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John Williams - Gold to Prevail as System Falls into Disorder

With so many questions surrounding the stability of the financial system, John Williams of Shadowstats issued this warning in his latest commentary: “Dollar Debasement Has Just Begun. Despite all of Wall Street’s negative hoopla over gold during the price volatility of the last week, the precious metal still is on track to outperform the Dow Jones Industrial average, meaningfully, for the year. That would be the eighth consecutive year of doing so. Irrespective of any recent or future extreme price swings, however, I look at gold as the long-term hedge against all that has started to unfold in the ultimate debasement and destruction of the U.S. dollar.”

John Williams continues:

“My outlook has not changed a bit. The underlying fundamentals have not changed a bit. The domestic and global financial systems, however, appear to be on the brink of massive instabilities. This environment is one where prudent investors—in a U.S. dollar-denominated world—should be looking to preserve their wealth and assets, using assets that are liquid and that preserve the purchasing power of invested funds.

Accordingly, gold, and related hedges such as silver; and stronger currencies such as the Swiss franc, Australian dollar and Canadian dollar; should be held for the long term. Irrespective of short-term market instabilities, such assets will prevail as the system falls into disorder.

A much weaker dollar and higher oil prices are likely in the near future, as the Fed remains locked in a position where it likely will be forced to act publicly in support of the banking system, with some new round of systemic liquefaction or easing. The effects of that should push the exchange rate value of the U.S. dollar much lower and push oil prices, domestic inflation and the price of gold much higher.

The Fed and the Treasury remain committed to preserving the system, to preventing systemic collapse....

Continue reading the John Williams interview below...

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“Accordingly, as they did in 2008 and beyond, the Fed and Treasury can be expected to guarantee, loan, spend and create whatever money is needed to prevent a systemic failure.

The long-term cost of these actions remains inflation. Inflation, however, is likely to be a very near-term effect this time as well. The various economic and financial outlooks remain as discussed in Hyperinflation Special Report (2011); they will be reviewed in the pending Hyperinflation 2012.

Despite the September 5th historic-high gold price of $1,895.00 per troy ounce, and despite the multi-decade-high silver price of $48.70 per troy ounce, gold and silver prices have yet to re-hit their 1980 historic levels, adjusted for inflation.

The earlier all-time high of $850.00 of January 21, 1980 would be $2,472 per troy ounce, based on November 2011 CPI-U-adjusted dollars, $8,702 per troy ounce based on SGS-Alternate-CPI-adjusted dollars.

In like manner, the all-time high price for silver in January 1980 of $49.45 per troy ounce, although approached earlier this year, still has not been hit since 1980, including in terms of inflation-adjusted dollars. Based on November 2011 CPI-U inflation, the 1980 silver price peak would be $144 per troy ounce and would be $506 per troy ounce in terms of SGS-Alternate-CPI-adjusted dollars.”

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Eric King

KingWorldNews.com

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