Tuesday, December 22, 2009

Is The Gold Bull Over? If Not, How High Can Gold Go?

The simple answer to the first part of the question is categorically "NO."  Spend seven minutes and watch the video below of Egon von Greyerz of Switzerland's Matterhorn Asset Management to understand why gold will ultimately go a lot higher than even most gold bulls would be willing to forecast.

One topic he covers is the ongoing debate about deflation vs. inflation.  Mr. Greyerz addresses this by explaining that the "deflation" we are experiencing now is setting up the inflation coming soon.  It is the rapid, catastrophic deflation in value of financial assets which is leading to the massive printing of currencies by Central Banks globally, which ultimately will lead to inflation/hyperinflation.  Bernank himself said in an infamous 2002 speech that he could print an infinite supply of money at virtually no cost in order to offset deflation.

Some other excellent comments include:  "Gold isn't going up, paper money is going down.  Paper money is doing what it's always done - it's being destroyed by Governments who are printing endless amounts of paper...and will continue at an accelerated pace."

Please note that gold has quadrupled in value against the U.S. dollar this decade without the benefit of any perceived inflation.  Given all the fears associated with the amount of money being printed by Banana Ben and other Central Banks, all it will take is for the market to get a small whiff of inflation and gold will jerk higher so quickly it will make your neck sore if you're watching.   Please make no mistake, and I'll cover this point in another blog soon, contrary to his blatant lies in front of Congress, it will be impossible for Bernanke to pull out the trillions he's injected into the system.
To answer the second part of the title question, I'll quote Mr. Greyerz:   "several thousand dollars without hyperinflation - with hyperinflation it could go a lot higher."


  1. Dave, you forgot to post the video.

  2. Are you sure? It's showing up on my screen. Anyone else have problems?

  3. I can see it. Wow that guy is BULLISH!

  4. Its in the page source but for whatever reason firefox 3.5 isn't displaying it...

  5. Not seeing the video either... using Firefox

  6. No problem at all. It's clearly playing it.

  7. http://goldswitzerland.com

    on the right side of webpage is the link

  8. I don't see it either but I googled his name and watched it on the goldswitzerland site.


  9. Yup, it's a Firefox problem. Hal and Gary, thank for the link.

  10. Dave tell it to me straight. I keep hearing everymonth from newsletters, etc. about how the crimex is going to go bust, yet nothing ever comes to pass and the month ends in a whimper. What is going on, am I being fed BS from these pumpers or is it just the boy who cried wolf senario?

  11. JonT, funny you should bring that up, as I was just discussing that issue with my fund partner last night at our holiday get-together (3 of us plus significant others LOL).

    Let's look at JPM for an example. JPM is short silver contracts representing 200 million ounces. The Comex has only 111 million total ounces of silver, of which only 56 million is registered, meaning available to be delivered. So JPM is short nearly 4 times the amount of deliverable silver on the Comex.

    Aside from the manipulation implications that are going unenforced here, if enough silver longs were to stand for delivery, theoretically JPM would blow up, or be forced to cover, driving the price of silver significantly higher.

    My partner and I were discussing the idea that ultimately, just like in 1980 when the Hunts tried to corner the silver market from the long side, the Comex will change the rules and allow JPM to settle those contracts in cash OR, as they've already done in terms of changing the rules, allow JPM to settle those contracts using SLV.

    IF/When this occurs, it will send a big signal to the global market about the true condition of the growing scarcity of physical gold/silver. But in the meantime, as JPM has shown with its ever-increasing monthly silver short position, JPM can just keep selling as many contracts as it wants to try and keep a lid on the price of silver, and it has been indeed doing this.

    We have already seen the Comex bailed out of a gold squeeze last May when Deutsche Bank, a large gold short seller, suddenly transferred 800,000 ounces of gold from London to the Comex, alleviating a potential blow up short squeeze.

    So, the short answer to your question is that I don't believe the Comex will "blow up" any time soon because the CFTC refuses to enforce mkt manipulation standards on the gold/silver market. And I don't believe it ever will enforce those standards, contrary to Ted Butler's dreams, and I think the Comex will continue being an illegal short-selling operation in gold and silver until there's a "de facto" default, which will occur when JPM has to force-settle its silver shorts with either a huge cash premium offer or something like 100 million shares of SLV.

    Right now I believe that silver is the investment opportunity of a lifetime.

  12. Sooner or later (hopefully sooner since I am old enough where I do not buy green bananas) this wil blow up.

    my analogy? Try going to Vegas and playing almost anything (but slots). When you lose you double up the next bet and a little more. When you win you go into the black.

    Two problems at least--do you run out of money before you win? And do table limits freeze you out at some point even if you have hte money to play.

    Since JPM's money (fiat) is somewhay unlimited (until we see differently) that rules that out.

    Table stakes? Thats the deliverable silver for this discussion. Game over when deliverable silver is gone.

    When someone is ready it will happen--we merely ride the coattails of whoever that will be.

  13. That Michael guy comparing the 1860-1910 deflations to the present day is a moron...

    During periods on the gold standard- price deflation was the natural process of weeding corruption out of the system.

    Today, deflation is a smoke in mirrors attempt by Central Banks and their cronies in the mainstream media to disguise the fact that real assets are appreciating, and the only things "deflating" in price are the billions of consumer non-essential products being cranked out of Chinese factories.

  14. Agreed. I thought he was turning over rocks trying to discredit Egon's thesis AND he kept cutting him off and interrupting him. He was being a dick and he was clearly refusing to accept that the current fiat system, as all other's before it over 5000 years, has failed.

  15. In a recent article, Jim Willie stated China will take out COMEX and the USD in their own good time.

    I believe this is spot on and I also believe it is going to happen sooner than anyone thinks, possibly early 2010.

    Joe M.

  16. Joe, eventually Comex will be rendered useless. I don't know if this will occur from a physical squeeze, or if the cause will be the Comex changing the rules - as they've done in past - to allow for cash settlements, or if global players will just ignore the Comex altogether.

    The 9 million ounce of gold and 111 million ounces of silver, even it were all made available for delivery, wouldn't put even a dent in the global demand for physical gold/silver.

    My best guess is that China is leaving the Comex alone for now, letting the manipulating bullion banks keep a lid on the price - thereby allowing big buyers like China to accumulate metal at artificially low prices. When it becomes impossible for big chunks of gold (i.e. like the IMF gold for sale) to be acquired in the context of the current trading range, my best guess is that China will force the paper price higher to wherever the next level is that a big chunk is made available. The price right now is transitioning into a dynamic in which the price at which big sellers are willing to sell is really where the real market it.

    I don't know if the big buyers will blow up the Comex in 2010 because, for now anyway, the Comex is a big buyer's best friend.