Gold and silver are in the middle of another smackdown. This may be the one to test notable lows. Hopefully you are not leveraged up in this market. This does not look too good. The gold price was orchestrated downward by the central planners to remove most of us who believe that gold and silver are the only “currencies” that can retain value over the long run. The bullion banks who carry out the central planner’s mandate are not concerned about profits since they have somewhat of a guarantee over the long haul. Unless utter destruction comes, they simply rollover their positions until they finally book a profit. This can be achieved by trading dips with large sums of money and booking the profit. You and I don’t have that privilege.
In the last five years the Fed has financially repressed the middle class and taken billions of dollars in interest income away. I see nobody paying for that infamous deed. Now, the Fed must deal with rising interest rates and this is where it will get ugly. It is estimated that there are $441 Trillion in interest rate derivatives. When rates go up there will be substantial losses and margin calls. “Gamblers” will have to come up with cash to cover their margin call requirements. They will even sell Grandma’s jewelry if necessary. They will sell anything of value to raise cash, including gold and silver. In the short term, this will cause a cascading drop of all asset prices. It will be the unwinding of the “Wealth Effect”. If the contraction of cash gains momentum, it will shrink spending thus shrink the economy. The end result? Possibly THE Depression. Will it be the “Great, Great Depression”? Only Our Heavenly Father knows. Is this the time of Babylon falling?
The chart below shows the quick drop in the price of 10 Year US Treasury Bonds. When the price goes down, the yield goes up and holders of the bond lose big money. If they leveraged their position by borrowing money to hold these bonds, they get whacked… or as we say in cowboy country “jack-slapped”.
Notice how quickly the price fell. In percentage terms that is a huge drop (and loss). Be careful about investing. There are perilous times for the small investor. I will buy silver with the belief that its value will not go to zero. I can’t say that about the U.S. Dollar though.