Saturday, 28 April 2012

Gold Flags

I haven't blogged for a while as most of the stuff I've written is coming to fruition so its pointless writing "see, I told you".

  • US debt spiralling out of control and the debt fuelled recovery stalling as the election looms.
  • European debt is spiralling out of control and the Monetary Union is simply imploding and civil unrest spreading as austerity triggers a poverty and economic spiral. 
  • UK debt spiralling and this week, officially in recession.
  • Australian property continues its slide (1.15% fall a month for 5 years is 50% off!) as the mining myth remains a mirage for the simpletons in suburbia as Australian debt approaches 270% of GDP (Australian Debt).
  • The Chinese bubble deflating rapidly.
  • Japan is just a train wreck.

So what next? If you think that Europe or the USA are going to pay their debts, you are delusional. Next step is an attempt at hyperinflation. They'll just print money like confetti in an attempt to make that $15Trillion debt today look like a $15 fifty years ago. It will cause chaos and spiralling unemployment but f*ck the little people, as long as the banking kleptocracy stays high and dry.

The strategy involves central bank simply printing money and buying government securities...

...and the government then drops its new money on the financial sector (M1, broad money supply) like confetti...

In 1980 the Zimbabwean dollar was worth more than the U.S. dollar, with ZWD 1 = USD 1.47. Throw in some money printing and on 18 July 2008, a report on Zimbabwe's inflation, said that an egg costs ZW$50 billion (GBP 0.17, USD 0.32), and it showed adverts for prizes of Z$100 trillion in a Zimbabwean derby and ZW$1.2 Quadrillion ($1,200,000,000,000,000.00: approx. GBP 2,100; USD 4,200) in a lottery. It also showed a monthly war pension currently is ZW$109 billion (GBP 0.37, USD 0.74), shops can only cash cheques if the customer writes double the amount, because the cost will go up by the time the cheque has cleared, and people can only withdraw a maximum of ZW$100 billion froman ATM.

In 2008,  thirteen US cents (yes 0.13c) got you...

Has the USA had hyperinflation before? It certainly has, Hyperiflation in History (with 32 cases).

If the USA tries to hyper-inflate, gold is going polaric. Even this week the  Bank of Japan announces fresh stimulus to boost growth.

Some signals.
  1. Fed Signals No Need for More Easing Unless Growth Falters (and growth WILL falter eg The Second Foreclosure Tsunami Is Coming, And Is About To Kill Any Hopes Of A "Housing Bottom")
  2. Risk off? Having Sold Most of its Own, IMF Now Lauds Gold as 'Safe Asset'
  3. Peter Schiff - QE3 is coming

Gold in a Bull Flag?

Firstly, some Technical Analysis 101. What is a Bull Flag?
Bull Flag Pattern 1
Bull Flag Pattern 2

Is Gold in a bull flag like in the links above? I think so.

How high could gold go? I came across this interesting piece of analysis. Ambitious? Maybe (or maybe not).


  1. Not too long ago, total Australian debt was around 2.2 trillion bucks, didn't seem like it took all that long to reach 3.9 trillion.

    Seems like the high tide of debt and credit issuance still hasn't subsided as yet. What a bucket of really cold water on a sleeping face that day will be.

  2. I think we're due for (and possibly beginning right now) a fifth wave of the move from the 2008 bottom. In commods and gold, fifth waves are when blow-offs occur, so a big move is possible, but there are limits.

    At first glance, the chart you've shown would leave the green 3rd wave W3 as the shortest wave, shorter than green wave 1 W1 and shorter than the hypothetical wave 5, which breaks the rules of EW.

  3. ^^ +1 Unknown

    Nice summary Jesse. I do know the feeling of running out of things to say because everything you've said comes to fruition. More or less :)

    Interesting about the gold flags, thanks. I must be a natural contrarian or cynic/skeptic because I've been getting a bit uneasy lately hearing most of the mainstream gold bulls going all out on 10K (or thereabouts) gold lately. Certainty makes me uncertain you could say.

    That said, i guess it doesn't matter if a person isn't looking for speculative trades in the next few months.

    I'm off to buy some of those sweet Spanish bonds. No-one seems to like them ;)

  4. Thanks for comment Avid, am a bit of an EW noob.

    Unknown, we could touch 300% debt to GDP with a little economic stalling, govt panic borrowing, then one day Barry and Betty will wake up to economic Armageddon as it unwinds or stag/hyper-inflation. Either pill is bitter.

    Don't forget those Italian bonds Pete, got to share the love ;)