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Resistance that gold is hitting is because 1) inflation is hitting the system and no one wants to admit it and 2) there’s some serious derivative exposure to gold that will be badly offside if gold goes up from here, so there is a lot of incentive to keep gold under control. When they get to the wall, gold will explode. The US will only have a sustainable bottom on their dollar if successfully address both 1) the current account deficit, which is out of control and 2) the budget deficit which he feels will be a trillion $’s before it ever sees $300 billion again. Greenspan has created new bubbles (analogy to the tech bubble) and nothings been corrected. If you continue to push money into the system and the world economy continues to grow aggressively, it will be serious.
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My grandchildren won’t see $500 and ounce for gold. About 2.5/3 years ago, the US pulled 3 levers to get us out of deflation, out of a depression that would have made 1929 look pale in comparison. 1) They lowered the value of the US$, 2) lowered interest rates and 3) began to spend like crazy. They pulled the largest economy, the engine of the world, out of serious deflation. Now we’re going back to normal. Interest rates have gone from ¾% to 2-¾%. They have put a bottom on the US$. Feels the budget deficit will get fixed, but not concerned, so bring on the deficit. Better to have growth than to have a recession/depression. To hit the spending button was the right decision.
