Monday, April 15, 2013

Gold & Silver Smash, Monetary Train Wreck

“After the trashing given gold and silver the last two days, Eric, it is time to go back to the basics. So here are some of the many questions I have been asking myself, along with my answers, to see whether anything fundamental has changed in the outlook for the precious metals....

1) Is the Federal Reserve decreasing the quantity of dollars every month by $85 billion to bring about a deflation and enhance the dollars’ purchasing power? No, they are increasing the money supply by $85 billion every month, further debasing the dollar by transforming debt into currency.

2) Is the high level of unemployment being reduced so that more people are working and bolstering the economy? No, there are 113.3 million people employed in the US in private industry, or in other words, those employees creating goods and services for profit. Amazingly, it is fewer people than were employed in February 2006, over seven years ago.

3) Is the future of the euro secure? No, it is still hanging by a thread, moving warily from one crisis to the next. Importantly, we now know from the Dutch Finance Minister to the EU that confiscating depositor money in banks in Cyprus will be the template for future bailouts, meaning the uncertainty about the euro and European bank solvency remains at scary heights.

4) Is the yen going to strengthen to decrease the attractiveness of holding gold in that country? No, the Japanese government and central bank have laid out a blueprint to debase the yen even more rapidly than than the speed at which currencies of other industrialized countries are being debased.

5) Are all of the banks in the world solvent so that there will not be another crisis like Cyprus? No, many banks - including some of the largest in the world - are so financially weak and undercapitalised that if you take away central bank support like the ECB did to Cyprus, they would collapse just like the banks in Cyprus collapsed.
6) Are crude oil and gasoline prices matching the fall in the gold price this year? No, while gold is down about 18% since the beginning of the year, energy prices are basically unchanged for the year. By the way, the gold price this year has fallen less than Apple, which has dropped 21%.

I could go on with more questions and answers, Eric, but I think my point is clear. Nothing has changed except the gold price. And more to the point, the lower price makes gold ownership even more compelling. It is $240 cheaper, or in other words, better value than the $1600 price at which it traded at the beginning of this month. "

- James Turk via a recent King World News interview, read the full interview here: