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Where is Gold Headed?

July 6, 2012

It’s been another two days. And a steep drop in the price of gold, once again. So what’s going on here? Why is gold supposedly losing value? Why is a poor jobs report bearish for gold? And why do people seem to be fleeing it for the dollar when the US economy tanks?

It’s interesting. People are still drawn to the perceived safety of the dollar, especially in light of the developments in Europe. For some reason, people think the rough road is exclusive to the eurozone, and the American economy is incomparable. Which is funny when you think about it. Because relative to Europe as a whole, the economic problems plaguing us are significantly larger. They’re catastrophic.

The United States has over $15 trillion in debt, which is already past 100% of GDP. The unfunded liabilities surpass $100 trillion. Social Security and Medicare will be broke within a few decades (at best). And almost nobody has the slightest idea of where to begin expenditure reduction. We witnessed the debt ceiling fiascoes only last year. With all things said and done, the actual reduction in spending was in the mere millions. In other words, the situation was just as much a calamity as it ever was.

The mirage of dollar safety cannot, and will not, last forever. It’s like the law of gravity – no matter how much you may want to fight it, if you drop a paper clip, it’s going to land on the ground. It’s just another law of nature. With the financial disaster that we find ourselves in, people will flee the dollar. Slowly, as people realize the ultimate fate of the titanic, there will be no hesitation in jumping off a sinking ship.

So it’s clear where gold is headed. The frivolous distractions that we see from time to time are just that – distractions. The fundamentals are still in place. As people begin to abandon dollar denominated assets, the value of gold will skyrocket. And for those looking to cash in on the prize, it will already be too late.


From → Current Events

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