It will take more than money-printing!

Larry Edelson

As you know, I am not convinced that gold, silver and other commodities are ready to fully break out to the upside in the short term.

In fact, judging by the wicked 13% decline in oil prices in the last three weeks, I’d say deflation still has the upper hand.

Ditto for the 12.6% decline in the price of soybeans over the last month. Or the 8% decline in cocoa prices …

Or the bigger 44% decline in the price of coffee over the past 14 months … the 25% decline in sugar prices … the 34% decline in orange juice prices … and the 17% decline in economically sensitive copper prices.

Mind you, all of this is happening despite QE III and unlimited money-printing from the Federal Reserve and the European Central Bank. Not to mention more money-printing from the Bank of England, the Bank of Japan, and even the People’s Bank of China.

If you just arrived from another planet and took a look at all that money-printing, you’d think most, if not all, hard asset prices would be at new record highs.

But, as I just showed you, not only are they not at record highs, most of them are DOWN considerably.

Yes, I know gold and silver prices have been creeping up. But gold is still some $121 BELOW its previous record high. Silver is roughly 30% below its previous high. And while all this money-printing is going on!

So what gives? Why are investors so wildly bullish on commodities right now, especially gold and silver?

What the heck is really going on?

IFTHEN(FIELD9=1) {

Internal Sponsorship

America Needs a Miracle

The candidates will rise and fall in the polls but there is already ONE thing we can know for sure: America’s economy is so badly broken, it will take a miracle to mend it.

No matter who wins the race, it now seems certain that Congress will remain divided … deadlocked … and utterly incapable of dealing with the train wreck that the U.S. economy has become.

This is exactly why we produced our latest video: To introduce you to investments that are most likely to skyrocket as the world discovers the results of our November 6 elections so you can buy them NOW — before the thundering herd — and by doing so, seize truly massive profit potential!

}

IFTHEN(FIELD9=2) {

Internal Sponsorship

America Needs a Miracle

The candidates will rise and fall in the polls but there is already ONE thing we can know for sure: America’s economy is so badly broken, it will take a miracle to mend it.

No matter who wins the race, it now seems certain that Congress will remain divided … deadlocked … and utterly incapable of dealing with the train wreck that the U.S. economy has become.

This is exactly why we produced our latest video: To introduce you to investments that are most likely to skyrocket as the world discovers the results of our November 6 elections so you can buy them NOW — before the thundering herd — and by doing so, seize truly massive profit potential!

}

IFTHEN(FIELD9=3) {

Internal Sponsorship

Watch This If You Own Gold or Plan to Buy It

No matter who wins the presidential race, it now seems certain that Congress will remain divided … deadlocked … and utterly incapable of dealing with the train wreck that the U.S. economy has become.

One big defensive measure you can take today is buying gold. Because as the need for gold grows, so too do the risks of buying it and owning it. In fact, every ounce of gold you have in your possession — or buy in the future — is now facing a huge new threat.

And this is precisely why it is so crucial that you view our new video immediately.

}

IFTHEN(FIELD9=4) {

Internal Sponsorship

Watch This If You Own Gold or Plan to Buy It

No matter who wins the presidential race, it now seems certain that Congress will remain divided … deadlocked … and utterly incapable of dealing with the train wreck that the U.S. economy has become.

One big defensive measure you can take today is buying gold. Because as the need for gold grows, so too do the risks of buying it and owning it. In fact, every ounce of gold you have in your possession — or buy in the future — is now facing a huge new threat.

And this is precisely why it is so crucial that you view our new video immediately.

}

IFTHEN(FIELD9=5) {

External Sponsorship

A Return of 68,000 Times the Investment?

At an initial cost of only $5 million, one $7-billion Canadian company is now sitting on a discovery that “could be worth some $300 billion,” according to Wall Street’s top news reporters.

Here’s how you can take advantage of it before production begins in the fourth quarter of this year.

}

Here are my answers:

First, investors are right. Almost all commodities will explode to new record highs. Eventually.

Gold to over $5,000. Silver to over $125. Food prices to double, triple and even quadruple their current levels. Oil prices to soar to over $150 a barrel. Gas prices of $5 a gallon. And more.

All of this will indeed happen. I have always maintained that view.

But second, the main reasons are not as obvious as they might seem. You see, sometimes it takes more than money-printing to inflate asset prices.

