Marc Faber of the Gloom Boom Doom Report was interviewed by Bloomberg on Friday, and of course topic number one was the brutal takedown of gold. Not all that surprisingly, he likes the resulting buying opportunity and expects “a major low in gold within the next two weeks.”
More interesting from a theoretical/historical point of view was his segue from gold to the state of the global economy:
“Today we have commodities breaking down including gold and we have bonds rallying very strongly. If you just stand aside and just look at these two events they would suggest that there are strongly deflationary pressures in the system.”
So is it 2008 all over again? A sharp break in stocks coinciding with multiple fiscal crises (Slovenia and Portugal look primed, Italy and Japan could go anytime) would revive talk of a deflationary crash. Bad for precious metals in the short run (2008 was maybe the worst-ever year for mining stocks) but great long-term because the inevitable response of governments around the world will be to emulate Japan: decree 2% inflation and create as much new currency as it takes to get there. If the Fed’s $3 trillion balance sheet didn’t do it, then we’ll try $10 trillion. If buying mortgage backed bonds doesn’t revive those animal spirits, then junk bonds and stocks are next.
If the Long Wave is indeed winning, we’re about to discover the true meaning of an “unlimited” printing press.
Stocks Tank In After-Hours Trading -Making new lows.
Building a new crisis on the existing crisis” seems to be the goal of policy in Japan, the United Kingdom and the United States. Reflecting these financial products that have exploded in flight in 2008, “CDO squared” which are complex constructions o…
Somebody out there is sure getting prepared for something really big. We have just witnessed a takedown of gold and silver unlike anything that we have witnessed in decades. On Monday, the price of gold had fallen by more than 10 percent at one point. It shocked investors all over the globe, and overall what we have just seen was the largest two day decline in the price of gold in 30 years. The price of silver dropped even more rapidly on Monday. It was down more than 14 percent at one point. There was an atmosphere of “panic selling” as investors and financial institutions raced to liquidate their holdings of silver and gold. But was this exactly what someone out there wanted? As I wrote about the other day, big banks and news outlets all over the world have been boldly proclaiming for weeks that gold is entering a “bear market” and that now is the time for all of us to sell our gold. In particular, Goldman Sachs reportedly told their clients earlier this month that they “recommend initiating a short COMEX gold position“. Was that just a “good guess” on their part, or was something else going on? Were they actually trying to help create a “selling frenzy” that would drive the price of gold much lower?
What we witnessed on Monday was absolutely jaw-dropping. Just check out this chart of the price of gold over the past 10 years. The takedown of gold on Monday sticks out like a sore thumb…
And that chart does not even show the full extent of the collapse. As I write this, the price of gold is sitting at $1355.20.
But this is just the beginning for gold and silver. As I have warned repeatedly, the price of gold and the price of silver will experience wild swings in the years ahead.