Gold & Silver Breakout

October 10, 2010

The increasingly visible vote of no confidence in the fast failing USGovt financial structure, and in the missing capital formation apparatus that was once Wall Street, and in the entire avalanche of paper in debt monetization to undermine valuation, is the GOLD & SILVER PRICE. Both metals are breaking out to the upside. They are registering votes of NO CONFIDENCE.Gold & Silver are put in investment portfolios to hedge against monetary system breakdown. They are insurance policies for private wealth, to protect from erosion of money through sponsored sanctioned monetary inflation. A deep problem with the current strategy of monetizing debt and inflating debt to a reduced level, is that it betrays creditors. It forces a debt write-down on creditor investments in USTreasurys and US$-based securities. It invites retaliation in trade war, whose financial expression is COMPETING CURRENCY WAR.

The financial friction is reaching a higher level each month. On Tuesday, the Bank of Japan announced a cut to 0% interest rate, this being done a full 20 years after their financial crisis stuck them with the dead-end 0% interest rate. The advantage of a trade surplus helped Japan for two decades. That surplus has disappeared, handed over to their Asian rival China. The two nations are in hot disputes in the last month. The ramping Competing Currency War is better described as a race to the bottom, in which only GOLD & SILVER win. Anyone wondering why an inert metal would prevail over investment in a financial structure or debt parade is simply obtuse and of dull mind. Gold represents money in a land where money has been systematically debased. Money today is nothing more than debt in disguise, and legal tender is nothing but denominated debt. The system is on the verge of failure, complete with failure of state, due to the cancerous nature of its faulty money. The high priest apologists have lost credibility after regular justifications for a sequence of failed theories. Gold & Silver are refuges.

My forecasts in the past have been for a $1300 gold price, now achieved. My forecasts in the past have been for a $21.50 silver price, now achieved. The two precious metal markets are in a clearly recognized bull market breakout. The big banks are on the defensive, covering shorts, almost their entire positions being underwater. They will strive to shove their portfolios into some USGovt closet, like Fannie Mae or AIG or a hidden USDept Treasury device. The deceptive commentary has become humorous, about gold being in a bubble. Be amused by it, if not horrified by it. Alarm systems are never bubbles. Gold is indeed a hedge, but against many misfortunes.

  • The gold market represents a hedge against the USTreasury bubble.
  • The gold market represents a hedge against the breakdown of the monetary system.
  • The gold market represents a hedge against coordinated wreckage of the currencies by the central banks, resulting in uniformly lower purchase power of money.
  • The gold market represents a hedge against a ripple effect from a global spread of sovereign debt writedowns, defaults, and their extension to the currency system.
  • The gold market represents a hedge against the insolvent banks.
  • The gold market represents a hedge against an extended banking system shutdown.
  • The gold market represents a hedge against heightened trade war and great destruction.
  • The gold market represents a hedge against the loss of wealth, plainly stated.
  • The gold market represents a hedge against the US systemic failure in progress.
  • The gold market represents a hedge against the inevitable USTreasury default, whatever final form it takes.
  • The gold market represents a safe harbor for money, since it is true money.

Gold & Silver are investments in legitimate money. Gold & Silver are votes of NO against the Fascist Business Model and its trappings. Gold & Silver are investments in bullion whose price in no way properly reflects the diverse shortages and contract shorting by official chambers without benefit of metal collateral. Gold & Silver are investments in grossly under-priced bullion whose move toward equilibrium will bring about price advances of multiples higher, not just hefty percentages higher. Prepare for $3000 gold and $80 silver. Support of the US$ DX index at the 78 level is not holding. A further slide below 77 will invite calls for direct global USDollar intervention, and another upward thrust in the Gold price. The huge move in the Gold price over $25 and the huge move in the Silver price over $1.00 in a single day on Tuesday was triggered by the Bank of Japan, which registered commitment to the Competing Currency War. The issue is not inflation versus deflation, but rather of systemic breakdown and the focus on tainted money, if not lost store of value. The Gold price will show a mid-term top only when anything is fixed. The USTreasury Bond rally is a loud signal of systemic failure. There is liquidity all around, supposed at zero cost, but it is all hemlock. It is not INFLATE OR DIE, but rather INFLATE & DEFAULT. The stock market is the distraction steeped in irrelevance, since stocks could rally, but money is losing value.

In case sleepy observers have not noticed, Team Obama in the economic dugout just disbanded. Nobody is left except a hologram inside a great void. In the president's hip pocket is found a copy of "Dialectical of Materialism" without much public notice. The helm is empty. The Ship of State is adrift, a derelict vessel. Peter Orszag is gone (broken budget, spiraling deficits). Christina Romer is gone (wise mediocrity but ignored). Lawrence Summers is gone (loser preppy). Cindi Sparks is gone (stimulus plan architect). One can only hope that Tim Geithner departs too. Although not on any economist team, the exit of Rahm Emanuel should be interpreted as meaning that Obama is a political liability. Running for Chicago Mayor might raise difficult questions on his resume, best not asked, since he wears two hats. The legacy of US economic counselors in the past two or three decades has been heresy reinforced by rationalization, embellished by obfuscation, touted as erudite, ignorant of history. They stand atop unsound money, having lost the concept of money, industry, and income. In the current pathogenesis of systemic failure and debt default, Gold wins!



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Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at . For personal questions about subscriptions, contact him at


Jim Willie CB, financial & economic analyst has experience in three fields of statistical practice during 23 industry years after earning a Statistics PhD at Carnegie Mellon University. The career began at Digital Equipment Corp in Metro Boston, where two positions involved quality control procedures used worldwide and marketing research for the computer industry. An engineering spec was authored, and my group worked through a transition with UNIX. The next post was at Staples HQ in Metro Boston, where work focused on forecasting and sales analysis for their retail business amidst tremendous growth. His website is at

Peru became the world’s largest producer of silver in 2012.