To understand why, let’s go back in time for a few minutes. When the commodities boom first began, largely in late 1999, almost everyone was bearish commodities and bullish stocks and bonds.

Then the tech wreck came. Then 9/11. And the Federal Reserve responded with massive money-printing.

Our government simultaneously went to war, spending hundreds of billions of dollars.

Those hundreds of billions of dollars … plus the initial Fed money-printing … were enough to kick off the first phase of the commodities bull market.

But it wasn’t enough to keep propelling commodities higher and higher in a non-stop fashion. That’s because one very important ingredient was still intact: Most of the world still had confidence in the U.S. government. In Washington.

Confidence that the U.S. government would be successful in keeping us safe from terrorism. Confidence that, between Washington and the Federal Reserve, the economy could be rescued from the ravages of the tech wreck. And more.

And indeed, stocks did recover. Confidence in the government largely boomed. The best gauge: The rip-roaring bull market in U.S. Treasury bonds.

That’s why I maintain my view that until confidence in the U.S. government (and in Europe’s government) completely collapses …

Commodity prices in general are not about to take off to the moon, no matter how much money-printing is going on.

You may disagree with me. After all, we all know about Occupy Wall Street … we are all angry at investment bankers and the government and how it seems like they are cahoots with each other …

But the fact of the matter is that confidence is not fully shattered yet.

If it were, U.S. Treasury bond prices would be collapsing … and money would be flowing from bonds (confidence in government) into commodities (no confidence in government) en masse …

Setting off the next spectacular stage of the biggest commodity bull market, ever.

That time is coming. But it is not here yet.

So how will we know when it’s here; when confidence in government is completely shattered, when the next phase of the commodity bull market really gets started?

IFTHEN(FIELD9=1) {

External Sponsorship

A Return of 68,000 Times the Investment?

At an initial cost of only $5 million, one $7-billion Canadian company is now sitting on a discovery that “could be worth some $300 billion,” according to Wall Street’s top news reporters.

Here’s how you can take advantage of it before production begins in the fourth quarter of this year.

}

IFTHEN(FIELD9=2) {

External Sponsorship

A Return of 68,000 Times the Investment?

At an initial cost of only $5 million, one $7-billion Canadian company is now sitting on a discovery that “could be worth some $300 billion,” according to Wall Street’s top news reporters.

Here’s how you can take advantage of it before production begins in the fourth quarter of this year.

}

IFTHEN(FIELD9=3) {

External Sponsorship

A Return of 68,000 Times the Investment?

At an initial cost of only $5 million, one $7-billion Canadian company is now sitting on a discovery that “could be worth some $300 billion,” according to Wall Street’s top news reporters.

Here’s how you can take advantage of it before production begins in the fourth quarter of this year.

}

IFTHEN(FIELD9=4) {

External Sponsorship

A Return of 68,000 Times the Investment?

At an initial cost of only $5 million, one $7-billion Canadian company is now sitting on a discovery that “could be worth some $300 billion,” according to Wall Street’s top news reporters.

Here’s how you can take advantage of it before production begins in the fourth quarter of this year.

}

I’ll tell you what I’m watching:

First, the U.S. Treasury bond market. When Treasury prices really start to show signs of cracking, take it as your cue that confidence in Washington is about to go completely and utterly down the tubes.

Second, the U.S. dollar itself. This used to be the primary leading indicator you wanted to keep an eye on. But the dollar is now being buffeted by so many different cross-currents, especially Europe’s crisis, that it is not as reliable an indicator as it was in the first phase of the commodity bull market.

Nevertheless, the key line in the sand for me is the Dollar Index’s past record low of 72.696 on May 2, 2011. As long as it continues to hold, the next big move up in commodities is not here.

Third, I am of course watching gold prices closely. The recent rally isn’t enough to cut the mustard. Gold must close above the $1,823 level to give me a clear-cut buy signal.

Do we need all three of the above signals? No. But I’d like to see at least two of them before I can say the next phase of the commodity bull market is here.

I may be one of the only ones out there who’s not rip-roaring bullish on commodities right now, but that’s OK. It reminds me of all the other times my forecast differed and, yet, I was proven right.

Best wishes,

Larry

P.S. For more in-depth analysis of today’s rapidly changing world and markets, including very specific entry and exit points for many more recommendations, consider a membership to my Real Wealth Report.

