Gold Is the Only Long Tem Bull Market

The following are excerpts from an article that appeared on Seeking Alpha today titled ‘Gold Is the Only Long Tem Bull Market‘ by Steve Saville.

“One of our themes over the years has been that monetary factors are driving the major trends in the financial markets. To put it another way, we have tended to downplay the effects on market prices of non-monetary drivers such as the expansion of the internet, the industrialisation of China, and “Peak Oil”.  The dominance of monetary factors has an implication that we have intimated in the past, but have not blatantly stated: gold is not only in a long-term bull market, it is the ONLY long-term bull market.  By way of further explanation, for something to be in a long-term bull market it must be in a long-term upward trend in REAL terms; that is, its purchasing power must be increasing.”

“a good case can be made that gold is the only long-term bull market ‘on the go’ at this time. Moreover, based on the information presently at hand, we suspect that this will remain the case over the coming decade or until there’s an upside blow-off in the gold price.”

The view that the ‘purchasing power’ of any fiat currency or monetary metal is fundamental to the thoughts I developed in the 11 Post Series I wrote in the fall of 2008 ‘Gold as an Investment’ – see in particular Post #9 here.  I am interested that Mr. Saville has focused on ‘purchasing power’ in his article and strongly recommend you click here and read the entire article in context.

Is the British Pound on the path to Collapse?

The following are excerpts from an article that appeared on Seeking Alpha today titled ‘Is the British Pound on the path to Collapse?” by Simit Patel. Click here to read the entire article.

“The situation is the same in Britain as in many other economies at the moment: a credit binge fueled an era of great consumption; excessively cheap credit, as institutionalized via monetary policy, resulted in malinvestments — many of which occurred in the housing sector; and now, economies are faced with the question of how to deal with debt payments in a troubled economy.”

“Particularly, if foreigners are the lenders and are the primary owners of the wealth in the economy, inflation resulting in currency devaluation is particularly costly, as the exchange rate risk is more sharply felt. As a result, lenders who see inflation can begin a run on the currency. That is what happened in Argentina and Iceland.”

“Can It Happen in the States?  In my opinion, the strongest argument for why it can’t happen in the United States is that the dollar is the world reserve currency, and thus there is “nowhere to run.” Gold bugs, however, will cite gold as the place to run to, and will cite gold’s longstanding purpose as guardian of sound monetary policy — a viewpoint once espoused by Alan Greenspan, most notably in his 1966 essay, ‘Gold and Economic Freedom.’  To see if the United States is proceeding along the path to currency devaluation, we should look for a few indicators:  1. Nationalization of banks. 2. Purchase of corporate bonds. 3. Strong inflation policy. 4. Treasury bonds give back all of their gains since October of 2008.”

I have thought hard about what I saw (and see) as a dichotomy that occurred in the past few months when the U.S.$ strengthened and the gold price retreated.  The only 20,000 foot conclusion I could reach is exactly what Mr. Patel has said, that “the (U.S.$) dollar is the world reserve currency, and thus there is “nowhere to run.”  Having said that, and I do not consider myself a ‘gold bug’, fiat currencies are fiat currencies.  With the increase in the gold price over the past few days (it has dropped approximately $10 this morning) perhaps investors and holders of U.S. paper are beginning to refocus.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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