Recently, there are a lot of chatter in the financial market about the end of the gold bull market. Those who believe that will use the examples of smart money to bolster their argument- George Soros selling his gold, Goldman Sach warning that gold prices can fall further, etc. Indeed, there are no shortage of experts offering their opinion on why the gold bull market is over. It is easy to believe it because gold prices has been going nowhere since 2011. If you look at the 10-year chart for gold prices, you can be forgiven for thinking that the uptrend seems to be over. Is the gold bull market really over?
Before we answer this question, let?s look at the current popular narrative that tries to explain why gold prices is falling. The prevailing story is that the US economy is finally on track to a real recovery and hence, the money printing measure enacted since the GFC can finally stop. When money printing stops, at least the debasement of money can end. With luck, if the US economy continue to recover and become gangbusters, Bernanke may even start to clean up and unwind the money litter. In either case, gold will not be needed anymore since confidence in fiat money (ie US dollars) will return.
Indeed, the financial markets are reading Bernanke?s lips to divine when he will start to stop printing money. Bernanke did a good job of confusing the market. But in our opinion, it is very hard for him to end the monetary rain. Why? Because once it becomes clear that Bernanke will eventually stop printing money, guess what will happen to the US dollar? It will continue to rise and rise and rise and rise. That will kill the export competitiveness of the US economy and pull the US back into the economic hole that it just got out. Do you think the US will be stupid enough to score its own goal and give countries like China and Japan a chance to high-five each other? Anyway, let?s go back to the popular narrative?
Unfortunately, this popular narrative (that the US will start to stop printing money) miss one important big picture fact. Missing this fact is so mind-bogglingly stupid!! It is as stupid as missing a gigantic elephant in the room. Those who fail to see this elephant will sell their gold to those who could see it. In due time, when this elephant gets noticed, there will be a rush back into gold.
What is this gigantic elephant in the room?
The answer is found in the last section of chapter 5 of our book, How to buy and invest in gold and silver bullion.