Gold to be or Not to be

QUESTION:

Mr. Armstrong,

Much respect for your work.  Thank you.  Could gold be entering into an extended bear market that could take us past a low in the next couple of years.  I cannot possibly grasp how gold can even be involved in a portfolio with the movement to electronic money.

My question is, could this even be a possibility?

Thank you,

J

ANSWER: Moving to an electronic currency seems to be deflationary for it may be closely related to currency controls. The government have been targeting the underground economy and that includes gold. Not from a price manipulation perspective, but keeping track of any sales that are unreported. Refiners have reported to us that they must report from whom and to whom all gold is being moved and this includes gold that was shipped in to be refined here and returned overseas. They want to know what everyone is doing, why, and when.

From a price perspective,so far there is no indication that gold is entering a long-term bear market. We should confine the decline to 3 years max and the sharp price drop we just saw is VERY GOOD because we want to see it thrust down to achieve that decline within the short time frame. This is always about price and time. So if we can see gold break the 1,000 level in 2014, we have a reasonable shot at this being finished. If we do not see that price level, then yes, we could see it drag on for 5 years total.