Anyone bother to ask why? I saw this headline a few minutes ago on cnn.com: “Oil, gold, silver are ‘uncertainty magnets’.” The is pure b.s. Oil, gold and silver are “magnets” for all of the paper currency that has been, is being and will be manufactured by global Central Banks and Governments. If there is “uncertainty” out there, it is derived from the instability of fiat paper monetary systems and the real fear of not knowing how extreme CB and Govt monetary/fiscal policies will become. It’s really that simple.
The biggest source of instability and uncertainty is right here in the United States and is reflected in the value of the U.S. dollar – a currency that may be approaching a state of collapse. Eric King posted an excellent piece from Faros Trading on his blog last week. The Faros guy points out that OPEC countries will take in $1 trillion in dollars from oil sales this year. He also points out that these Arab nations have no interest in keeping these dollars and have been aggressively stepping in front of the Chinese to swap them for euros. Here is the LINK It’s really a must-read.
The highly respected and well-weathered Richard Russell also posted commentary on the potential for the dollar collapsing today on the King blog. You might not know who Faros Trading is, but trust me that Richard Russell is someone who has been around longer than just about anyone. Here is RR’s thoughts on the subject: LINK
Gold and silver are moving a lot higher here, despite the headwinds being tossed at them by the idiots in the media, because the possibility U.S. dollar instability, and even collapse, becomes more real by the day. The thing about whether or not QE3 will happen has become quite a boring debate in my mind. If someone can explain to me how the Government is going to finance its Treasury issuance if the Fed printing stops at the end of June, then I will accept that we will not get QE3 in one form or another. But here is the latest proof that the Fed has been largely responsible for keeping our Government funded since the start of the QE program: This comes from http://www.zerohedge.com/, which has done a great job of tabulating the Fed’s accumulation of new Treasury issues: LINK The fact of the matter is, per zerohedge’s accounting, the Fed has provided 83% of the Treasury’s cash since QE2 started: LINK While I’m willing to believe that our policy leaders would like to stop the printing presses, until someone can show me how the mathetics to keep the Government funded without QE3 will work, I’m still confident that QE3, in some form – overt or disguised – will happen.
I will leave you all with the comment of a close friend and advisor to our fund. This is someone who served as the director of the Denver Branch of the Kansas City Federal Reserve Bank for six years. In other words, he has valuable insight into the “thinking” of the Fed:
The Fed will pay lip service to stopping at QE2 but there is no way to unwind at this point given the economy and they will go into QE3 and use Japan and Middle East as cover for it……….there is a huge problem creeping up around forex carry trade that will need to be unwound concerning the Yen
This is why gold and silver are going higher.