Thursday, October 27, 2016

Something Happened in 2001 --- and Nothing Shows It More Clearly Than the Gold Price

27 October 2016

Gold attained its intraday high price of $887.50 USD per troy ounce in early 1980, after climbing from its (fixed) 1934-1968 level of $35 in a steady and exponential march. From 1980 - 2001, the gold price didn't really do much, except mostly fall. I hope that even to the naive observer, however, it is evident that something changed in 2001 --- and that was central bank experimentation with money printing and ultralow interest rates that is unprecedented in all of human history (combined with a series of out and out crashes --- not yet done --- that have wracked the inflated markets and made mainstream investors increasingly insecure). 

After peaking in September 2011, the gold price fell until December 2015 --- and this occurred because market participants believed the moneyprinting and low/negative rates were working to boost the economy. 

What is now becoming apparent is that moneyprinting and low rates actually create a trickle-up economy, in which funds flow to those who can afford to borrow and leverage up at low rates and speculate. Investment in truly productive projects has remained neglected --- almost stagnant --- while speculators occupy themselves with paper gains, stock buybacks, leveraged buyouts encumbered with unpayable debt, showpiece projects (Trump Towers, anyone?) and other unproductive or even destructive misallocations of capital. 

Live 24 hour Gold Chart

This post is just meant to be a heads-up. The moneyprinting and free money don't actually make the economy grow... they just take it off-track in unproductive dead-ends. If I'm right, then, from here, gold is headed much, much higher than its 2011 peak of $1934 USD. Decide for yourself. I've made my decision....

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