Gold – Look Out Below!

Henry Makow – May 2, 2012

Many “Patriots” who own gold and silver must be frustrated these days. The metals are stuck in a narrow trading range and mining stocks are hitting new 52-week lows. Despite gold being only 10% from its all-time high, the multiples on gold stocks are contracting. It’s a Chinese water torture.
I am not a financial adviser but I think mining stocks are a harbinger of a major sell-off in the metals in May or June. The catalyst will be the overthrow of the “austerity” program in Europe, new stimulus there and new doubts about the survival of the Euro. While austerity is bad, it will drive investors to seek refuge in the USD, resulting in a decline in the Euro and commodities, including precious metals.
Occasionally readers ask me if they should buy gold or silver, I say wait until you see inflation in the marketplace. We have had a steady rise in metal prices without a lot of inflation. The reason for this is the perception that the USD is worthless because the US debt is out of control. Another reason is “quantitative easing” but who knows how much money disappeared in the credit crunch?
These factors which underpin precious metal prices are spurious because currency is a medium of exchange, i.e. a coupon. It doesn’t need to be “backed” by anything. (“The full faith and credit of the US government?” – see what I mean!) 
As long as people are prepared to exchange real goods and services for these coupons, you want them. Only when they start losing value, should you buy precious metals…

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