Long-Term Direction Of Gold Remains Very Clear
Jay Taylor
“The Bush Administration now projects a gimmicked deficit of $410 billion for fiscal 2008, up from $163 billion in 2007. With no allowance for a recession in the assumptions underlying the deficit projections (the Administration forecasts real 2008 GDP growth at 2.7%), the final 2008 numbers should be much worse than the current
Administration estimates. While GDP growth estimates can be gimmicked, incoming tax receipts (based on consistently applied tax policies) remain an independent estimate of underlying economic reality and have started to
reflect the economy’s mounting problems.”(John Williams, Shadow Government Statistics)
In other words, Bush himself is projecting a $410 billion deficit for 2008, based on a rosy view of the economy. Even if it is only a $410 billion deficit, it means there will continue to be oceans of new money created out of thin
air to fund not only the federal government deficit but to also fund all manner of other bailouts from large corporations (mostly financial, because the bankers control our increasingly fascist system), to thousands of
individuals who were induced by the banking system to buy houses they couldn’t afford. If you want to see how “helicopter money” will in fact be distributed, you need look no further than the Katrina event, when anyone with a New Orleans address was handed a $3,000 check. Or, more recently, consider the tax rebate checks. The government can and, according to Ben Bernanke, will hand out as much of this funny money as is necessary to
inflate our enormous debt burdens away. However, as they carry out that policy, the dollar will continue to suffer. And as the dollar suffers, international commodity prices will continue to rise. Note the inverse relationship between the dollar and oil in the chart above.
The rise in the amount of money created out of thin air by our policy makers is very alarming. In fact, M-3, which the Fed has chosen not to make public, is now rising at the fastest pace since the highly inflationary 1970s. And based on the work of John Williams, double-digit inflation rate of the in general, have been rising dramatically.
Review also the chart showing the $120. In fact, as we were going
of gold and oil? If this relationship of around $1,200 before long.
What we are witnessing now is a very healthy correction in the gold market. The data points in the red line above represent the monthly average price of gold, dating back to January 1995. The blue line represents data points for the 20-month moving average for the price of gold, and the yellow line reflects the 40-month moving average. The monthly average so far in May
2008 is $875.63.
During this pullback, gold has held above $850 so far, which was the all-time high, established back in January 1980. The average price so far in May 2008 has been $875.63, and as we were going to press, the price of the yellow metal was $906.50. We may well be ready now for the next major run in the price of gold to over $1,000. We suspect that this time, gold might stay above that minimal four-digit point.
May 20, 2008
Jay Taylor; Editor of J Taylor's Gold & Technology Stocks www.miningstocks.com
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