Gold and silver took an unexpected upward jump, probably triggered by Chinese TV telling 1.3 billion Chinese people to invest in gold and silver, which they could buy from their local bank. This resulted in an orgy of metals buying from the local banks and accounts for the upward jump.

Gold and silver have been profitable but modest performers over the last year or two, probably because inflation is a big trigger for gold and silver, and society is not entranced with deflation due to the weakening economy, rising unemployment, and consumers increasing savings.

Temporary Phenomenon

This is a temporary phenomenon. Sooner or later, the trillions of dollars created by government and given to the banks will be loaned out, as the banks will realize they can’t make enough money just depositing all their money with the Federal Reserve while repairing their balance sheets.

Sooner or later they will start lending the money into circulation. The velocity of money, combined with the huge quantities of money, will create monster inflation, but first, we have to wait out the present deflation.

Perhaps it should tell us something that despite the deflation, gold and silver are still rising. So what do you expect when the deflation is over and the velocity of money increases?

I believe there will be a veritable explosion of monetary inflation, and gold and silver will respond. In the meantime, they are not doing badly.

By Howard Ruff
The Ruff Times