Gold Drivers 2009 - Extraordinary Bullish Outlook for Gold

• Gold proves itself as only true alternative for the dollar
• Confidence in currencies shaken to the core
• Gulf countries are keen to break away from the link with the US dollar
• Chinese appetite for US debt in decline
• Former Bank of England official expects dollar collapse
• Investors fleeing into gold as US prints trillions
• HSBC, Citigroup, Merril Lynch, Goldman Sachs all turning bullish on gold
• Senior gold shares ready to move higher after impressive 100% bull run since October 2008
• Junior gold shares waking up - bottomed out in December 2008

Eric Hommelberg February 06, 2009

This piece is an update on "GoldDrivers 2009 - Extraordinary bullish outlook for gold" so I would urge readers to read that piece in case they haven't done so. The year of 2009 started as how it ended in 2008. The inflation/deflation debate intensified and still there seems to be no agreement whether we're heading into a deflationary or hyperinflationary depression.

I've stated many times that hyper inflation will be the tune of the day coming years. The deflationists can argue what they want but the simple truth is that the US government will default sooner or later on its inability to service its ballooning debt which makes the US dollar worthless overnight. This happened to the Reichsmark, this happened to the Zimbabwe dollar and this could happen to the US dollar. Once confidence gets into a steep decline foreign investors will dump their worthless dollar holdings which will translate itself into the death of the dollar.

Deflationists may argue that governments can't keep up with printing money as fast as credit is being destroyed through means of weapons of financial mass destruction called derivatives so the net result would be deflation, yet they still miss the point that no government ever managed to create the strongest currency in the world by means of default. The US government is adding debt at the fastest pace ever but no one seems to be willing to take on that debt. The only alternative would be (and will be) to monetize that debt which will eventually lead to a confidence collapse for the dollar. Any currency facing a confidence collapse will eventually seek its intrinsic value which is zero. Needless to say what inflation figures would look like by then.

Maybe I’m too pessimistic so let’s see who could come to the rescue here. The Japanese perhaps?

"The dollar may lose as much as 40 percent of its value to 50 yen or 60 yen from the current spot rate of 90.40 today in Tokyo"

Japan Should Scrap U.S. Debt as Dollar May Plummet, Mikuni Says