By Sean Kelly

Unhinged Washington, Fed Mean Higher Prices Ahead! 

The price of gold traded at a record high of $1923.70 in 2011.

Now, nine years later, it has broken through to a new all-time high.

As we write this, in the middle of the trading day on Tuesday (7/28), the gold price is $1947.  Overnight in Europe gold hit $1984 as it prepares for the coming assault on the $2000 benchmark.

Already major investment banks are raising their gold price targets.  Goldman Sachs just raised its to $2300.

We don’t have it in us to say we told you so.  But we don’t mind saying that it was completely predictable.

Much higher prices than this are still readily predictable.  After all, the price of gold is not some weird random happening in an economic vacuum.  Nor is it a strange astrological event that depends on a passing comet.

The price of gold is the markets assessment of the future value of the dollar.  To say that future value is shaky is an understatement, because the custodians of the dollar’s value—Washington and the Federal Reserve—are completely unhinged from reality.

Here is a quick look at some of the numbers.

On January 1, the US national debt was $23.201 trillion.  Now it is $26.538 trillion.  The debt has grown by 14 percent in seven months, with still more borrowing on the way.

On January 1, the Fed’s monetary base, the dollar value of things the Fed has purchased with made-up money, was $4.173 trillion.  Today it is $6.964 trillion.  It has grown by two-thirds.  With still more money printing on the way.

Stated differently, Washington, has borrowed an additional $3.337 trillion since the first of the year.  The Fed has printed $2.791 trillion since the first of the year.

There are other metrics, but instead of reciting them again, it should be enough to point out that we are in a position worse than Hotel California: not only can we never leave this mess, we can’t even check out!

By that we mean the government cannot get us out of this predicament.  And it cannot even paper it over and pretend it can get out of it.  The monetary authorities are prisoners of their own device.

Their apologists will say they did what they had to do; the authorities had no choice. That is what the mad money-printers, whether in Germany a century ago, or more recently in Zimbabwe, always say about the ruin they deliver.  In the words of the song:

What a nice surprise
Bring your alibis

All they do is blow up much bigger bubbles that then pop with much more destructive force.  They leave ruination in their wake.  They only people spared the devastation are those that protected themselves with precious metals.

Gold is at all-time highs in currencies around the world, not just in the dollar.  That is because faith in the ability of central banks everywhere—not just the Fed—to manage monetary affairs honestly has been lost.

Deservedly so.  It will not be restored.

That makes higher gold prices predictable.

60 Years Experience