Egon von Greyerz: Gold And Silver Will Be The Only Assets that Will Protect Investors Fully Against The Destruction of Money!

• Egon von Greyerz exhibits perspicuity in his writing rarely found in most modern writers. His articles are a great read. His reasoning is sound and makes boring economics enjoyable. I have said before and I will say again, remember the Golden Rule: ’Whoever has the gold makes the rules!’
   
  In 2002 we advised investors to put up to 50% of their liquid assets into gold when the price was $300. To us it was crystal clear that the mountain of debts and derivatives would never be repaid with normal money but would be inflated away by money printing and this is what is now happening. The media are now talking about a bubble in gold and comparing to the 1980 top at $850. Let us be very clear, although gold has gone up 5 times since the 1999 bottom at $250,  it is nowhere near its peak. Adjusted for real inflation (as per shadowstats.com) the 1980 gold peak in today’s prices corresponds to around $7,200 today. So gold could easily go up 6 times from the current price of $1,220 and still be within normal parameters.
    
  There are many factors that will contribute to gold’s rise from here (in addition to money printing):
   
  1. Gold production is going down.
  2. Neither Comex (the futures exchange), nor the bullion banks would be able to deliver more than a fraction of the physical gold for which they have outstanding commitments.
  3. Central banks and the IMF probably don’t hold even half of the 30,000 tons that they claim they have. Most likely, at least 15,000 tons (6 years gold production) have been sold to suppress the gold price.
  4. The precarious financial system will lead to a total distrust of paper gold including most of the ETFs which have no physical gold.
   
  The four factors above will lead to the most massive surge in the gold price. There will be nowhere near sufficient gold to satisfy demand at current prices. We had been expecting gold to start its acceleration in March 2010 and this is exactly what is happening. We expect the move to be relentless during most of this year with very few major corrections but with high volatility. Moves of $100 in one day could easily happen.
   
  So gold is likely to make a top in the next few years between $5,000 and $10,000. But if we get hyperinflation the price could go exponentially higher like in the Weimar Republic when gold reached DM 100 trillion per ounce in 1923. Will gold experience the same type of correction when is has peaked as happened after the 1980 peak? Probably not, because gold is likely to be a part of a new monetary system that will be created when the current one has collapsed.
   
  The table below illustrates the total destruction of paper money against gold in the last 100 years and shows how many ounces of gold that $1,000 bought at various times. In 1910, $1,000 bought 40 oz of gold at $25 per oz. Today in 2010, $1,000 buys 0.80 oz of gold at $1,230 per oz. This is a massive decline of 98% in the value of the dollar measured in real terms in the last 100 years. The next significant year is 1971 when Nixon abolished the convertibility of dollars to gold. It was this disastrous decision that opened the floodgates for the credit and money creation that we are experiencing currently. The dollar is down 97% since then. But even if we take more recent years, the purchasing power of the dollar measured in gold has declined catastrophically. Since the 1999 gold low, the dollar has declined by 80% against gold and since 2002 (when Matterhorn Asset Management recommended major gold investments) by 76%.

   
  
  Virtually all currencies show similar declines in value against gold in the last 100 years. This is the clearest evidence of governments and central banks defrauding their people of their hard earned money. Where will it end? It will end when the dollar and many other currencies reach their intrinsic value of ZERO. That time is not far away.

The Martians does not know what is GOLD so how can they ever understand?

So, when they attack earth what do you think they will carry back?

warren_buffet      ( Date: 19-May-2010 14:28) Posted: Very interesting discussion here   The Martians are looking at earth people... what are these people digging.....GOLD.....and then put them back into a hole???  ....and then employed guards to guard the hole???? What is GOLD?

SMART GUY!

have u bought ur physical gold yet? or are u holding fiat money that can be printed and reproduced time n time again..

Germans Lead Gold Rush Frenzy!

...people “are not as dumb as economists. They believe there is going to be inflation and are buying gold to protect themselves.”

• The public is slowly but surely waking up to the reality of a global currency crisis. Fiat currencies worldwide are being debased. As the major currencies: USD, Euro, Yen, Swiss Franc, UK Pound are devalued in cycles, other currencies will feel the market pressures for competitive devaluations. Take for example the Asian Tigers: Taiwan, S. Korea and Singapore, if they maintain a strong currency as the major currencies fall in value, their economies will be affected. They will lose export competitiveness and jobs. The problem is made worse by the Chinese Yuan peg to the USD. As the USD drops in value, the Asian Tigers will find it even more difficult to compete with China!
   
• The reality is: all fiat currencies are being devalued against gold. Gold is making record highs in all currencies. Gold is the insurance against a global race to bottom for fiat currencies! The Germans and many Europeans are waking up to this reality and rushing to buy gold. FT reports: (emphasis mine)
    
  14 May 2010 (Financial Times) — The telephone has not stopped ringing at the Rand refinery in South Africa this week. Panicking German dealers and banks have been desperate to get their hands on krugerrands… The refinery, which usually sells 2,000 coins to each customer at a time, says that last week it received an order from one German bank for 30,000 coins. Another bank requested 15,000 coins…
   
  Frank Ziegler, head of precious metals at BayernLB, one of Germany’s largest wholesale suppliers of gold, says: “People are buying krugerrands like crazy.” The frenzy pushed gold prices to a nominal high of $1,248.95 a troy ounce on Friday while the euro price surged through €1,000 an ounce for the first time. Adjusted for inflation, however, gold prices are still a long way from their all-time high above $2,300 an ounce in 1980.
   
  Although coins account for a small part of the market, they are one of the best indicators of investor sentiment towards the precious metal… … 
  Other important factors are supporting prices: institutional investors are pouring billions into bullion-backed exchange traded funds; central banks have reversed 20 years of selling gold; some, including the Chinese central bank, are buying it; and mine gold supply growth has stagnated.
     …..
  there is no indication that Germans are ready to stop buying. Panicked by the possible inflationary implications of this week’s €750bn bail-out, they have been snapping up gold coins and small bars at a faster rate than in the aftermath of the Lehman Brothers bankruptcy.
    …..
  The European Central Bank says its government bond purchases will be “sterilised” by operations to remove inflation risks. But Martin Siegel, manager of Westgold, a dealer of gold in Frankfurt, says people “are not as dumb as economists. They believe there is going to be inflation and are buying gold to protect themselves.”
   
  German investors are notoriously wary about inflation. While few are old enough to remember the hyperinflation that wrecked Germany during the Weimar Republic in the 1920s, the episode remains etched into the national psyche: archive film from the period has been running on the news in recent days.
   
  The appetite for coins has been so intense that shortages are developing. “In the European market there is a shortage of krugerrands,” says Mr Ziegler. As a result, the premium paid for krugerrands in the secondary market has risen from about 2 per cent to 6-8 per cent.