FREE: JOIN 100,000+ READERS   

≡ Menu
SOVEREIGN MAN

Gold: the clearest sign yet

August 4, 2011
Vilnius, Lithuania

Here’s some food for thought that I’d like you to chew on for a bit.

The debt ceiling debacle has been settled… President Obama is celebrating his 50th birthday, no doubt dancing a little jig that a major crisis has been averted, and equity markets in the US have begun to move off multi-month lows.

Investors can safely say that the US will not default, and the rating agencies have even maintained America’s AAA credit rating, albeit with a warning that the US may be downgraded within the next two years.  Yields on the Treasury’s benchmark 10-year note have fallen from 3% last week, to just 2.6% yesterday, and the Dollar Index is off its lows from earlier this week.

Here’s the question: with all of this good news and calm in the world of the dollar, why does the price of gold keep going up, 5 out of the last 8 sessions?

This may be the strongest indication yet that a major shift is taking place in the global financial system. I first started talking about this in December 2009 when I wrote:

 

“In a flight to safety, institutional money still flows into the dollar. Gold will not truly break out until there is a bifurcation in investors’ mentality regarding safety.

“To put it more clearly, when worried investors start piling into gold instead of the US dollar to protect their assets, this is the sign that we are charging towards the top.

“For now, it’s not happening yet, and that’s why I recommended going long gold against the euro…”

 

Gold has surged 50% since then, and it’s become quite clear that this ‘bifurcation’ I predicted has occurred. Gold is now viewed by the market as a safe haven asset, much safer than the financial system’s traditional safe haven– the US dollar.

Today, even when Treasury yields fall, the gold price surges. This is a dramatic departure from the core foundation of the financial system, and it’s clear that the market has less and less confidence in the stability of any fiat currency.

In the US, there are numerous indications that the fake recovery is stalling, and investors are beginning to expect Quantitative Easing 3 from the Federal Reserve… because, if at first you don’t succeed, keep trying the same thing over and over again.

persistence Gold: the clearest sign yet

Are there any alternatives?

The yen is often thrown around as a safe haven asset as institutions foolishly have confidence that the Japanese government, in debt over 200% of GDP, will make good on its obligations.

This morning, though, the Japanese government intervened directly in the foreign exchange market in a move to weaken the yen, and further announced that the Bank of Japan would expand its asset purchase program. More debt, more printing. The yen tumbled over 3% on the news.

Even the Swiss franc, widely seen as among the safest of all currencies, experienced a steep decline yesterday when the Swiss National Bank unexpectedly slashed rates to curb the franc’s appreciation. Investors pushed back vigorously against the SNB, increasing the likelihood that some form of capital controls may be coming soon.

Just eight days ago I predicted that the SNB would intervene to stem the rise of its currency, though even I didn’t expect it to happen so quickly.  Things are definitely moving fast, and it’s clear that governments are willing to move mountains in order to keep the party going.

Look, there are some incredible opportunities out there in the world, and I’ve written about these extensively. But we cannot be blind to the tremendous risks to our assets and livelihoods. It’s imperative to first take steps to protect what we have in these chaotic times before government intervention destroys it all.

Six months ago we held a sold-out workshop in Panama where individuals learned directly from some of the world’s foremost internationalization and asset protection experts– things like:

- HOW and WHERE to purchase gold and safely store it overseas in one of the most secure facilities in the world

- HOW and WHERE to easily establish an offshore bank account and protect your money from the coming wave of capital controls

- HOW and WHERE to set up one of the most rock solid asset protection vehicles in the world; it’s nearly impossible to break open, and one of the smartest things you could do for your estate

- HOW and WHERE to establish residency and even obtain a second passport in over a dozen different jurisdictions ranging from Brazil to New Zealand to Singapore to Europe

- HOW to do it all within the rules of the law, to file all the proper forms, and sleep well knowing that you are 100% compliant

The entire event, plus special bonus features, has been professionally archived into a comprehensive DVD kit containing over 20-hours of footage and an interactive workbook.

If you’re serious about protecting your wealth… if you’re determined to be among those that survive and thrive in these chaotic times, you owe it to yourself to get your hands on the workshop DVD kit at our special discount rate while supplies are available.

Our goal is simple: To help you achieve personal liberty and financial prosperity no matter what happens.

If you liked this post, please click the box below. You can Download our Free 17 page Report The 6 Pillars of Self Reliance.

image

Click Here to Download

About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

Comments on this entry are closed.

