As of late, there are excessive amounts of money standing by for investing into gold and silver. The timing for this is imminent; meanwhile precious metal prices are poised to skyrocket. The dollar itself on the other hand, is set to drastically tumble in terms of its purchasing power, due to the tremendous weight of immense debt and insane annual deficits within America.
On Wall Street there’s still much misunderstanding among traders & speculators regarding the true value of the dollar, against gold. Many experts believe a rising dollar when measured on the Dollar Index (DXY) actually will cause the price of gold to drop, they won’t factor anything else into the equation, thus ending their analysis.
However there are also those who understand that the intrinsic value of the dollar actually holds more weight if the price of gold is not just determined among a selection of other fiat currencies. There are numerous market analysts that believe the dollar has now risen 5 percent on the DXY since February. This has been accredited to the “king” dollar’s return, thus the reason why the price of gold has been dropping.
Fact is that many of America’s major trading partners own economies are in recessions. Japans central bank is now implementing a very aggressive monetary campaign to sharply reduce the value of its own currency, relative to the Federal Reserve’s outright attacks on the dollar which cannot be over looked. The BOJ is on track to enhance its balance sheet to the tune of $1.4 trillion by December 2014. However is also important to note that while the Federal Reserve very well could reach that same goal, Japan’s economy is still only 1/3 the size of America’s…
On the other hand, the dollar’s intrinsic value is decreasing, with an ever-increasing rate, even by simply confirming it against the DXY index shows this. Thus far, there is no plan on the immediate horizon to change the Federal Reserve’s zero interest rate policy and no reduction in sight to lessen the $85 billion per month of money printing. With America’s deficits continually on the rise in front of consistently weak employment data and nominal GDP growth, the Fed’s commitment to continue its endless money printing scheme will go on just as forceful for many more quarters to come.
Several market analysts also maintain that the Treasury and Federal Reserve both should be printing and borrowing more money that way the dollar would be able to lose even more value against the yen, pound and euro currencies. These particular analysts go on to believe that the weakening dollar would also balance trade deficits and prop up GDP growth. Furthermore they contend that by devaluing the currency further, would only affect US consumers negatively, should they be vacationing abroad or purchasing items, imported from outside America.
Fact of the matter is that you can’t balance account deficits simply by boosting GDP growth or dropping the value of the currency, at least, there is no evidence available to supports this. In this theory there’s also a total lack of understanding in where the real effects of currency devaluation are. To print money just for the purpose of devaluing it, also creates domestic inflation. This is true (with all things equal) not only because import prices will increase but rather because commodity prices (being in limited supply) have to increase in response to an increase in the currency supply itself.
Those who remain holding dollars will find no comfort in owning a currency that’s only able to increase its value against other worthless currencies such as the yen, pound or euro. Meanwhile investors soon will be realizing how ridiculous, the belief of a strong dollar is, simply because the rest of the fiat currencies are currently weaker. This is the prime reason money is to pour into precious metals once again as the dollars intrinsic value continues to drop under the weight of $1 trillion in annual deficits and $17 trillion in national debt, all which currently are monetized by the Federal Reserve.
Federal Reserve Desperate To Keep Up The Charade
The Federal Reserve’s latest market interventions are a clear warning that there is something desperately happening behind the scenes. The Federal Reserve is struggling its best to keep control so the whole monetary system doesn’t implode.
The attack upon gold and silver has been an orchestrated attempt to further protect the exchange value of the US dollar. While the Fed is printing out $1 trillion dollars per year (out of thin air) the world is decidedly moving away from the world’s reserve currency for international payments.
This is resulting in an increased money supply with a decrease in demand. This translates into a falling price. Ultimately the attacks upon precious metals will not be able to continue succeeding. The whole point of this is simply to buy time for the Fed so that they can continue to finance the federal budget deficit by their notorious QE tactics to further delay rising interest rates & hold debt prices higher just to support the Feds balance sheets.
Once the Fed is incapable of printing money any longer, which would signal the dollars collapse, (as additional printing would only worsen the problem) bank deposits and pension funds would be next in turn to be hijacked from the general public in order to add revenue to finance the nations deficit just as was recently witnessed in Cyprus.
Because the Fed is engaged in the practice of short selling gold, this practice is screaming that something is desperately wrong. Under all assumptions, that something is related to the US dollar. Should the dollar’s exchange value suddenly drop the Federal Reserve would be in trouble, because they wouldn’t be able to continue controlling interest rates and bond prices therefore all the asset bubbles that are currently inflated, would blow-up simotainiesly.
Countries that are engaged in, or looking to get out of, the dollar’s use for international settlements according to recent reports, include the BRICS countries as well as Japan, and all of East Asia. It’s only obvious that this latest attack upon gold by the Federal Reserve will not be able to last much longer as India is buying up gold as well. Meanwhile the BRICS nations will take this chance to dump as many dollars as possible. This action targets the sentiments between Americans and gold bugs alike. Thus meant to scare this group out of the markets, and stop the flow of money from ordinary people into precious metals altogether.
Over last week and this week there’s been tremendous selling going on, with the Feds signature written all over it. With paper shorts flooding the markets there are no real people selling bullion. The plan to bust gold’s momentum is for the sole purpose of holding onto lower interest rates, high bond prices and continued QE. If the Fed were not able at this time to continue printing money the federal deficit would not be able to be financed. Printing money is how the Federal Reserve is able to buy bonds as well as jack up derivative related debt instruments on the banks books allowing these banks to all appear solvent.
If the money printing stops they won’t be capable of purchasing more bonds to keep those banks from collapsing, or allow the Treasury itself to remain in operation. Escalating gold prices are a direct threat to that. Therefore the Federal Reserve will continue taking necessary and desperate actions in opposition to gold. For how long these measures will last? For how much longer they will be able to get away with it? It’s unknown, but one thing for sure their time is running out.
Tom Genot -