Even some diehard gold and silver enthusiasts these days “are experiencing the discomfort of rising panic,” says a gold research analysis report in Gold Money. Discomfort hardly does the sentiment justice.
It’s not easy holding onto convictions when reality does such a good job of defying logic. But that “reality” can’t stand up for long in the face of building headwinds in the fundamentals. At the root of the panic is “the investment establishment, which has bought into the bond market bubble” on the belief that gold and silver aren’t “any longer an alternative to paper money.”
In other words, gold and silver investments are being considered “risk on” – exactly the opposite of their historically proven role. And it is diametrically opposed to the stand being taken by the IMF.
The recent purchase of $2 billion in gold by the IMF sends a clear signal of its belief in the need for gold and silver to stabilize the escalating deterioration of the global money supply. That the figure matches JP Morgan’s recent gambling debacle may be more than coincidence.
Egon von Greyerz of Swiss Matterhorn Asset Management said in Gold Switzerland, “the current $1 quadrillion plus (the $700 trillion figure is incorrect) of outstanding derivatives is a time bomb of colossal magnitude. It is guaranteed that we will see losses in the trillions in the next few years … the whole financial system of today is extremely fragile. Central banks and governments are fully aware that without money printing in the trillions of dollars and more likely in the tens of trillions, the banking system is unlikely to survive.”
“This has happened,” says Gold Money, “because the financial community, sucked into the bond market bubble, has not even begun to discount the debt threat to government paper from sovereign bankruptcies.”
The forces behind falling gold and silver prices are merely the product of misguided faith that the worst is already behind us. Highly publicized opinions have pegged our emergence from the doldrums anywhere from later this year to within the next three years. But GATA cites a study by noted economists Reinhart, Reinhart, and Rogoff that 2030 might be closer to the truth, as the average period of recovery from excessive public debt is 23 years. “Given their previous work on the aftermath of credit bubbles and the impact of public debt, investors have every reason to take their prediction seriously,” GATA says.
That isn’t “doom and gloom” rhetoric, it is an appeal to reason in plain English. It is why “wealth preservation is so critical and investors should not worry about a relatively small correction in the price of precious metals,” says Greyerz. “The most important investment you can hold today is physical gold and silver stored outside the banking system … Investments within the banking system will always involve major counterparty risk.”