  • saskvoch

    Great report as always… have become a fan of your site. A bit of an offshoot question here. Im in the process of obtaining my second passport (im a  natural born US citizen getting a passport in a european country). I found for my second passport its quite easy to get since my father was born in the euro country I seek the passport for and since I am a direct relative I simply fill the forms out and send in the money to said country. I dont even need to speak the language.
     
    So my question… how do i travel abroad using two passports? i leave the US with my US passport, then use my european passport within europe? this doesnt pose any problem with any authorities?

    Many thanks for any tips!

    • TheCaptain

      Yes, use the US passport for exit and entry into the US and the other for everywhere else. No, it’s not a problem with anyone but maybe the US ICE…but aren’t they part of the problem anyway?

  • disqus_TLcMqwnySr

    “But gold and silver crashed today – look, they’re in a bubble!”

    “It’s 2008 all over again! Sell everything!!”

    Yes, the official prices came down. Yes, it’s just like 2008 when everything plummeted except for the dollar and treasuries.

    What did we learn from that? Three years hence, the problems have spread and become worse while gold and silver are multiples of their prices in every currency.

    This is the “great excuse” to resume business-as-usual for governments around the world.

    Never waste a crisis, was it? More like cause a panic when you want to get your way. It still astounds me that the juvenile bankers and politicians throw tantrums like this and still hold so much sway.

    A few more years and the threads will be unraveled…

  • Fiend’s Brave Victim

    Much as I think you’re great Simon, I think you might have mistimed today’s article a little! 

  • NotAHugeFanOfLargeCorporations

    Simon, why do you keep hammering on Obama?  This mess started with Bush and Obama has had little or no help from the Repubs/TeaBaggers.  I doubt seriously he is dancing a jig today (by the way, that is a little racist imagery on your part).  The Dems had no choice but to give in to the House since there were idiot TeaBaggers that thought not raising the debt ceiling was a good idea.  I agree that socialism is not a good solution but neither is doing things the Ayn Rand way (what a sad, failed human she was).  There needs to be a balance and right now my money is on the Dems to at least meet half-way.

    • Diogenese_

       I’m part Irish like Obama and I personally don’t find references to Irish jig dancing to be offensive. 

      The US yearly GDP is $ 14 trillion.

      The US unfunded mandate total is at least $114 trillion.

      The US must sell at least 1.5 trillion of bonds yearly to pay it’s budget, which is added to the above total.

      Would you lend money to someone who is 8 years in debt and borrowing more to pay both current bills and the interest on past debt? Do you understand what will happen economically when the US government reaches the point where it cant pay interest on it’s bonds? Do you think the entire population paying %50 taxes for 16 years is an economically feasible way to avoid a government debt driven economy destruction? Hint-the US government has never succeeded in confiscating more than %30 of GDP, let alone %50.

       Maybe you should consider the numbers instead of demanding ever more money from productive people.

      • Diogenese_

        The %50 tax calculation is incorrect. It should be %50 taxation for the whole population In Addition to whatever their current tax bracket is. This is because their current tax level is needed to pay for the current and ongoing level of government spending, which was effectively Increased by the ‘debt ceiling’ outcome. The %50 tax raise is for debts from the past that were never paid for. The %50 addition also assumes that US bond buyers will continue to fund %9 of Federal spending, otherwise the tax addition would be about 58%. This also assumes that current government spending will not rise in the future, which it has not failed to do for decades.

        So here are the new tax levels needed to pay off government debt and welfare promises:
        tax bracket  |  new taxes
        0 to 8k: %10 + %15 fica + %50=%75
        8500 to 3400: %15 + %15 + %50=%80
        3450 to 86000: %25 + %15 + %50=%90
        86000 to 100k: %28 + %15 + %50=%93
        100k to 174k: %28 + (%15 below 100k) + %50 = around %90
        174k to 374k: %32 + (%15 below 100k) + %50 = around %89
        above 374k: %35 + (%15 below 100k) + %50 = around %86
         
        Does any one think the economy will function at those tax levels even if the government could do the impossible and collect such a high percentage of GDP? Does anyone think the government can avoid default?

        ps-I forgot to include state and local taxes.

    • Domlanic

      <> Was she? Don’t know much of her but this seems extremely judgmental! Anyway, I mean to ask what is so evil about socialism and why do Americans equate it with communism (which IS repulsive)? 

      • http://www.salescopywriter.net/ Alan

        Dom, socialism is a stepping stone towards communism, though the patient usually dies of the disease long before full communism is reached.

        Actual communism, like cancer, is invariably fatal for an economy.

