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How US Investors Can Best Profit from the Trashing of their Currency...

Technical Analyst & Author
April 30, 2006

Gold and Silver ended the week on a very strong note, and the questions on many investors and traders minds include, of course, how much farther has this bull market run got to go, and could we see further acceleration from here?

If we stand back and look around at what is happening in commodities markets generally, it should be abundantly clear that what we are seeing is a global flight into hard assets, a flight that will obviously be exacerbated by a plunging dollar. The implications of this are that, despite their current overbought status, the rate of increase in prices of many commodities will continue to accelerate, near-term correction or not, and when you stop to think that gold is the king of commodities and in times of extreme uncertainty and especially in conditions of hyperinflation is the most attractive stuff on earth, you quickly realize that the upside potential for gold is enormous.

Many citizens of the United States see their country as the center of the universe, which is understandable as it is continental in size and has a massively powerful military and - until now - has possessed the “de facto” world currency. However this view can create a dangerous myopia, particularly for U.S. investors who tend not to invest outside their own country. The United States has exploited the advantage and leverage potential resulting from possession of the world currency to the absolute limit, and created debts and obligations that are of truly astronomic proportions and are physically impossible to correct. The inevitable consequence of all this is that the dollar is now buckling and is set to plumb much lower levels, which will pose a grave risk for the world financial system.

An immediate and obvious corollary of a dollar collapse is that the commodities bull market will continue - and will accelerate. A learned associate wrote to me with the “revelation” that gold’s rise could accelerate and it could even reach its 1979 high in the $840 area. $840?! - this is nothing considering what’s bearing down on us, especially if you factor in all the inflation since 1979. While there are striking parallels between the late 1970’s and what is going on now, the analogy should not be pushed too far - because the situation we are now in is far worse, and could easily result in gold racing quickly towards $2000 - $3000, and if what is written about the silver supply situation is even half true, it will go to the moon.

Many United States investors need to wake up fast and start “thinking outside the box” if they are to preserve their capital. Here is a fact of life - if your assets are denominated in US dollars and the dollar falls in value on world markets by say 50% over the next year or two, as is possible, you will have lost half your capital. It may not seem like it at first as you go about your local shopping, but just watch the inflation that comes down the pipe and you’ll discover the new reality soon enough. Better still, try going on a foreign holiday and see how far you get.

So what’s a poor US investor to do? The solution is actually simple and involves two key planks. The first thing you have to do is get your money out of US denominated assets, and the second thing is to invest in hard assets - Base Metals, Precious Metals, Oil and Commodities generally, via stocks or other instruments that are not priced in US dollars. In other words, put your money into hard assets priced in more resilient currencies.

Another key point is that the Precious Metals market especially appears to be moving up through the gears, and shifting from a trading market, with rallies followed by substantial reactions, to a situation where it will be rising steeply, and more or less continuously for a significant period. Therefore, investors should increasingly desist from trading this market and instead buy and hold.


Clive Maund, Diploma Technical Analysis

[email protected]

Kaufbeuren, Germany, 30 April 2006

Clive Maund

Clive P. Maund’s interest in markets started when, as an aimless youth searching for direction in his mid-20’s, he inherited some money. Unfortunately it was not enough to live a utopian lifestyle as a playboy or retire very young. Therefore on the advice of his brother, he bought a load of British Petroleum stock, which promptly went up 20% in the space of a few weeks. Clive sold them at the top…which really fired his imagination. The prospect of being able to buy securities and sell them later at a higher price, and make money for doing little or no work was most attractive – and so the quest began, especially as he had been further stoked up by watching from the sidelines with a mixture of fascination and envy as fortunes were made in the roaring gold and silver bull market of the late 70’s.

Clive furthered his education in Technical Analysis or charting by ordering various good books from the US and by applying what he learned at work on an everyday basis. He also obtained the UK Society of Technical Analysts’ Diploma.

The years following 2005 saw the boom phase of the Gold and Silver bull market, until they peaked in late 2011. While there is ongoing debate about whether that was the final high, it is not believed to be because of the continuing global debasement of fiat currency. The bear market since 2011 is viewed as being very similar to the 2-year reaction in the mid-70’s, which was preceded by a powerful advance and was followed by a gigantic parabolic price ramp. Moreover, Precious Metals should come back into their own when the various asset bubbles elsewhere burst, which looks set to happen anytime soon.

Visit Clive at his website:

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