What will we be saying about 2012 one year from now? While we can’t know for sure, there are some factors to help us consider the possibilities.
It’s an election year in the U.S. This means that the string pullers won’t want to do anything that allows the American markets to look weak. A falling dollar, crashing stock market and/or rising unemployment each would likely spell doom for a democrat reelection.
It’s not unreasonable to expect to see all three of these move in a manner that makes the current administration look as good as possible. As we get closer to the elections this could become more apparent.
However, the battle this administration faces is unlike anything we’ve seen before. The downward pressure on the dollar is staggering, like free booze offered to an old drunk, getting an extra shot here and there by Federal Reserve printing presses. Eventually this has to come crashing down on us all, with catastrophic results for all who fail to prepare accordingly.
But, in light of this being an election year, it is highly unlikely that we’ll be discussing the fall of the dollar a year from now. The inevitable is not necessarily imminent.
Will the stock market crash? Again, not likely during an election year. The plunge protection team may have their work cut out for them. But they have the printing presses to back them up as well. So, while there is downward pressure on many stocks, we shouldn’t expect to see the stock market come crashing down during 2012.
How about unemployment? This is a tougher issue to resolve. Most of the numbers we receive today are bogus anyway. Those who have given up searching for work are cut from the rolls of the unemployed. The underemployed are not figured in. Meanwhile, those who have to work two jobs just to make ends meet are counted as two employed people. It’s all a sham anyway, so what could we possibly expect? Perhaps more doctored numbers, regardless of what is really going on in the U.S. work force.
What about the euro? It’s taken some hard knocks recently, and for good reasons. While the reasoning is basically the same as we see for the demise of the dollar, the euro doesn’t enjoy world reserve privileges. However, it appears that there are about forty elections in Europe this year as well. Obviously this will influence fiscal policy during 2012. Perhaps we should simply recognize that the euro is in serious trouble, but expect European governments to keep the euro propped up through the year.
So what does this mean for precious metals? The upward pressure on gold is every bit as staggering as the downward pressure on the dollar. This isn’t because gold is being used up, but because of its intrinsic value augmented by the debasing of world fiat currencies. Constant control of prices through central bank auctions keep the price down as well. But does that mean gold will move up in 2012?
In a sense, yes, it should mean that. We will be shocked if a new record for gold is not set in 2012, possibly by mid-summer. And, with the diverse pressures constantly beating against the various markets, we expect some continued volatility as well.
Expect gold to go up, probably a lot, and then go down. Expect it to go down, maybe experiencing another large pullback, then go up. But the long term trend and underlying strength of gold isn’t diminished a bit by these fluctuations. We expect the shiny yellow metal to continue to rise into new territories and post annual gains for many years to come. In other words, consider the fundamentals of what’s happening very carefully, and then prepare accordingly.