The victory for gold bulls is only just beginning
By GCRU Gold News on Monday, August 8 2016, 23:16 - Permalink
My view that there is a perfect storm for gold is based on three closely interrelated dynamics, whereby central banks and global markets are both testing the limits of monetary policy and credit markets as well as the boundaries of fiat currencies.
The current path of monetary and credit expansion is unsustainable and will eventually burst, leaving investors struggling for “the return of their capital, instead of return on their capital”, an extremely bullish scenario for gold and other real assets.
Over the past few years we have witnessed the first stage of Gresham’s law whereby “bad money displaces good money”, and are now at the early stages of the second and final phase, whereby “good money displaces bad money”.
Gold and the US dollar are best placed to play the role of good money, which could result in a substantial appreciation against the bad money currencies. But inability or unwillingness of the US to normalise its monetary policy leaves the door wide open for gold to retake its reserve currency status and put an end to the monetary supercycle that started in 1971 with the end of Bretton Woods. It’s a period that has seen the outstanding volume of paper money grow disproportionately relative to the amount of gold that once upon a time backed it.