Sunday, July 31, 2011

Deepcaster: We're On the Threshold of Hyperinflation

With REAL CPI now at 11.13% ( QE 1 working its way through the system, the effects of QE2 will start to show up in the CPI over the next 6-18 months) Deepcaster believes we have now reached the threshold of hyperinflation.
As QE3 will begin (either officially or unofficially, it must begin) as soon as the Treasury is authorized to start selling T-bills again, we would have to agree.

Throughout the Process from Monetary Inflation (e.g. in the “cheap money” 1st decade of the 21st century and in QE 1 and 2) to Price Inflation (e.g. beginning now) to Price Hyperinflation and then Depression, Gold tends to appreciate (Caveat: But beware of “Paper Gold” and Cartel* Price Suppression Attacks). Indeed, it has appreciated dramatically in the last decade in Fiat Currency Terms, performing much better than Equities-in-general which, considering Inflation, have actually lost value.
Initially, in the Fiat Currency Monetary Inflation phase, Gold, as The Ultimate Money, appreciates because all Major Fiat Currencies decline in Purchasing Power vis a vis Gold, (albeit in varying Degrees) as they have for the last decade.
And then, as Price Inflation becomes Price Hyperinflation, Gold Soars as Fiat Currencies’ Purchasing Power Plunges. Indeed, we reiterate we have already arrived at the Hyperinflation threshold with the Real U.S. CPI at 11.15% per**.

After that Hyperinflation, as Economic Depression Sets in (and thus when Fiat Currencies have lost much of their value) Gold tends to Retain its value vis a vis the Damaged or Destroyed Fiat Currencies.
One other consideration relates to Gold (and other Precious Metal) Mining Shares. Their Value tends to track Bullion prices only somewhat, because they are after all, and above all, Stocks. Thus, overall Stock Market performance is likely to be a substantial determinant of their Price at any given time, rather than their Value as actual or potential Precious Metal producers.
Maximizing Value in Precious Metal shares (as opposed to Bullion) is thus in large part a matter of Timing… Generally speaking, they are better purchased near the Bottom of Equities Markets Downlegs, and/or Cartel Takedowns. Deepcaster’s Recommendations regarding Timing have resulted in Significant Profits for those who followed our recent recommendations***.
Silver, The Poor Man’s Monetary Metal, can in the Hyperinflationary Process be expected to perform similarly to Gold, except for the fact that it is also an Industrial Metal, used, and used up, by Industry.
While Gold has recently powered up to trade around its all-time Nominal High around $1620ish/oz, Silver has in recent years been stronger even yet, recently trading around its all time high of $50.
But it is important to note that while Silver has in recent years been acting more like the Monetary Metal that it is, rather than the Industrial Metal that it also is, its price is also in part a function of perceived Economic Prospects.
For example, the prospect of sustained Higher Oil Prices justifiably exacerbates fears that such high prices will dampen Economic Activity, thus dampening demand for Industrial Metals, including Silver. On the other hand, the Price of Silver as Safe Haven Money has spiked UP along with Gold in the Past Decade. Indeed, Silver prices are spurred by a Critical and Worsening Supply Shortage of Physical.
Moreover, recently Prospects for another Economic Downturn provided the Cartel with a pretext and Opportunity (in late April, early May, 2011) to drive Silver down from $50ish/oz to a low of $33ish/oz.
Thus we have, and will continue to have, this Very Volatile situation in the Precious Metals Arena with the Contenders being: The Cartel vs. Economic and Financial Reality.
Any perceived diminishment of The Intensifying Crises around the World and/or a Major Equities Takedown will surely bring renewed and intensified Cartel Suppression Attacks on the Precious Metals Prices. But Cartel Price Suppression attacks on the Precious Metals has, in large part due to increased demand and tightening supply of physical (especially for Silver),  been less successful recently than in past years.
Therefore, we have Forecast the approximate timing and Targets for an even more Vigorous Cartel Attack on Precious Metal in our most recent Alerts.
And that will provide a test of The Cartel’s Precious Metal Price Suppression Power, which has been diminishing of late.
In the Middle and Long Run, Gold and Silver are likely going higher, much higher.
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