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Why will the precious metals boom of this decade surpass the 1970s?

*Dow Theory Letters, Richard Russell, January 20, 2006

“The charts don’t lie. The charts tell us that it’s taking more of everything to buy a given quantity of gold. This is the result of monetary inflation. Monetary inflation leads to price inflation, and the tell-tale indicator is gold. No wonder governments don’t like gold. No wonder the central banks despise and fear gold. They fear gold because when gold rises, it’s telling the world that their governments are debasing the currency.

Economists can babble about “inflation being contained,” and the government can release phoney inflation statistics. The Fed can eliminate M-3 statistics so that we don’t know what’s happening to the broad money supply.

But gold knows. Gold tells us the story. When gold rises as it is now doing, it’s telling us that our so-called money, the money that everything we own is denominated in — it losing its value. This is inflation pure and simple. Rising gold trumps all the government lies and denials; rising gold trumps all the phoney statistics put out by the Fed (“core” inflation for example).

I find it simply fascinating how little is currently being written about the big bull market in gold. Where anything is written, it’s almost a warning that “gold is volatile,” that “speculators are driving gold up,” or that “the gold shorts are simply being squeezed.” Never a word about the Fed creating new inflationary oceans of liquidity, never a word about the dollar losing its purchasing power, never a word about real money rising against all other asset classes. Silence reigns regarding what could be the most significant bull markets in recent history.

I lived through the gold bull market of the 1970s, but I believe this is a much bigger, more important gold bull market. First of all, the 1970s bull market was pretty much about US inflation. This bull market is about a world view of the dollar, that view being that the dollar is headed for major trouble — due to massive US debts. Furthermore, that 1970s gold bull market ended with interest rates “through the roof” and with long T-bond near 15%. This gold bull market is progressing with LOW interest rates, and low interest rates don’t bolster the dollar.

Finally, this gold bull market includes “an extra” one third of the world — China, India, Russia and most of Asia. While the European central banks have foolishly been selling gold, I believe the “secondary” central banks have been buying gold. Gold is moving out of Europe and into Asia. Follow gold and you’re tracking the direction of economic power.”


*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

Aftershock Investor