Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

A Gold Revaluation Could Transform Your Financial Status - Overnight

Commodities / Gold and Silver 2016 Apr 28, 2016 - 10:23 AM GMT

By: Nick_Barisheff

Commodities

David Smith writes: As we move through 2016, the Horsemen of the geopolitical, economic, and social apocalypse are on the march.

China burns through its currency reserves as billions in yuan flee the mainland for safe harbor. Japan prints mountains of yen debt in an effort to create inflation - and thereby the conscious devaluation of its citizens' purchasing power.

Saudi Arabia's gamble of cutting oil prices to the bone in an effort to break the back of the shale oil industry is becoming so costly that it may have to sell a portion of mighty Aramco to outside investors, while keeping secret the amount of its U.S. debt.


The U.S. government holds an incomprehensible $19 trillion dollar debt, in a presidential election year where the programs offered by front-runners of both parties would increase that amount... by trillions more!

And to top it off, many nations - the U.S. included - are moving to implement a policy of negative interest rates (NIRP), where the bank charges you the customer for the privilege of holding a cash balance! Think about how corrosive NIRP would be. And while that's going on, the government is actively working to promote inflation - in order to pay its social security and government pension obligations - while your purchasing power continues to decline.

The result of this policy is financial repression. A double sucker punch to your economic gut.

In Europe, NIRP is causing large corporations to hoard cash and buy gold rather than keep a large bank balance. In Japan, home safes, in which to store cash, are being purchased in record amounts, and demand for 100,000 yen (c. $1000) notes is going through the roof.

Central Banks' net purchases of Gold continue driven by diversification of foreign reserves
Since 2010, central banks have become net buyers of gold

As the world's governments come face to face with the prospect of currency collapse, something's going to give. Confidence in (acceptance of) fiat money is literally all that holds things together.

Let a run out of a country's paper money get underway - into anything of tangible value - and it's GAME OVER. Even the ability of banks to suspend redemptions from your money market funds - instituted by federal decree last year - will prove to be nothing more than a metaphorical finger in the dike.

What is to be done? How can the central banks of countries around the globe, as they slip into a synchronized recession (or worse), dig themselves out of the approaching monetary-debt abyss without going through a systemic collapse first?

There is an answer... it's written about occasionally, but scoffed at by virtually every "intellectual" and "economist" who has cared to give its backers the time of day.

That "answer" is born and nurtured through centuries of history in the crucible of economic need: There will be a revaluation in the price of the most powerful, effective, and durable store of value humankind has ever utilized - gold.

Talking heads and politicians like to say, "but there wouldn't be enough gold for that!" Oh, yes there is... but only at the right price!

Gold revaluation (not monetization - where gold is redeemable in exchange for paper script as a monetary medium), would be instituted by central banks - perhaps first by the U.S. Federal Reserve, with others in tow...

Revaluing All Currencies against Gold Is as Simple as Eighth Grade Math

So far, the world's major currencies have been taking turns devaluing against each other, to improve their country's trade position in the global economy. It's mathematically impossible to devalue all currencies at the same time, so as the "currency wars" intensify, the inevitable result is a spiraling race to the bottom.

Jim Rickards, in his recently-published seminal work, The New Case for Gold, shines a light on the way out for these dysfunctional entities, saying:

"...if you devalue it against gold - because gold is money. It's not the kind of money that can be printed by a central bank... (but) with gold, everybody can devalue (their currencies) at once... It's eighth grade math."

In order to derive a per ounce dollar figure at which gold needs to be priced, in order to restore public confidence, and jumpstart inflation - central bank goals - Rickards suggests the following formula:

First take 40% of global money supply (M-I x 40%), then divide this figure by the official gold holdings of the world's central banks (35,000 tonnes), and you get $10,000 an ounce as a realistic gold revaluation price. This action would stop deflation - a central bank's worst nightmare - dead in its tracks. And they might not even have to reduce the money supply!

Other thinkers, including Antal Fekete and Hugo Salinas Price, have toyed with a gold figure of between $10,000 and $50,000. Price, who has been a tireless advocate for using the silver Libertad in Mexico as a circulating parallel currency, selects $20,000 as a realistic figure.

International Paper and Gold Reserves in Central Banks

Price says, "The discipline of gold as Reserves backing currency at a revalued price will restore order to a world that has refused to adopt the necessary discipline until forced to do so in the desperate situation now evolving, where there will be no other alternative but to accept the detested fiscal and financial discipline imposed by gold."

Exchanging a "Paper Promise" for Real Money

The idea of backing a large portion of the floating debt that David Morgan of The Morgan Report has long referred to as "paper promises", looks like it may be moving from a once far-fetched idea towards a place on center stage.

You may think that if a gold revaluation happens, you will be able to quickly go to the local coin shop and pick up a handful as soon as the possibility of a gold price rocket launch becomes obvious. But think again. Most likely announced on a Sunday evening, by Monday morning the precious metals supply would be gone. And mining stock share prices would go through the roof. Rickards notes:

"Gold will be in such short supply that only the central banks, giant hedge funds, and billionaires will be able to get their hands on any. The mint and your local dealer will be sold out. That physical scarcity will make the price super-spike even more extreme than in 1980. The time to buy gold is now, before the price spikes and before supplies dry up."

In summary, continue to buy and hold physical gold (and silver) as insurance first and for possible profit generation second. But now you have a third compelling reason - if gold revaluation does come to pass, those who have it will also have a personal financial game-changer of the first order!

David Smith

MoneyMetals.com

David Smith is Senior Analyst for TheMorganReport.com and is a regular contributor to MoneyMetals.com. For the last 15 years, he has investigated precious metals mines and exploration sites in Argentina, Chile, Bolivia, Mexico, China, Canada, and the U.S. and shared his findings and investment wisdom with readers, radio listeners, and audiences at North American investment conferences.

© 2016 David Smith - 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 http://www.MarketOracle.co.uk - 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