If things are as bad as I have been writing (and saying*), then why is the dollar price of Gold ($POG) falling? If Gold is the insurance that will preserve your wealth and that everyone needs right now, then why is the demand not causing the $POG to rise?
Though seemingly contra-intuitive, the $POG falling is entirely logical.
Briefly, pieces of fiat money represents tiny slices of the national debt. They are, in fact, I.O.U.s. Fiat money is an I.O.U. of the government. Each time that the government borrows more ‘money’ into existence, some of the I.O.U.s go out in the form of fiat ‘money’.
Now, the fundamental problem is that the world’s politicians have borrowed and spent like drunken sailors. There is no possibility of ever repaying the debt – even if that were mechanically possible, which it is not.
But it is not only sovereign debts that are the problem. Individuals, families, businesses, states and councils have also joined in the party.
Everyone will try to pay their debts, any which way that they can, for as long as they possibly can. A family will work like mad and make a lot of sacrifices to ensure that the mortgage is paid so avoiding losing their house. The business person will go to hell and back to try to repay his business loans so that he is not bankrupted. In the same manner, sovereign nations, states and local councils will do anything rather than default on their debt and be unable to borrow again into the foreseeable future.
The harder it gets to service dollar debts, the more the demand for the dollar rises. As Gold is the measure of value, so it must measure that the value of the dollar is rising. The rising demand for the dollar equals a rising value for the dollar.
And that increased value of the dollar means that it takes less of them to obtain one ounce of Gold.
Does that mean that the dollar will keep rising right up to the point that it falls off a cliff and the debts collapse?
No, despite the strength of the dollar, there is an enormous interest in Gold out there in the investment world. At some point, that interest in Gold will overwhelm the demand for dollars and the $POG will soar.
Forget the $POG, just keep acquiring Gold and/or silver.
* For almost a quarter of a century now – I’m almost as sick of my dire prognostications as my wife is.