The biggest economic and financial bubble in history has been inflated. Several years of record low interest rates and extravagant central bank money-pumping schemes have bloated total world debt to over $200 trillion, 286 percent of the global Gross Domestic Product.
Thus, when interest rates eventually do rise, so too will the cost of servicing the debt. As debt burdens grow and economies stagnate and/or falter, defaults and financial panic will ensue.
Since January 22, when ECB President Mario “I’ll-do-whatever-it-takes” Draghi announced his quantitative easing plan, gold has fallen sharply. Injecting monetary methadone into money junkies who can’t break their gambling habit temporarily boosts equity markets but won’t cure the chronic economic illness.
Gold will outlive and outperform both patient and pusher. Since the New Year, equity, currency and commodity markets have experienced ongoing bouts of extreme volatility. The greater the volatility, the greater the demand for gold as the safe haven commodity.