Gold Sets All-Time High, So What’s Next?

29 Jul
gold and silver portfolio

Gold Sets All-Time High, So What’s Next?

This week the price of gold set the all-time and seems ready to continue to break it’s own each day. Meanwhile, silver made one of its biggest moves in history.

It has everyone talking.

But the real question is what’s next?

We think the answer is higher prices.  

Much higher.

Already major banks and forecasters are raising their target prices for gold and silver.  They have to.  Many of their old targets have already been smashed.  

We’ve practically made a career here of telling our friends and clients what the Fed is doing with the printing press in the basement of the Marriner Eccles Building in Washington.  

It has been wholly unprecedented.  And we don’t mind telling you we have tried to raise an alarm about it.

Likewise, we have tracked and graphed, and explained and reported the explosive growth of government deficits and debt until our charts have run out of room.  That growth, too, is wholly unprecedented.  

We don’t just mean that as a figure of speech.  We mean the debt is growing faster than ever before in history.

To reiterate some of what we have been reporting, Washington has increased federal debt by 14 percent since January 1.  The Fed has increased its asset base – the stuff it buys with made up money – by two-thirds since the beginning of the year.  

Explosive.  Unprecedented.

We want to illustrate things one more way.  The following is a chart of the money supply (M2, a measure of cash and cash-like liquidity such as checking deposits, savings accounts, and money market funds)

Since the first of the year, M2 has grown by 20 percent.  We have been watching these things for a very long time and have never seen anything like it.  Not even in Quantitative Easing.  Not even in the double-digit inflation of the 1970s.

Explosive.  Unprecedented.  

One more thing.  We have been clear that the most important megatrend in the financial world is the move away from the US dollar as the reserve currency of the world.  We haven’t shied away from the subject even when people we respect have downplayed the prospect.  But we know what we have seen.  We have watched central banks like Russia and China add gold to their reserves at a steaming pace and have concluded something important is going on.

Now we add the recent observation of Goldman Sachs to what we have said, citing Goldman strategists including Jeffrey Currie:

“Gold is the currency of last resort, particularly in an environment like the current one where governments are debasing their fiat currencies and pushing real interest rates to all-time lows.” 

There are, they write, “real concerns around the longevity of the U.S. dollar as a reserve currency.”

So again, what happens next?

We think the answer is higher prices.  

Much higher.

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