Times A-Changin’ – But Gold Permanent

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GOLD AT ALL TIME HIGHS IN MANY CURRENCIES

Gold in US dollars is up 10% or $120 since the bottom in August 2018. Still, clearly a long way from the 2011 top at $1920. But the temporarily strong dollar doesn’t reveal the true picture of gold. For that we need to look at gold in other currencies. We know of course that gold in Argentine pesos or Venezuelan bolivars has made exponential moves. 

Less known is perhaps that gold is at or near the highs in many currencies like Norwegian and Swedish kroner or Canadian dollars. And in Australian dollars gold made a new quarterly closing high in December 2018

 which is very significant. Major moves normally start in the periphery so what is happening with the gold price in various currencies will eventually spread to all currencies. It would not be surprising to see new highs in gold in all currencies in 2019, including against the US dollar. But remember it won’t be a straight move and there will be a lot of volatility.

GOLD – SILVER RATIO CONFIRMS STRONG UPMOVE COMING IN METALS

The other major predictor for the precious metals is the Gold/Silver ratio which I often have mentioned. Real sustained moves up in gold and silver only happen when the Gold/Silver ratio falls which means that silver moves up faster than gold. The ratio made a new high at 87 at Christmas and has moved down 6% in 7 trading days. We still need to see validation of this move but long term momentum indicators confirm that a major move down has started.

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RISK GREATER THAN ANY TIME IN HISTORY

What we do know is that risk in asset markets and in the financial system is now greater than any time in history due to the size of global debt of $250 trillion, plus unfunded liabilities and derivatives of another $1.75 quadrillion giving a total risk of over $2 quadrillion. Once this risk starts to manifest itself in defaults, the money printing undertaken by central banks will dwarf any QE programme of the past. The big difference between today and 2007-9 is that next time the fake money created will have no effect. The magnitude of the problem and the money creation will have the same consequences as in any hyperinflationary economy. It will totally debase the dollar and other currencies until they are all worthless.

What is clear is that times are changing. Bob Dylan, the Nobel laureate described the course of events that we will see next already 55 years ago in his 1964 song:

THE TIMES THEY ARE A-CHANGIN’

Bob Dylan 1964

Come gather ’round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You’ll be drenched to the bone.
If your time to you
Is worth savin’
Then you better start swimmin’
Or you’ll sink like a stone
For the times they are a-changin’.

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