Energy Return on Investment) than the big “easy” Elephant Fields of decades past) Crude Production is forecast to increase by only less than 1% (i.e., 0.9%) per year over the next decade, as the Big Easy (i.e., High EROI) Elephant Fields continue to be depleted.
Therefore, mid-to-longer term, Fundamentals and Technicals dictate inexorably rising Crude and therefore Gasoline and other distillate Prices.
Soybeans
Soybeans have been (and still are) in a Massive Price Uptrend for months, in part because they are a favored food in Asian nations. Expect more Bullishness.
So being long Copper and Crude and Essential Foods like Soybeans, have been and are likely excellent Antidotes to Increasing Price Inflation (See Note 3).
One other Antidote is Selected High-Yield Equities whose prospective Total Return (Gain plus Yield) exceeds Real Inflation (See Note 1).
But what about Gold and Silver. Some readers will already know that a Cartel (See Note 2) of Central Bankers and Factota periodically engage in Precious Metals Price Suppression to try to maintain legitimacy for their Treasury Securities and Fiat Currencies.
Not surprisingly, at this time Gold seems to be stuck in Bear Trend territory, trading below its 120 day M.A. of $1679ish.
However, notwithstanding continuing Cartel Price Takedown Attacks (e.g., the April 24 to May 2, 2012 increase in Short Interest by 20,455 lots was a Precursor/Set-up for the May 3 Price Takedown by the Cartel), Mega-Buyers (including Central Banks!) are buying the Metal in the low to mid $1600s.
Most Important: However, both from a Long-Term Fundamental and a long-term Technical Perspective, Gold (and Silver) is now in a (still) Solid Uptrend.
And as the Massive & Increasing Central-Bank-Provided Monetary Liquidity increasingly becomes reflected in Prices, Gold and Silver Prices are likely to launch up to New Highs notwithstanding Cartel Price Manipulative Operations which are so eloquently described by Jim Grant:
“This is a world of Immense Wall-to-Wall Manipulation. The Fed is The Giant Squid.
“They have manipulated Virtually every price in the Capital Markets.”
Jim Grant, Interest Rate Observer
Bloomberg (05/03/2012)
However, Short-Term, it is more likely than not that Gold and Silver and the Miners Shares have more downside in them. (For specific Timing and Targets Forecasts see Deepcaster Alerts.)
Even so, if Investors fail to Buy near Interim Lows for fear these Precious Metals and their Miners will be taken lower, they risk not getting in when these Metals and their Miners are Dirt Cheap, and are ready to launch up.
Therefore, with another round of QE likely later this year, we stand behind our earlier Bullish Forecast for Gold and Silver, for the Mid and Long term.
Significantly, it is becoming increasingly hard for the Cartel to sustain Takedowns, as the Mini-Takedown and launch back up of April 10, 2012 showed.
In sum, the Best Antidotes to The Most Investment-Destructive Force – Inflation – are The Monetary Metals, Gold and Silver, and the Essential Tangible Assets like Food and Energy.
Best regards,
www.deepcaster.com
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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.
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