Greyerz:  “Looking at the gold market, Eric, the physical buying continues and COMEX warehouses are getting emptied.  Gold is also still in backwardation and all of that is very bullish for gold.  The fact that producers are now talking about hedging is also bullish from a contrarian perspective.  Hedging led to disastrous problems for the mining industry as gold entered its bull market.  It literally bankrupted some companies.

For a while now I have talked about July as a turning point, and that has clearly happened now.  The 22-month correction in gold finished on June 28th....

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“So both gold and silver are ready to begin the next leg higher in their secular bull markets.  But the real move will come this autumn.  At that time both gold and silver will be at on their way to new highs. 

Yesterday gold went up right on cue.  Over the next 12-to-18-months we are really going to see the price of gold and silver explode.  It’s always nice when both the fundamentals and the technicals come together, and right now everything is lined up for an explosion in gold and silver prices.  I’m absolutely convinced we will see that Eric.

I would also like to add that when you go back to last week, Bernanke testified that gold doesn’t predict inflation.  But since 1913, when the Fed was created, the dollar has gone down almost 99% in real terms, which is against gold.  So how can Bernanke say that gold doesn’t predict inflation when the dollar only buys 1% today vs what it bought in 1913 in terms of gold?

Bernanke also said he doesn’t understand gold prices.  Well, he clearly chooses not to understand gold prices since gold reflects central banks’ deceitful actions in destroying the value of paper money.  The one thing Bernanke was right about is gold is in fact disaster insurance because totally destroying the value of the dollar is a disaster.  And the last chapter of dollar destruction will be starting imminently.

Right now the world is facing massive debts, bankrupt governments, and a bankrupt banking system.  The banking system is only surviving temporarily because of massive QE and zero interest rates.  So the Fed can’t see a crisis when it’s staring them in the face.

Central planners just don’t understand the liabilities they have created by letting the unregulated derivatives market grow to over one quadrillion dollars.  Greenspan argued that derivatives were a cushion against instability in global markets, but derivatives are not a stabilizer.  Derivatives are financial nuclear bombs, and virtually guaranteed to detonate.

The only way to attempt to offset the coming derivative disaster will be for governments to print the same amount of money as the counterparty failures.  I wonder what printing $200 trillion would do to the U.S. dollar and to the gold price?  We might see that one day.

But it makes no difference what central planners say.  Government mismanagement of the economy has put the world in a position that it cannot get out of without extremely serious consequences.  So investors need to avoid all of the noise and protect themselves from the coming collapse of the financial system.” 

Greyerz also added:  “Eric, looking around the world we have three disaster areas -- Europe, the US and Japan.  Now we have another potential disaster in China, which is showing signs of a dangerous bubble.  The first three areas are guaranteed to become even larger disasters, and when they do it will also impact China very badly. 

In China, many economic indicators are now turning down.  There are now three million empty properties in China.  That’s an increase from 700,000 three years ago.  So China, just like the US, has to create more and more money in order to maintain growth. 

Of course in the US all of that money creation is just allowing the economy to stay at very depressed levels.  In the US we also have major cities going bankrupt and a country that can only survive by expanding debt exponentially, and buying its own debt because nobody else wants it.

So all of the ingredients are now in place for enormous chaos in the global financial system and it is going to start this autumn.  This is another fundamental reason why gold and silver have bottomed and will now begin a violent move to the upside.  As I wrote on KWN yesterday, gold will trade above $10,000, and silver will eclipse $500 as the current global financial system collapses and the real chaos begins.”

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Eric King

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