My Last Forecast On Silver and Gold Prices (GLD, SLV, IAU, AGQ, PHYS)

June 25, 2012 12:37pm NYSE:AGQ NYSE:GLD

Jeff Nielson: It seems at the very least ironic that as I begin a new chapter in my own career as precious metals analyst for Silver Gold Bull, that simultaneously I’m writing my last chapter on one facet of that analysis. This will be my last effort at playing the increasingly

irrelevant game of attempting to forecast gold and silver prices – in terms of the bankers’ paper.

Many readers will be aghast at this announcement. How can I “analyze” the gold and silver market without providing guidance on its (paper) prices? I would immediately reverse this proposition with a question of my own. How can anyone provide rational estimates for future prices of hard assets which are being priced in paper which is already effectively worthless?

Now it is the paper-peddlers who would be horrified by my stance. How dare I assert that the beloved fiat-currencies which they (and their propaganda machine) place in such high esteem are worthless? Here I have a host of arguments at my disposal, several of which I have used in the past.

There is the obvious analogy between paper currencies and the shares of a corporation. With nothing officially “backing” these paper currencies, our governments can only impute value in this paper as a claim against these sovereign entities which issue them. How much is a share worth in a bankrupt corporation? How much is a dollar worth, when it is issued by an obviously bankrupt debtor?

However we don’t need to go down that road, since it would inevitably lead to a debate between the phony, official numbers of the United State’s “national debt”, and the $200+ trillion in debts and liabilities which it would be forced to acknowledge if it had to follow the same accounting rules as all U.S. corporations are required by law to use.

There is a much simpler and more direct way to demonstrate the worthlessness of the U.S. dollar, one which is beyond any possible debate. As a tautology, anything which can be obtained in infinite quantities and produced at zero cost must be worthless. If this were not the case, then one would simply produce an infinite quantity of that item – and then exchange itfor all the goods (and services) in the entire world.

With most of our fiat currencies now being conjured into existence electronically, this is the ultimate example of an infinite quantity/zero cost item…with one exception. Since all of this funny-money is borrowed into existence, the bankers were previously able to claim that in fact this was not a “zero cost” item – because of the debt/interest attached to each currency unit.

However that argument, the only basis for claiming that the bankers’ fiat currency had any value whatsoever evaporated the day that the U.S. began its permanent era of 0% interest rates. On that day the U.S. dollar fully became a zero cost/infinite quantity item – and indisputably worthless as a basic proposition of logic.

Why do people think B.S. Bernanke attempted to peddle the myth of an “exit strategy” – i.e. an end to 0% interest rates – for nearly three years, before finally being forced to abandon that absurd pretense? Because he and the rest of the banking cabal are terrified that someone would stand up (as I have done on several occasions) and announce that “the Emperor is wearing no clothes.”

At the end of Tulipmania 400 years ago; one day a single tulip could be exchanged to buy a house. The next day that tulip was merely a flower. The tulip itself was unchanged. All that did change was that the mass delusion that tulips were items of considerable value suddenly and collectively evaporated. It is one of the reasons why every fiat currency ever created has gone to zero (or simply been removed from circulation before it hit zero). It is one of the reasons why they tend to go to zero very, very quickly – more commonly known as “hyperinflation”.

The moment we accept the logical fact that these fiat currencies are already worthless we see the absurdity of attempting to price valuable assets (like gold and silver) in paper which has no meaning. If I announce that in hyperinflation-ravaged Zimbabwe that an ounce of gold is “worth” $2.5 trillion Zimbabwe dollars, does that actually mean anything to anyone?

Sadly, we have collectively been so completely brainwashed (over the past century) that we are now almost incapable of conceiving a world which is not priced in paper. However, go back little more than a century (and for all the centuries preceding it throughout history) and we encounter a world virtually the mirror-opposite of our own.

In that world, everything was “priced” in gold and silver. The only way that mere paper could ever acquire value was as a certificate directly backed by gold or silver. The concept of a world where everything was “priced” in fiat paper which was backed by nothing (and effectively worthless) would have been a proposition much too ludicrous for any of our ancestors to consider – except during their own, brief, disastrous experiments with such paper.

As our fiat currencies begin their final descent into history’s dust-bin of failed paper, we are entering a period of transition and re-education. We must reintroduce into our minds the concept of once again pricing goods and services in terms of items of enduring value (i.e. real money).

There is no space here to explain (yet one more time) why gold and silver are “money” while our paper currencies are obviously not. Readers will have to refer to previous explanations of the definition of money. Once readers have completed this second step in their mental transition, they are ready to return to a world of real money – and rational “value”.

