Silver And Gold Nowhere Near Top And Still Underowned

Anyone spending too much time wondering if Bernanke will or won’t QE later this week needs to look around and see the larger picture. The larger picture is an American debt that is out of control, leaping forward now by nearly two trillion a year.

Meanwhile, word yesterday morning about billions of dollars in transactions between Iran and Turkey in gold and silver, at the same time that striking miners in South Africa may very well initiate some serious supply constraints to one of the world’s largest gold producers. Chinese gold and silver imports are through the roof, and there is no sign of the end of a multilateral move being made by many nations to diversify their currency holdings into gold.

Add to this the fact that these metals are still underowned when compared to the 70s and early 80s–yet several high profile investors have made comments in favor of tangible asset investing–and it all suggests to me that a lot of people are still watching this bull market. I submit that they will not watch forever.

If the global economy is in fact slowing, where are foreign nations going to get the money to supposedly buy all our debt? Or has back-door monetization by the Fed already begun? Fears of deflation are still strong, but those can very quickly turn to fears of inflation.

Low interest rates aren’t only about central bank intervention– many individual investors are helping to keep rates low by purchasing bonds. The idea that central bankers have an exit strategy if this changes, however, is nonsense. They are committed to bailing out the banks at any cost. Central bankers will not allow a banking collapse, even if investors begin to redefine the nature of savings by purchasing real assets (and thus causing serious inflation.) There truly is no exit, and gold and silver prices are nowhere near a peak.