Gold Headed Higher and the New Bubble in the US Treasury Market

Are you watching the dollar? Maybe the unwinding of the dollar- based paper money system is coming sooner than we expected. Yesterday, the dollar fell again – now it costs $1.37 to buy a euro. And if you want an ounce of gold, it will cost you $937.

It looks to us as though gold is headed to $1,000 again…maybe higher. This is not what we expected… Not yet anyway.

What we still expect is a broad, long rally in stock prices. We think the Dow might go back to 10,000 before it is over. This is the rebound we were waiting for. It should boost asset prices generally – including gold, commodities and oil – as well as stocks.

Oil, by the way, rose $2 yesterday too. It’s back to $62.

But this trend is probably a fake out. Underlying the positive market news is an economy that continues to decay, degrade and deflate. Remember, this is a depression, not a recession. The bubble era is over. Because the transmission is broken. The financial industry has blown up. It won’t be repaired. Instead, it will be bailed out…nursed along…and mollycoddled.

Once a bubble blows up, it is never repaired and reflated. Instead, if new money is added to the system, it goes into a new bubble. Right now, the new bubble is in the US Treasury market. How long that will last, we don’t know. But currently, if you put your money into Treasury bills – short-term US paper – your yield will be negative. This does not happen very often. If it ever happens in our lifetimes again, it will be when the moon turns blue. And anyone betting on an indefinite continuation of this bubble is probably a lunatic.

But when it blows…we wish we could tell you.

Bill Bonner
for Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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