Game, Set, Match!

$5000, $10,000, $25,000 GOLD?

June 17, 2010

By Jim Deeds

In Paris a couple weeks ago, probably one out of a thousand tennis spectators would have known the name Francesca Schiavone. But, surprise, surprise, this 29-year-old became the women’s French Open champion!

The financial game is, surprisingly, very much like the Paris tournament this year. We start with an unknown. Will the world’s only real and time-proven money (that most Americans don’t really know or care about) go up in price next year? If history is our guide, in the next two weeks, two months, or two years, gold may easily reach $5000, $10,000, or maybe even $25,000 an ounce in price. The bigger question will be, “Did the price of gold go up that much, or did the value of the dollar (or the Euro or the pound) simply go down that much?

Look again at history. In 1913, gold was $20 an ounce. Today, gold is traded on world markets at over $1,200 an ounce. Did gold go up 60 times over the past 97 years, or did a paper dollar lose 98.33% of its value (purchasing power) in terms of gold?

Still looking back, in 1913 people traveled on horseback – or a wealthy few in a Ford Model T. Today, we travel in Boeing 767s at the speed of sound. Everything moves and happens faster – and that frequently includes financial developments, as well. So, looking ahead with that fact in mind, where will the gold price be in a month or a year from now?

Today, there are dramatic “unseen forces” and “unexpected events” that are already changing our lives forever. In the Gulf of Mexico, it’s a huge, rapidly expanding under-the-surface pool of corrosive toxic oil spewing out from one BP oil well 5,000 feet down on the bottom of the sea. Will BP’s secretive “dispersants” keep the oil sludge below the ocean’s surface where no one can see the developing disaster? Or will a hurricane or ocean current finally reveal that the formerly living late-great Gulf of Mexico is now the world’s Dead Sea #2?

The story, believe it or not, is exactly the same in the gigantic “flood” of debt-based paper money and credit (bonds) that Ben Bernanke is creating out of thin air. This monetary pipeline is saturating the world’s credit markets in our Fed’s vain attempt to give our dying financial system new life. Junk money created over the past 15 months by the Bernanke Fed and Geithner Treasury now totals over $2.8 Trillion, and these men are not alone in their inflationary efforts. China, England, and now Europe are mimicking the American monetization process as they try to spend their way out of a Depression. Capitalizing what few profits there are and socializing all losses is now a worldwide phenomenon.

All money debasement occurs behind the curtains of the Fed with secretive bailouts or an innocent term called “Quantitative Easing” (QE). Since the beginning of time, all bankrupt empires or governments have used the printing press or counterfeit coins to extend their reigns ”one more day.” America, with our technological wonders, has added bogus computerized credit as the greatest new “money-multiplier” of all time.

So, as all nations now print new bushel-baskets of their sovereign currencies and debt (bonds) every micro-minute of every day, can we really guess an ultimate price for gold? What will a gold or silver coin be worth next year?

Today, only 4% of American people invest in gold. In Europe, India, and even China the number of people who buy and save physical gold and silver is much higher. In the near future, when perhaps another 10% of the American people finally wake up and decide they trust only a gold or silver coin for savings, the coins will disappear quickly from sight. When gold and silver is all you trust, who will sell?

Then a new wave of coin buyers, shut out of the physical market, will rush to buy gold or silver mining stocks as a last resort – a Hail-Mary pass in an attempt to protect rapidly shrinking paper dollar savings with some semblance of precious metals ownership.

This has already happened last week and last year in other nations, when their sovereign debt markets defaulted. America, as the world’s greatest-ever debtor nation, will soon follow suit.

Will gold go to $5,000, $10,000, or even $25,000? Will Silver Wheaton stock (on the NYSE) go from today’s $19 a share to $500? A person could know that answer only if he knew how far down the American dollar would ultimately fall.

In short, the gold question is not a question at all. Gold has maintained its value throughout history; it will continue to do so. The question, as always, is how bad the fall will be for fiat currencies. Specifically, the question for you is this: At the end of the match, will you have backed the unknown champion, or will you have gone with the highest-seeded, most popular players – the ones who will lose?