TradersClass

Superior Trading Skills through Education

 
Gold & Silver reaching Escape Velocity Print
Written by Site admin   

20-01-2020

Back in the 70's inflation was rampant. The post war economic stability of the fifties and sixties was replaced by economic chaos.

Tricky Dicky Nixon, aided by Paul Volker, kicked it off when they had little choice but to float the US Dollar and drop the peg of $35 per ounce of Gold.

Anyone living on a fixed income and in rented property, became a pauper. Those who owned hard assets of precious metals, land and property couldn't believe how their perceived wealth was multiplying before their eyes.

It was the best of times and the worst of times.

The rest is a history of endless money printing which far surpassed economic growth. The associated booms, bubbles and busts since the seventies can all be traced back to that decision.

The Gold price rises over time as a function of inflation and money supply. Notably, the 1979/80 spike in gold reflected inflation that kept rising. Inflation then became out of control, rising from 11.35% in 1979 to 13.5% in 1980. Paul Volker then burst the bubble with a series of shock interest rate hikes.

Gold bugs worked out that the yellow metal knew the real price of assets. The assets, and gold, still had the same utility value as they ever did, it was just the paper currency used to buy them no longerrepresented that value.

The response to the 2008 Global Financial Crisis was more money supply.QE became embedded as Gold hit a new high. It slipped back and then, this year, the Coronavirus response lead to this.....

This is then the argument for Gold that has historically acted as an anchor to monetary systems. See the next post the charts.

 

From the blog

Keep Calm and Carry On

Keep Calm and Carry On

Lock down is now affecting many parts of the western world. GDP is collapsing and the chances of a major banking and bond run are getting greater, as last weeks newsletter highlighted.

Read more...

Check these links

  • JoomlaWorks Simple Image Rotator