A Feel Good Article from King World “The ongoing strength in the U.S. dollar simply means that it’s the worst currency in the world except for virtually all of the others. The irony of this is that the global market bid up the U.S. dollar after Congress’s threat to default. When these kind of illogical movements in markets take place, it’s very difficult to talk about where they will end.
This may not provide any near-term solace for metals investors, but the truth is that we are where we are. I reiterate that I am more comfortable owning gold and silver than not owing the metals. But I’m perfectly aware it’s possible that this position may cause me additional pain before this is over.”
Eric King: “Putting aside short-term movements, where are we in terms of the bigger picture?”
Rule: “In the short-term, perception is much more important than reality. There is such an enormous bias against the metals at this point because people have become so conditioned by weakness in the gold and silver markets. As an example, if these markets were in an uptrend, the problems in the Middle East, uncertainty in Hong Kong, the Russian incursion into Ukraine, all of these events would be excuses to take the gold price higher. But because we have had weakness for such a lengthy period of time, people are looking for any excuses to take these markets lower.
It’s my opinion that the bigger picture for gold and silver is going to improve radically as soon as people begin to question the premise surrounding the rally in the U.S. dollar. When they look at the sustainability of state and federal deficits and the sustainability of $70 - $80 trillion off-balance sheet liabilities, this is when the gold and silver markets will do incredibly well. There may also be a financial event that begins to call into question the sustainability of those liabilities.
But when I look at the bigger picture, I remember George Soros’s saying that you become a billionaire by finding a widely held precept that’s wrong and betting against it. Nobody believed that in the fight George Soros vs the British currency that he would win, but that’s what happened.
Another example was Paulson’s bet against collateralized real estate obligations in 2006. Wall Street said everything was in order. Paulson said it wasn’t in order and when the dust settled he walked away with $20 billion and Wall Street walked away being restructured.
I’m not suggesting that there has to be a sudden, cataclysmic shift like there was in 2008. But I am suggesting that as investors around the world finally realize that liquidity is not a substitute for solvency, this will ignite the gold and silver markets and move the metals into the next phase of their secular bull markets, which will eventually mean new all-time highs for both metals.”