“The fundamental flaw in the thinking of the conceited members of the National Assembly of France in 1790 was their mistaken idea that they could invent a money more suitable than gold to achieve the prosperity of France.”

– Hugo Salinas Price

US Dollar & Bonds are Toast

The massive redemptions in US based funds have pulled the hot money from international markets back to the US. As a result, the dollar has strengthened, but this can’t last for too long. As we have called for two years now, US treasury bonds are beyond junk, and printing of at least $2.6 trillion in “bail out” money is only adding fuel to the fire. Certainly, the deleveraging of the system is helping keep inflation low, but the credit quality of treasuries is “C.” As we belabor this point once again, it all points to the fundamentals: energy (clean energy in particular), water, food based commodities, and gold/silver.

It all points to physical gold

Now that all asset classes including:

  • property
  • equities, mutual funds
  • bonds
  • cash/currencies/money market funds
  • commodities

have gotten hammered, and the US dollar has rallied due to mass redemptions of foreign investments, an optimal position is in physical gold and silver. The paper market of gold is 2.5 times the size of the physical market, and with the IMF and others selling off positions gold is getting hammered. This should only be for the short term, and the current US$745/ounce won’t last for too long. As the US dollar and Euro get hammered in the medium term, precious metals will very likely shine.