GOLD AT THE FOOTHILLS OF A MARKET MANIA
The connotation of "foothills" is a perfect way of stating precisely where we are at in the collapse of the US Dollar based global financial system and the return of the king,gold,as money.It is perfect because while we are certainly seeing a movement towards a mania,with gold hitting fresh all-time highs in US Dollar terms on almost a daily basis throughout September and much of October,we are still far from reaching the top of the mountain.
We have begun to enter into the mania stage but,we are still a long away from reaching its peak.Here are arguments and proof for both statements.It should be pointed out,however,that we don't necessarily see gold as being in a "typical bull market".What we believe we are witnessing is the return to gold as money after decades of suppression. However,we believe that the mania phase of this progression will transpire.
It is our belief that once we reach the new paradigm,it actually will be the new paradigm. There will not be any denial nor "return to normal" because returning gold to functioning as money is in itself a return to normal.That is not to say that certainly gold will likely overshoot,by a great amount,its "true" value at the height of the collapse of the US Dollar based global financial system in terms of its value in comparison to other goods.And there will be a time when it will make sense to sell some or all of our your gold in favor of other assets.But for our purposes lets use the following chart to try to approximate where we currently are in the mania stage of gold.
For those that have been invested in this sector since 2004, we can recognize the period from 2004-2009 as being the awareness phase.And that brings us to August of 2010,which began the very first baby-steps into the mania phase.We can see all the signs of it around us now. Gold is mentioned more and more in the media and it has begun to start making all-time highs on a regular basis.
The dumb money,governments and central banks,are finally starting to catch on to what is happening.The central bank of Bangladesh bought 10 metric tonnes of gold from the IMF last month.This is on top of 212 tons of gold the IMF sold last year to the Reserve Bank of India, the Bank of Mauritius,and the central bank of Sri Lanka.And Saudi Arabia,Russia and the Philippines have recently announced big additions to their gold reserves.But how can we be sure that we aren't very close to the peak in the precious metals market?Nothing is certain in life but there are numerous indications that we are still early on in the mania phase.
As we can see,if we are near the top then this was one of the most disappointing bull markets in bubble history! In fact,just to match the gold & silver bull market of the early 1980s gold would have to quadruple in price from here to $5,200 per ounce.And we think this bull market will be much stronger than the 1980 bull market.
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