    • Charleydan

      Demanding more money from the people who think they have a 14 trillion dollar debt is only one issue to address. Of course when voting for who to steal from as in the form of printing and taxation. Only comes back to the consumer at purchase. The ones who think they get it free are hurt the most in their lack of knowledge.

      This Nation has been importing greater then exports for years now. Creating approximately 39 trillion world reserve currency, that is being rejected by the world now. Coming home to America. This inflationary affect will make cash goods inflate by at least 300%. 300% more money chasing the same amount of food, clothing, fuel and rent. Inflation far exceeding the printing this nation is doing and have no control over.

      When that is considered it is not hard to see gold at 2500 and far higher. The middle class disappearing to a Nation of struggling like our forefathers when they came as immigrants. Only the vision of a future will not exist as it did then as they remember the past way of life with freebies.

      The jig is up and there really is only one way or the other—to bite the bullet or invest and move else where. 

  • Diogenese_

     Great article. This is an important point that only a very few commentators are making, that Treasury rates going down, the dollar going up and gold going up all at the same time doesn’t make sense. I think it’s clear that this is a short term ‘immediate catastrophe avoidance’ dollar raise. This is shown by the dollar index chart:
    http://www.bloomberg.com/apps/quote?ticker=DXY:IND

     If the US was a sailor on leave, it would be like he owed everyone money and people were getting mad at him, than at the last minute he got a new credit card and took a few of those people out for drinks in a show that he will pay them eventually.

     The media claims a catastrophe was avoided, but in fact a catastrophe did happen. No real spending cuts at all happened, just the rate of increase of new spending was reduced. That would be like your speeding up to 100 mph really fast, and your passenger screams at you, so you don’t step on the accelerator as hard. That’s not stepping on the brakes, and that’s not even slowing down. The brick wall is still ahead and your passenger now has a false sense of security.

    The tea party went all out for budget cuts and were completely rejected by the majority of the country, who adamantly demanded that no spending cuts at all happen. The statist majority of the country think the tea party is being ‘mean’ to senior citizens and others on various types of dole, but what the majority doesn’t understand whatsoever is that what’s at stake is the total destruction of the economy as we know it, not class warfare.  The statist controlled mass media succeeded in convincing a majority that ‘compromise’ was needed, when in fact there is no grey area involved in currency destruction through government debt.  When US bonds are no longer sold at the rate they once were, the dollar will collapse, period.

     A collapsing dollar will destroy the US economy, because the resource prioritization calculation function of prices will no longer work. That’s what happened in Argentina, and it Will happen in the US. The politicians will continually deny it, and the majority will believe them.

     Edmund Burke and others predicted over one hundred years ago that welfare-warfare Democracies are bound to destroy themselves eventually because voters will keep voting to tax, borrow and spend until economic collapse, and they were absolutely right.

     I think the new super congress will dictate capital controls as part of it’s plan, it will end up having to do that to maintain the governments power. I think the US economy will come apart in stages, with the bottom being reached in about a year to year and a half. It will then stay there for at least 10 years, similar to certain circumstances in Japan and Argentina. Crises will come in 6 month increments, because that’s how long it takes printed money to work it’s way through the economy, in a pre hyperinflation economy, at least.

  • http://twitter.com/llboyd El Boyd

    I agree with a lot of what you say, but today is the first real “panic” in the market we’ve had in quite some time and gold was down (marginally) and many flooded into the dollar.

  • Jj

    I would not buy gold unless it is to hold money, and I would not own it as an American or inside an iffy country. All the US has to do is make it illegal to own or trade gold and everything you have in it could instantly be confiscated, don’t fool yourself about this threat. If you are open to living off the land, buying fertile farmland in various stable 3rd world countries is the most stable purchase to use your money in my view. Also things like concrete will never go down in price. Think differently, think what people will always need on a root level that won’t perish easily or easily be confiscated or devalued by credit paranoia created by the media.

  • SmartLazyInvestor

    Regardless of whether gold goes higher or lower, it won’t go as low as the dollar is headed. If you have no financial education and don’t know how to use your capital any other way, then gold is a much safer investment than stocks or bonds in US companies, and mutual funds do little to reduce your risk, even if they invest in international companies.
    The best investment you can make is in your own education. And, no, I am definitely not talking about getting a degree. Learn REAL investing skills so you don’t have to worry about what the market does. I am a Real Estate Investor and know that I am going to protect the value of my wealth through real estate.

Read previous post:
Some of the many things you would love about this place

August 3, 2011 Vilnius, Lithuania As is typical for me, I woke up this morning with the sun shining in...

Close