
HomeMarket WatchHard AssetsInvestor's GuideDownloads

Hyperinflation to Follow the Deflationary Crisis

Following the 2008 crisis, many countries of the West have entered a deflationary crisis.
While inflationary and deflationary crises are both harmful, central banks tend to be more interventionist during the latter.
Deflation simply tends to erode economic growth, slows down the economy.

As prices drop, interest rates drop, people tend to "sit on their money" instead of spending it. Therefore, investments slow down, money circulates less.

Gold has crashed crashed in 2013 (as reported earlier, here) and it is set to go much, partly due to the deflationary environment that we're currently in.
The price of gold is highly likely to continue the fall in 2015 as well. You will find the reasons in the news and analyses published here, Market Watch.

But the price drop will eventually end. There is no bottomless pit, gold will eventually bottom.

What will happen to gold's price when deflation ends?

Why Deflation Could Ignite Gold's Bulls

Because central banks tend to react more "ferociously" at deflationary crises, we can expect a lot of money-printing actions if the deflationary environment worsens.

Governments would attempt to print their way out of the deflation, which freezes their economic growth.
More and more money will have to be printed, but as we know - excessive money-printing is a vicious circle and will undermine the long-term development.

Inflation will push precious metal prices higher.
If this will be the case we will see in the coming future, then we will find that gold's recent price drop will have been rather a correction, rather than the popping of an investment bubble (read more here).

While the USA has been scaling back on monetary stimulus, other countries have resorted to more money-printing.

Japan's "abenomics" is an example of what could happen in the West.

There, gold's price started rising even when the USA and the EU witnessed cheaper gold.

Ideally, governments during a severe deflationary crisis, will attempt to stimulate consumption and exports by cheapening the currency. But the monetary easing can easily get out of hand.

Runaway inflation could cause gold to rise tremendously. Some are speaking of gold above 10,000 dollars.

When gold will be less affordable to the ordinary person, then the masses will turn to silver. Which anyway, is the second choice when it comes to investing in precious metals.

Silver is more volatile and more prone to huge price jumps. In terms of percentage, it could rise a lot more than gold's price.

Fact is, we are already in the first phases of the deflation, gold will continue to drop. For a while. Then, the turning tide will prove once again, gold is indeed an ideal safe haven asset.
The ideal time to get in is while it's still cheap. During a severe inflation, it will be too late to buy in.
The tremendous rise in the 2008-2011 period occurred in 3-4 years time (and we didn't count the entire decade!), but in a severe crisis, this could happen in a matter of days!

Watch this video by Michael Maloney (below). It explains the long-term evolution of gold and fiat currencies. It will help you understand the timing of gold investments.
Ideally, during a deflation should be an ideal time to buy gold and silver. This is when the price drops. If it will skyrocket later on (as Maloney believes - he speaks of hyperinflation to follow this deflationary crisis), then the opportunity of cheap gold and silver will not return.

Michael Maloney on Gold's and Silver's Long-term Rise

comments powered by Disqus

Prime Values on FacebookPrime Values on Twitter

about us    terms of use    privacy policy    disclaimer    partners    advertising    contact us