Was it the crazy drop in trading last week? Was it all of the talk about defaults in Europe or the actual bail out itself?
Whatever it is, it is driving up the price of gold – every survivalists’ favorite commodity and the investment that only really makes sense when you’re bearish on absolutely everything else.
At the moment I’m writing this (noon on May 12), gold is trading at about $1,245 per ounce. The last big purchase I remember hearing about was India‘s 200 ton acquisition back in November at or around $1,050 an ounce.
That was six months ago – and now gold is trading for almost 20% more than it was. No one is saying that India was buying at the top of the bubble any more – in fact they just pulled a huge, quick profit simply because they didn’t need to print up a money to stay solvent & investing in the economy. Now every bailout of crisis that strikes a western economy is just going to amplify the value of that investment.
The problem is largely inflation beyond wages – but people don’t really feel this until they’re already on the edge of bankruptcy or foreclosure. So many costs are fixed – car payments, mortgage payments, student loans, etc… – that consumers aren’t really feeling the deflationary effects in autos & real estate in any kind of positive way.
Meanwhile, milk and gas are back near $3 a gallon, most meat is up 20-25% over the last year or so, and insurance rates, local taxes, & communications fees are on the rise. The only parts of the economy experiencing inflation are the ones that aren’t fixed for consumers – the parts experiencing deflation are fixed at the old, higher rate.
Wages haven’t really gone anywhere, so the result is that people near the edge are going to have to constantly cut back until they simply can’t anymore. At that point, default becomes logical as its the only way to really take advantage of the deflation in other sectors that brings the total CPI down.
So the markets are speaking up, and this is what I hear: Walk away from your debts, and/or buy up physical gold because the government is just going to keep printing to make those banks whole for the debt losses.