With the Fed’s balance sheet approaching a double in size, U.S. money supply, M-1 SA, is already growing at a 25-30% annual rate. “Printing money” at that rate can only lead to a loss of purchasing power. Anyone expecting an increase in general purchasing power of the dollar, monetary deflation, is simply on the wrong track. Gold is the only historical defense against the coming dollar debacle. The financial risks combined with the most populist President in U.S. history, and perhaps the most inept since Wilson a hundred years ago, make Gold an absolute necessity for protecting wealth.

Some weeks ago the above chart was introduced in somewhat different format. The red line, using the left axis, is the inflationary component of U.S. money supply growth over the past six months. The green line is price of $Gold, and uses the right axis. Black triangles are buy signals on $Gold created from the inflationary money supply growth rate. Those signals occur when the inflationary money growth is negative and then turns positive.

These signals, while from a model not intended to be a precise timing model, suggest another good time ahead for Gold investors. In the past four plus years it has only given three other signals. Investors should not ignore the coming threat of excessive money creation, and buy Gold on all price weakness or dips. Wealth once lost to the tyranny of money, is never regained!

Ned W. Schmidt
CFA,CEBS,