How many ounces of gold does a house cost? How many pairs of shoes could one purchase with an ounce of silver? When the “dimes” and “quarters” in our wallets once again contain actual silver (real money), we could once again buy a chocolate bar with a dime (as we could only a few decades ago) – and perhaps several.

This mental transition will naturally seem like a very intimidating concept to many, just as the Dutch couldn’t conceive of a world which was not “priced” in tulips – the day before Tulipmania ended. Here it’s important to make readers explicitly aware of the penalties for being one of the last to make the transition away from the bankers’ world of worthless, fraudulent paper.

If you were a Dutch resident who exchanged his/her tulips for items of real value before the day Tulipmania ended, you fully protected/insured your wealth. If you did not do so, you were completely wiped-out financially – with nothing to console you except a handful of pretty flowers.

If we exchange our dollars (or euros) for hard assets (i.e. silver and gold) now, before they inevitably suffer the same fate as the Zimbabwe dollar, we can still protect what is left of our wealth. If we attempt to exchange our paper the day after our own “Tulipmania” comes to an end we will find we are holding nothing but an inferior brand of toilet paper.

It is because the speed at which this final collapse will occur is so unpredictable that it has become a Fool’s Game attempting to guess short-term prices for silver and gold – and now even predicting longer term prices as well.  Indeed, this is now so speculative that it only makes sense to do so in a “best-case scenario” for the bankers’ paper (i.e. where they are able to delay the collapse of their paper with the maximum amount of success). Obviously in their worst-case scenario the paper would be absolutely worthless, inferring infinite prices for gold, silver, and other hard assets.

Thus my worst-case scenario for the price of gold is a price of at least $5,000/oz within the next 2 – 5 years. Similarly, my prediction for the price of silver would be a minimum of $200/oz within that same 2 – 5 year time horizon. Some will accuse me of making a “prediction” so loose as to be useless. I make no apologies.

None other than the eminent John Williams of, the foremost expert on U.S. inflation, flatly asserted that hyperinflation could hit the U.S. as early as 2011. The fact that this estimate has proven premature is no slight against Mr. Williams. In periods of market “mania”, whether we are talking about Tulipmania 400 years ago or “dot-com mania” little more than a decade ago, such collective insanity tends to endure longer than any rational mind would predict.

So it is with “dollar mania”. I have just finished demonstrating that the U.S. dollar is already worthless, as a tautology of logic. At the same time, we have the shills of the Corporate Media assuring any and all Sheep who still heed their nonsense that the U.S. dollar is a “safe haven”. The endless assertions by these loyal drones of the “unsinkable” stature of the dollar is eerily remeniscent of the Titanic.

Understand that the Flight out of Paper has already begun. In the East – the prosperous economies which are slowly, steadily taking control of the global economy – $trillions per year in trade which used to be conducted in U.S. dollars is now being carried out through direct, bilateral trading using these nations’ own currencies.

This huge collapse in demand for U.S. dollars is yet another dynamic which can only end in a zero-value dollar. As the global glut of dollars gets larger and larger, the value of these ever-growing mountains of paper must rapidly decline in corresponding terms. Arguing that the U.S, dollar “has value” simply because it has not yet hit zero is precisely the same circular reasoning which doomed many of the Dutch at the end of Tulipmania.

Today I’m making my last call with respect to gold and silver prices. Another way of putting this would be that I’m making my “last call” for any/all passengers willing to disembark from the U.S.S. Titanic.

Related: SPDR Gold Trust (NYSEARCA:GLD), iShares Silver Trust (NYSEARCA:SLV), ProShares Ultra Silver ETF (NYSEARCA:AGQ), iShares Gold Trust (NYSEARCA:IAU), Sprott Physical Gold Trust (NYSEARCA:PHYS).

Written By Jeff Nielson From Bullion Bulls Canada

Jeff Nielson is from Canada and is a writer/editor for Bullion Bulls Canada He has a personal background in law and economics. Bullion Bulls  Canada provides general macro-economic and political commentary,  since the precious metals markets are among the most complex (and  misunderstood) in the world.

Bullion Bulls Canada also provides basic coverage of Canadian precious metals mining companies. Canada is the global leader in mining exploration, and Canadian-listed mining companies (on the Toronto Stock Exchange and Venture Exchange) are responsible for the majority of the world’s most-promising discoveries.

Read Next

Recommended for You

Explore More from

Free Daily Newsletter

Get daily ETF insights from our market experts. Never miss another important market development again! respects your privacy.

Best ETFs

We've rated and ranked nearly 2,000 ETFs and ETNs using our proprietary SMART Grade system.

View Top Rated ETFs

Best Categories

We've ranked dozens of ETF categories based on relative performance.

Best ETF Categories