Peter Schiff says gold is the canary in the economic gold mine, and those who ignore the continuing bull market in gold are like miners who think that since they can't smell any gas, the canaries must be dying of natural causes:
Like a battering ram in a medieval siege, gold keeps hammering away at the gate. For the third time in less than twelve months, the yellow metal is once again crashing into the $1,000 per ounce level. As of press time, it looks like gold will close above that level today and will set a new record in the process. Even if the breach is fleeting, who can doubt that it will mount another assault soon? In the meantime, there is no shortage of market analysts who are not buying gold while questioning the motives of those who are. Although they offer a variety of strained reasons, they nearly all agree that it has nothing to do with inflation, which is nearly universally considered dead and buried. As a self-confessed gold bug, I can assure all that inflation is the only reason I buy gold. And recently, I'm buying a lot.
When individuals choose to accumulate savings in the form of gold rather than interest-bearing paper deposits in government-insured accounts, there is only one reason for doing so: they fear that the interest will not be enough to compensate for their expected loss of purchasing power through inflation. This fear reflects both current inflation and the expectation for future inflation. While there are those who buy gold to speculate on its appreciation, the underlying factor that drives that appreciation in the first place will always be inflation. If governments were not creating inflation, there would be little investment advantage to owning gold.
Some believe that gold investors are primarily motivated by fear. It is often assumed that gold is the one asset class that holds its value when all other asset classes are falling due to market uncertainty. But this explanation brings us right back to inflation. When economies move into recession, there is always political pressure for governments to intervene. Their one tool is the printing press.
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