In our opinion, systemic risk continues to grow in a stealthy manner and is only manifested episodically, as in the current European banking crisis and in the fragmentation of the political consensus that was once the foundation for the Eurozone and the euro itself. Investors in gold should find reassurance in the palpable decay of investor confidence in central banking and radical monetary policy. There is scant reason, in our opinion, to expect waning confidence to revive. In fact, there is substantial evidence to suggest that ultralow interest rates, ballooning fiscal deficits in Western democracies, and competitive currency devaluations are jelling into a negative feedback loop for global economic growth. We believe the most likely macroeconomic scenario for years to come is a Japanese like twilight zone that oscillates between feeble growth and periodic downturns.

It seems unlikely that the long term erosion of investment confidence, the onset of a secular bear market in financial assets, and further advances in the stealth bull market for gold will take place in a linear fashion. There are bound to be shakeouts and fake outs along the way to camouflage the underlying reality that the global financial system as we know it is in extremis. We also believe that the current sharp correction in the precious metals complex is a setup for another major advance toward new highs in metal and share prices. We therefore recommend taking advantage of current weakness to build or establish new positions.

Tocqueville Gold Strategy Investor Letter