James Bond’s Golden Gun
1.In this super-crisis, central bank interest rate & quantitative easing (QE) policies have been the main drivers of the gold price. Many gold analysts and investors thought the bond market would crash, setting off a 1970s-style surge in gold stocks.
2.That hasn’t happened, because the US central bank is committed to maintaining low interest rates (high bond prices), until 2015.The financial system would close down if the bank stopped buying bonds now. I f that happened, guns would quickly replace silver, as the poor man’s gold.
3.The bank has committed itself to continuing QE, until the unemployment rate drops to 6.5%. The latest jobs report showed that the unemployment rate just rose to 7.9%. That data is going to make the Fed even more aggressive in its open market operations involving the T-bond.
4.I refer to gold bullion as Queen Gold, and the US T-bond as her secret agent James T. Bond. At some point, Sir James is going to outlive his usefulness to your queen, and a great bear market in bonds will unfold.
5.Specifically, I believe that the pressure put on all fiat currencies by the global tidal wave of QE, will make it appear that hyperinflation is a done deal. I don’t think you are going to experience full hyperinflation in this crisis, but you’ll get something very close to it.
6.As that happens, central banks around the world will likely begin raising rates aggressively, to combat the severe institutional loss of confidence in all fiat currencies.
7.So, should you hold & buy gold stocks now, or wait until 2015? The answer is that you should buy now.
8.Why buy now? The answer is now, because when gold first traded above $1800, institutional money managers showed strong interest in buying gold stocks.
Share this post