Michael Pento - Here is Why Gold & Silver Will Not Collapse
Kingworldnews
Sept, 29, 2011
With worries surrounding the recent decline in the metals, today King World News interviewed Michael Pento, of Pento Portfolio Strategies. Pento had some strong thoughts on why gold & silver would prevail,
“The main reason why gold is in this secular bull market for the last roughly twelve years is because interest rates in real terms have been falling. This is what happened recently with “Operation Twist,” where the Fed went out and endangered its entire balance sheet, by going out along the yield curve and extending its duration.”
Michael Pento continues:
“So now we know that not only will real yields be negative on the very short end, but they will also be negative in the middle and on the long end of the yield curve. So real yields are falling and we all know that when real yields are negative, it’s like rocket fuel for the gold market.
If you look at the other factor that is rocket fuel for gold prices, it’s not only the condition of real interest rates but it’s also the state of money supply growth. So let’s look at the largest aggregate kept by the Federal Reserve and that is M2. M2 rose at a 27% annualized rate in the last quarter.
So you have real interest rates that are falling out along the yield curve, and you have rapid, in fact very rapid money supply growth....
“Why gold is falling has to some degree to do with what is going on in Europe. I think a lot of these sovereign nations are dumping whatever they can and some of them have significant gold reserves and they are putting them on the market.
As I mentioned previously, Bernanke disappointed the gold market when he did not expand his balance sheet. He sterilized his purchases of longer-dated Treasuries. So the reason for the decline was the combination of that one-two punch, I don’t think it’s going to last much longer. This is a buying opportunity in my opinion.
The end game, not only here but also in Europe, is more money printing. Playing a game of balance sheet hot potato with Greek debt and Italian debt is not going to solve the problem. The end game in Europe is for the ECB to monetize, print money and take the bad assets, which are sovereign debts. These need to be removed from bank balance sheets.
So we are going to have rapid money supply growth in Europe and the gold price in euros will rise. We are going to have the same situation here in the US, we already have it going on right now. It will intensify over the next few years, so get ready for a huge increase in the gold price as expressed in dollars and in euros.”
Who is Michael Pento?
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