I’ve spent some time wondering exactly what the trigger will be for the tides to shift, ending this phase of gold and the Euro’s turn in the global debt crisis, the latter being simply a mirror of America’s 2008 panic. I believe Jim Rickards hit the nail on the head with SDRs being proposed yet again. Every time major financial trauma comes to the forefront, SDRs are pushed a little harder as the solution to all the world’s ills: a substitution for the ailing USD.
While Mr. Rickards has a very strong case, it must be acknowledged that this will not happen overnight. Instead of gold immediately going through the roof when the SDRs are announced, it is very likely that financial markets will initially view such a move as the solution to the Eurozone’s problems. Whether valid or not, if gold is at new records in the high USD$2,000-3,000 range, there is every reason to expect that the metal will tumble 30% or more shortly after an announcement, the drop to be assisted by the same organizations that have been fighting its rise for decades. Eventually, SDRs will be realized for what they are: more worthless paper controlled by yet another set of kleptocratic politicians.
Gold reaching $2,500 to $3,000 is increasing in probability with each passing day. That silly FOMC meeting ought to be the trigger that opens the floodgates. Repo market chicanery will allow for continued back-door bailouts on top of the visible recycling of existing junk asset income and the SDR resurgence will be the hammer that strikes gold for a final attempt at holding the precious metals below the exponential take-off level. Patience is an asset here.
Noble Nomads
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