The gold price
has several
market demand
forces propelling
it upward
The US Federal Reserve's September
13 Quantitative Easing 3 announcement brings
to mind Wayne Gretzky's famous quote: "A good
hockey player plays where the puck is. A great
hockey player plays where the puck is going to
be." When applied to what is now officially
sanctioned, open-ended, currency expansion,
Gretzky's quote speaks to the future price of
gold. Quite simply, it's going much higher.
While the prices of some manufactured goods
and labour-based services may not climb as the
globe's largest economies systematically devalue
their currencies on a beggar-thy-neighbour
basis, gold and other hard assets have no choice
but to rise. Jim Rickards documented this well
in his best-selling book Currency Wars, and provides an incontrovertible set of facts that run
counter to other analysts who have been tricked
by currency devaluation's sleight of hand into
believing that no inflation is occurring, or is
likely to occur.
The Fed's stated justification for QE3 is that
monetary easing will stimulate job growth. If
the US was the only country priming the currency pump, this might make sense (see Figure
1). However, Japan, China and the Eurozone are
all engaging in monetary easing. The end result
is that central planners are willfully destroying
the value of their currencies (see Figure 5). For
those invested in traditional stocks, bonds and
real estate, this portends massive wealth destruction, and the simple defense is to buy and hold
physical bullion.
As for QE3's goal of halting stagnation in the US
labour market (a valid reason for concern as we
note the lowest labour force participation rate in 30
NOVEMBER 2012
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