Markets

Dollar lost 99% to gold over the past 88 years

Current market commentary by Markus Blaschzok for GoldSilberShop.de

In view of the flood of money from the central banks and the historically high level of new borrowing in all countries that have shutdown, the demand for the safe haven of precious metals remains strong. The price of gold has now climbed to a new all-time high of $ 2,075. This means that the world’s strongest currency has gained more than 36% against the US dollar this year, after the price had already risen by 18% last year. In 1932 the ounce of gold was still at US $ 20.67, which means that an increase in the price of gold to US $ 2,075 corresponds to a 99% devaluation of the dollar against gold within 88 years. The mainstream press is now also realizing that the rise in the price of gold could very likely be an imminent depreciation of the US dollar and the euro, which will be discounted at an early stage.

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Since 1950 alone, the US dollar has lost 92% of its purchasing power to gold

US Federal Reserve Chairman Powell threatened to reject the inflation target of 2% only last week and also to tolerate significantly higher rates of price increases in the supposed fight against unemployment. Smart investors know that the real rate of inflation over the past decade has already averaged 10%, which is proven by the old calculation method of the American consumer price index or the Chapwood index. Powell is apparently planning to bring real inflation back into the range of 20% that the US last experienced during the stagflation of the 1970s. The dire prospects for the purchasing power of the state fiat currencies and the rising gold price are attracting more and more long-term investors into the gold market. This is shown by the exchange-traded ETF “SPDR Gold Trust”, which is popular with institutional and private investors and which now holds gold worth more than 80 billion US dollars. This makes it one of the largest gold holders in the world and outperforms the central banks of Japan and India.

In the past few weeks, silver has even risen significantly faster than its big brother gold. Within a month, the price of a troy ounce of silver exploded by 62% to almost 30 US dollars and thus to its highest level since the beginning of 2013. Since the crash low in the shutdown in mid-March, the increase has even been an incredible 150% within four months. The gold-silver ratio rose in the crash in mid-March to a historic record high of 130, making the silver price of 130 ounces for one ounce of gold cheaper than ever before in 5,000 years of documented human history. Within the last four months, the gold-silver ratio fell back to 1:70, which means that the silver price has more than doubled compared to gold.

Although industrial demand for silver declines during recessions, thereby relieving pressure on prices, this time there has been a shortage of supply as many mines have had to stop their production due to the shutdowns. In addition, there is a sharp increase in investment demand, which is the primary reason for the strong rally in the silver price. With precious metal prices currently rising sharply, the HUI gold mining index also reached a seven-year high of 273 points this week. Even if the broad American stock index S&P 500 and the Dow Jones are on their way to their all-time highs, the ratio to gold shows that the stock markets have long been in a real bear market and only the monetary illusion of inflation keeps prices at a high level lets linger. Gold mining stocks outperformed the standard stock market this year.

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Gold, silver, gold and silver mines as well as Bitcoin can rise sharply in the current monetary policy environment

Before the crash, in anticipation of the shutdowns and the recession, we managed to bet on a short-term fall in the price of silver, as we expected a similar short-term slump as in 2008. With the announcement of the new QE programs by the central banks, we switched back to the buyer’s side and recommended our customers and readers to do the same. Even the most recent rise above the resistance at 19.60 US dollars to 26 US dollars was anticipated based on our holistic analysis. It is possible that investment demand in the small silver market will push the ratio down to 1:15 or even 1:10 in the next five to ten years, which is a three to fourfold increase in the silver price even from the current level Gold would match. If the gold price succeeds in increasing to 5,000 US dollars in the coming years, which is almost probable given the flood of money, then a silver price of 500 US dollars per troy ounce cannot be ruled out. Silver is still cheap historically and is currently only at the beginning of an overarching long-term bull market. However, the price of silver is very volatile, which will give skilled traders good opportunities for additional profits.

Since one in ten Americans lost their job through no fault of their own due to the state shutdown and the weekly 600 US dollar corona special aid to the unemployed expired last week, US President Trump passed new aid by decree bypassing Congress. Now $ 400 a week is being paid out of already approved stimulus payments, allowing the freshly printed money to fuel consumer prices without any delay. Since the state has no money, all citizens ultimately pay this aid by devaluing their savings or by inflation tax. The reduction in income tax makes sense for citizens with an annual income of less than 100,000 US dollars. Trump is examining whether further taxes, such as income and capital gains tax, can be reduced, which will also provide positive impulses. Financing through the expansion of national debt or the devaluation of the US dollar will lead to a sharp real wage cut, which in the long term will be the basis for a new upswing, provided that the US dollar does not go overboard in this maneuver.

President Trump’s announcement on Wednesday that the labor market figures will be very good again on Friday came true. The ADP Salary Report had given a poor outlook on Friday’s report on Wednesday, but ultimately the poor expectations were exceeded with 1.76 million new jobs outside of agriculture. The June data has been revised upwards by 2.37 million new jobs to 4.31 million. One should not underestimate the devaluation of debt and the lowering of real wages via inflation with the incentive to take up work in times of crisis. Stagflation takes place completely differently than the classic boom & bust cycle with accompanying deflation and depression, but in real life people are very likely to suffer massively during this time. While we have benefited from the rise in precious metal prices, a devaluation of the state fiat currencies is an economically difficult time for most of the population. Hardly anyone is aware of this at the moment. . Fear of the invisible enemy prevents people from seeing the catastrophic effects of the shutdowns and, in particular, of the supposed state aid. Interest rates will be very negative in real terms and financial repression will eat up the retirement provisions of millions of pensioners who suddenly and suddenly face poverty in old age. The wages of all those who still have work will fall sharply in real terms and the real cost of living will multiply. In this stagflationary environment, the demand for luxury goods will decrease and people will have to focus on the necessary expenses. You can avoid this fate, however, if you make provisions early and secure your savings and retirement provisions from the inflation tax by buying precious metals. In this way you can not only save your fortune, but also make a real profit. Gold still has a long rise in price because the US Federal Reserve is not in sight of an end to money printing. The fundamental reasons for a further rise in prices will persist. Even the most loyal gold bugs will be surprised at how high the gold price and how quickly the gold price will rise in the next few years!

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