Submitted by J.C. Collins – philosophyofmetrics
I’m just going to come right out and state it with absolute clarity. Gold will continue to depreciate.
Not only that, but the Fed will continue with the planned incremental interest rate increases which are set to begin at any time now. The normalization of monetary policy is considered impossible by many analysts and economic commentators. This is mainly because the larger play, being the transformation of the monetary framework, is not fully understood.
The incorrect assumption is that the US dollar will be replaced as the international reserve currency by the Chinese yuan, which in turn will cause the USD denominated assets (Treasuries) in the foreign exchange reserve accounts around the world to be “dumped”, leading to a flood of dollars coming back to American shores and causing the ever-threatened and often-predicted hyper-inflation.
It is concluded that this hyper-inflation will see a mad rush into gold and silver, leading to upward valuations in multiples of thousands. With so many other alternatives developing (explained below), does this seem like a realistic scenario?
The volatility surrounding everything from commodity prices, exchange rates, sovereign debt, and equity markets, are jumbled together in passionate conclusions of doom and gloom. We are told by many that the only viable means of protecting ourselves is to purchase more and more gold, which continues to decrease in value more and more.
Common-sense would strongly suggest that there are multiple paths forward from the point where we currently are located. Though gold has its own unique and valuable qualities, and should be held in any strategically diversified portfolio, going “all-in” on one investment path is both harmful and irresponsible by those who promote such goofiness.
Let’s explore this in more detail. Continue reading