Gold and silver prices have both jumped today after several days of data and news that should make every precious metals owner feel vindicated. The economy is getting worse, the bankers are getting more desperate, and only gold offers actual insurance that isn’t backed by some corrupt government’s “promises”.
Gold prices are up over $30 as of the time of me writing this, putting it solidly in $1700 territory, giving signs that, if the data and news trends keep continuing, we might see at least a temporary resurgence in the gold bull market that disappeared in September of 2011. Let’s discuss what’s changed below.
Bad Data and Bad News
Today specifically, we see disappointing jobs data from the feds today, Friday September 7th, 2012. Only 96,000 jobs were created this last month, compared to the average job creation last year of 153,000 per month. And remember, last month was tortuously slow as well. The jobs simply aren’t being created — not nearly at a rate that justifies a trillion or two in deficits every year.
Speaking of “trillion”, the banks and governments of the world seem hell bent on achieving just one thing: devalued currencies.
Ben Bernanke began the month by signaling that he’ll probably begin QE3 next month, though there’s no way to be certain until it begins. It’s the nature of economics, now — it’s more about what politicians and appointed officials arbitrarily decide than anything else.
Just recently, the European Central Bank — the European Union’s version of the Federal Reserve on steroids — went ahead and announced they are prepared to do unlimited bond buying. They claim to counteract this with sterilization, which essentially means their goal is to pull one Euro out of circulation for every new Euro they create to buy the bonds. The overall impact to the money supply is minimal.
This is mostly just “kicking the can down the road”, and isn’t a huge shift. It sounds dramatic, though, so the reaction has been fairly strong, with metals having a bounce as well as other assets.
Long-Term Economic Forecasts
There’s no way to be certain about what lies right around the corner, but if we know anything about economics we can know the following is true:
Unemployment is worse than they say. Full-time jobs are being replaced with part-time jobs. This destroys the financial well being of families while helping those who have their jobs to somehow feel like things are getting better because of the reported data. This is absurd, but the sad world we live in.
National debt. The national debt is absolutely exploding, and will probably continue exploding. I see no realistic way for the debt to become curtailed at this point. The Ryan plan is extremely modest and won’t fix anything really at all for about 30 years, by which time we’ll balance the budget. That’s it — balance it. Not pay debt off. Just balance the budget. We’re fundamentally screwed.
Pensions. Pensions are really struggling in a low interest rate environment because they find it difficult to make payments with so low interest returns. They still have to pay rates that sounded good years ago — that’s destructive. Expect to see more bad news about pension funds over the next decade.
There’s other good and bad news, but this is mostly what’s on the market’s mind right now. If you see gold fall substantially at any point in the next three to five years, that’ll be a time where I’ll be buying more than ever. Buy low, sell high, and keep your powder dry.
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