I know many will not believe me but I put everything into the gold and silver market back in 2002. Of course back then I had less than 50K to do so.
I have always been a believer in the Gold Silver as real money thing and I remember well the 1980 run up. So when I saw metals starting to move back in 01/02, I was all in .
What brought the 1980 run up to an end was the FED bringing rates up to 18%. The FED showed the world, who needs gold and silver when the dollar will be valued as REAL MONEY AND pays interest to boot!
Fast Forward to today. There is nothing to stop the run in Gold and Silver. We have a FED that not only can’t but is unwilling to even talk about raising rates. Can’t because of the Federal Debt, won’t because they know the economy would continue with Depression 2.0.
When money can be created to bail out the mistakes of banks and our government, is it real money? Is money real if it can be created at the stroke of a key stroke and in increasing quantities?
Anything can work as money, paper, metal, rocks, salt and tree bark and all have been money in times past. What makes money money is that it is 1. easily divisible and easily transported and 2. the biggie, it must be limited in supply. The most important quality just happens to be missing from our current monetary system, it is not limited and is in fact very easy to come by for the big powers.
That said, the Fed meeting is Weds and the metals have been screaming. My experience in the Gold sector is flashing a warning of a looming correction. Only a correction but corrections can feel like collapses if you get in at the top.
GDX refuses to set a new high despite gold and silver doing so and I have seen this before. Cramer and everyone on CNBC is pretty much saying get into gold.
Unless this time is different, a steep correction is coming into the Gold sector. The logic will be something to the effect………QE2 is coming to an end. No plans for QE3. The Fed will begin a slow increase in rates in 2012. We have a lot of problems but so does Europe and the dollar will rally sharply.
The reality is, we are in an environment where if the FED raises rates, it would squash the economy. There is so much debt that we can now only function with 0 rates. The reality is a QE3 will be forth coming late this year or early next. QE4 and 5 are in the cards.
Take advantage of the upcoming buying opportunity and be wary about buying before the FED meeting.
