By Andrew McKillop
21st Century Wire
May 24, 2011
Question: Why could gold go parabolic?
Prices for the Yellow Metal have recently suffered, along with silver, from sudden investor retreat using rationales like ‘inflation is beaten’, the global economy is recovering and the US dollar is getting stronger. Against the overvalued euro, maybe, but against gold the US dollar, euro, yen and almost all other paper moneys only have one way to go: down.
Gold is a very special market and gold plays a key arbiter role in the unending attempt by the IMF and central banks to bolster and defend the value of “fiat moneys”. Their strategy is simple: push down the price of gold, anyway they can.
With the sudden and spectacular fall of the IMF’s Strauss-Kahn, 18 May, a large number of gold shuffling and swap operations between the IMF, central banks, the ultra-secret BIS and the world’s highly restricted number of authorized bullion banks could have been frozen in mid-air. When the balls hit the ground the collateral monetary damage could be a lot more interesting and much more powerful than what Strauss-Kahn did with his personal playthings in a Manhattan hotel room.
Strauss-Kahn’s sudden ouster comes at a key moment for its biggest debt bailout operations in favour of governments like that of Greece or Portugal, Ireland or Spain, the Baltic states, Iceland and others – who have to run a constant financing operation to save their national private banks, insurance companies and mortgage lenders. IMF austerity cures and forced firesale of government assets, under Strauss-Kahn or any body else, only makes the debt-load financing problem worse. To be sure, the IMF line is things have to get worse before they get better
Other so-called rich countries with similar crisis-level debt loads start with the USA, but at such fantastic rates of new financing need that, since late 2008, the USA is in permanent crisis territory.
WHAT HAPPENS NEXT
The near-term gold price target is US$ 2000 per troy ounce, and how this open-crisis price level for the Yellow Metal is reached will itself have powerful impacts on what happens next. Options will include the rushed introduction of an entirely new global reserve currency, itself driving gold prices ever higher, perhaps in a highly compressed time frame, measured in months.
Other options include a crash into recession far steeper than the 2008 crash.
Gold traders and holders including the big ETF’s led by SPIDR can themselves heavily influence the parabolic curve for gold prices through this summer. But central banks, due to the sudden disappearance of Strauss-Kahn and a likely gaping hole in the IMF’s own and real marketable gold reserves may be forced to enter the market and buy-buy-buy. Under this scenario, daily gold price hikes could become glaring signals of what is happening: $25-per-day and per ounce would be a giveaway signal.
To be sure, government leaders worldwide will try to talk down and thwart this gold panic – at the same time as their central banks drive the process.