Gold - did you know?

The Rats are Jumping Ship

I am beating the drum on inflation again. In the pursuit of WEALTH PRESERVATION, alternate currencies such as the EURO € will not eventually out-perform GOLD, SILVER and COMMODITY-based ASSETS that are PRODUCING NOW or have the potential to produce, including their respective businesses, because of INFLATION!

I believe it's important to keep refreshing the actual meanings of words in our minds so that when we hear them, we don‟t fall into complacency.


According to the Oxford English Dictionary, the word „INFLATION‟ means, “Increase in available currency, resulting in INFLATION.” So literally, INFLATION means to inflate the currency!


According to Wall Street Words: An A to Z Guide to Investment Terms Dictionary, “M3 is a very broad measure of the domestic money supply that includes M2 items plus any large time deposits and money market fund balances held by institutions, such as Savings & Loans Associations, like banks.”

M3 is in direct correlation to INFLATION as a measure. Now, if we take the world‟s reserve currency (USD$), its M3 has risen substantially since 1980 from US$1.8 Trillion to today's US$13.85 Trillion. That's an increase of over 7.6 times.In 1980 the GOLD price reached approximately US$850/oz. Thus, if we expect Gold to hit its former high price, the inflation-adjusted Gold price is now $850 x 7.6 = $6,460/oz.


Similarly, many investors are turning to alternate currencies, especially the EURO! Yet the European M3 money supply has now caught up with the US Dollar and is running on even par at €10.2 Trillion with equal inflation rates currently, or in U.S. dollars conversion terms, of US$13.85 Trillion.


Adding to the above, as of March 2006, the M3 broad money indicator has now been removed from the Federal reserves website making it far more difficult to track US Dollar inflation. However, I and my re-search team are able to do so by gathering multiple information from a series of different sources to calculate the data. With the current accelerated money supply, one does wonder why it was removed in the first place.


Put simply, GOLD and SILVER are not affected by INFLATION over the medium to long term. However, in the short term, many investors are jumping back and forth from a value-declining USD$ to alternate currencies like the EURO which have the same systemic inflationary floors!


Because of this INFLATION, investors are jumping a sinking ship like rats. However, the deception is that most of the rats are unaware that the ships they are jumping onto are sinking as well and will eventually have to jump ship again to the ships that are not leaking through INFLATION.


Smart business owners and investors alike have seen past this deception since the precious metals bull market began and have jumped ship with many other smart rats onto the currency of the king‟s ship which is not leaking. And that ship is Gold and Silver!In the wake of the above, the EURO, or any other fiat currency for that matter, is no alternative to the DOLLAR! Both will fail from a WEALTH preservation perspective.

Until next time,

Simon Heapes

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