It could not only save you tens of thousands of dollars by helping you to appropriately protect your money — but also help you garner potential HUGE profits as well. To join, click here now.

Your thoughts on “It will take more than money-printing!”

  1. Larry’s wisdom recognizes the correlation of gold prices is to the dollar, as the value in the dollar drops gold prices typically increase in value. However causation can’t be automatically tied to correlation. Sometimes stuff happens. Surprisingly, recessions are not similarly correlated.

    Larry correctly points out that current US money printing (QE-III @ 85 Billion/Mo) is not sufficient to trigger the next big leg up in gold. Other factors are in play.

    One factor is that some of this “new” money creation is offset by money destruction going on from deleveraging. Think underwater home loans. Total money supply is not a one-to-one ratio to printing new money when the depression is also destroying money. In addition Larry has also recently pointed out that the velocity of US money is very weak (ie; no lending).

    In addition, “Confidence in Washington”, as a proxy for Treasury bond prices, is not the whole story for the exchange value of the US dollar.

    A dollar bullish argument is fairly explained by the bigger picture of world trade, current account reserve balances and the role of the US dollar as the global reserve currency.

    Euro’s were supposed to mitigate that condition but, if you think the US politicians are the top economic morons, take a good look at the Austrian economic theorists’ policies in “austerity driven” Europe. Some recent foreign exchange flows come out of unguaranteed insolvent Euro banks, into insolvent US taxpayer guaranteed institutions. This also has the temporary effect of driving up “safe haven” US dollar demand.

    Another potential “dollar strength” scenario is explained by the Triffin paradox:
    “The country whose currency foreign nations wish to hold (the global reserve currency) must be willing to supply the world with an extra supply of its currency to fulfill world demand for this ‘reserve’ currency (foreign exchange reserves) and thus cause a trade deficit.” see wikipedia.
    This is reflected in fundamental imbalances in the balance of payments, specifically the current account. The trade deficit represents demand for exported dollars. Demand drives up price.
    Just saying, you may not want to hold your breath waiting for the Dollar Index to pass its recent record lows.

    Larry is correctly cautious. Sufficient blunders elsewhere could spike the US dollar up. I gotta wonder what Larry is seeing in his cycle models. On the other hand the fools in the US congress may mis-step when it comes to resolving the fiscal cliff / debt ceiling issues. These tea-party traitors may give us a self inflicted depression.
    This IS a potential trigger for gold price appreciation as it would impact the confidence Larry refers to.

  2. Great article again.
    I am holding on to my Gold/silver shorts that Larry suggested. A PM wipeout is brewing. I hope Larry will let us know when to switch position.
    Larry’s comments about US govt confidence is spot on.

  3. Larry as a subscriber “we’ve” done well. Along with what you note above, my concerns are focused around two related indicators; the Fed is buying up most of the Treasuries or, in my view, we’d have a failed auction in long to mid dated notes, and two, no matter how much they “print” there’s no velocity. It’s all tied up as Reserves, not much lending going on, Consumers aren’t borrowing (no equity, over leveraged). Corps are keeping money from non US sales off shore and they’re not spending and very much not borrowing.
    Treasuries are cracking a bit, but all those dollars/Euro’s are sloshing around in a digital tub; ergo no flight to commodities, dollar is going to be tough to drop below your guidance for some time.

  4. Great article and you might be right.My guess is that if the confidence in govt starts going south,it might happen so fast that most investors will miss a lot of the move into real assets or worse,not get into them because they missed the move and waiting for a pull back.Better to own them now,if you’re,like myself, not a quick decision trader.

  5. Larry,
    So many things that you have said over the past really do make sense. However, I have one simple question.
    Is it okay to buy a small quanity of gold and silver now, or to wait until it may go higher?
    I would pay 1650 for one ounce of gold than 1850. The same for silver. i would rather buy silver at 30 an ounce rather than at 36 an ounce.
    What I am asking, is it okay to buy some small stuff nowas I can afford it and just put it back for later?
    Thanks for the time to answer this, because I know several others who have the same type of question.
    Have a great day and God Bless!
    Mark Hall

  6. Good article Larry. As outlined in your Real Wealth Report, Treasuries did break the key support level.

Comments are closed.