QUESTION:
Dear sir
I have read your articles extensively and i have a few questions…
You have repeatedly said that the tree must be shaken (for gold) but as far as i know gold and silver are in a BEAR market. This is not a correction in a bull market any more but a bear market (due to technical analysis). So my question is this: how can you be so sure that the metals will resume the bull trend sometime through 2014-15 and make new highs to 2020?
My second question is about stagflation… If we are moving to stagflation then the commodities should be in a bull trend, not bear trend as now…
ANSWER: As wild as it might sound to the non-Goldbugs, the metals are actually not in a bear market. The truth is they did not breakout into a long-term bull market and that will not take place until silver exceeded the 1980 high and gold breaks through the $2300 level.
How sure? This is about a 100% probability. The issue is not the metals ALONE. It is everything interconnected. For the metals to enter a REAL bear market gold must close BELOW $680 on an annual basis and silver BELOW $8.50. This rise in metals AFTER 2015 will be in general chaos and the drop in confidence in government. We are NOT at that stage now and there will NEVER be an HYPERINFLATION that is total nonsense.
The STAGFLATION is being cause by the fact that the cost of government is rising rapidly. Any small town is an example. They have 10 policemen and 5 now reach their 20 year retirement point. They now have to pay them 100% healthcare for life and then they have to replace them so the net cost is the equivalent of hiring 15 policemen. These politicians assumed that there was an endless pot of revenue and people will pay whatever they demand. They then exclude the cost of government from your cost of living so this is the real rise in INFLATION but it acts like a black hole sucking in everything around it. Because it is government and not industry, it consumes the national wealth and contributes nothing to the productive capacity of a nation. Thus, the rising cost of government because DEFLATIONARY and not INFLATIONARY from an economic productive perspective. Hence we end up with STAGFLATION never HYPERINFLATION for the state and local government cannot increase the money supply. The unfunded liability at the state and local level dwarf that of the feds.
It is not that the METALS will rise alone, this is the trend for TANGIBLE (Private) assets compared to INTANGIBLE LIABILITIES (Public) assets. Weather is also in a chaotic trend and we will see rising food prices. The excessive rain in Europe and in part of the USA is starting to reduce supply. So it is never possible to forecast the future unless you have EVERYTHING put together for we are never alone – it is all connected.
The metals had to come down or else interest rates could not have begun to rise. This is a series of dominoes and once the first goes, the second must follow. It is unfortunate that the gold promoters have tarnished the role of metals and filled the airwaves with such nonsense. They have done far more damage to the metals than people realize because the next rally will begin only after the TREE HAS BEEN COMPLETELY SHAKEN and the bulls ate thoroughly discredited.
