Gold—The Only Way
To Opt Out Of A Very Broken System
Jay Taylor
When your building is on fire, you face systemic risk, so you opt out of the building if you can get out. When not only the U.S. economy but also the global economy is facing systemic risk, the only wise thing to do is get
out if you are able. And the only way to get out of the systemic risk inherent in the global economy is to opt out of fiat money and into real, asset-based money—namely, gold. True, gold has been coming down in value of late, as the whole system has started a deflationary process that, if left alone, would culminate in a deflationary depression far greater than that of the 1930s. We are not ruling that possibility out. Indeed for now, our IDW is strongly suggesting that is a possibility. On the other hand, we know that our policy makers are now moving toward fascist/communist economics. In a fascist/communist system, God—as Jews, Christians, and Muslims define the Ruler of our universe—is ruled out in favor of a human god, that being at the Fed or in government or some human institution. Our “god” now has a fleet of money-creating helicopters that he has promised us can print enough money to avoid a deflationary depression. What he has not promised us however is that he can avoid a hyperinflationary depression, which, for a variety of reasons, would ultimately be far worse than the deflationary depression. The point I am making is that whichever way we are heading, we are facing extreme systemic risk, and the only way I know to opt out of the system is to buy gold. Gold will perform well under either scenario, as it has since a major secular bear market in equities began in 2000.
Gold Bull Market Remains in Tact
The chart above displays the monthly average price of gold as well as the 20-month and 40-month moving averages for gold. Note how on many occasions since the bull market began in 2002, the monthly average gold
price has fallen to meet the 20-month moving average (purple line). Based on the London P.M. fix, as of Friday, September 12th, for the month of September the average gold price thus far is $789.50, compared to the 20-
month moving average of $788.19. With gold so significantly oversold from a technical point of view, and with reports of extremely strong physical off take in the markets, especially from India and elsewhere, we think there
is a very good chance that gold may once again hold above that 20-month average.
As you can see from the chart above, a successful test of the 20-month moving average has paved the way for major gains in the yellow
metal. We suspect the same may be true once again, in which event we may see our Model Portfolio make some significant improvements before year end.
September 13, 2008
Jay Taylor, Editor of J Taylor's Gold & Technology Stocks
www.miningstocks.com
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