Why Gold Will Soon Explode Higher

Riots in Tunisia

TUNIS, Tunisia—Riots over Tunisia's economy flared overnight in towns around the country, leaving one dead and posing an immediate challenge to the new prime minister and the country's path to democracy.

Crowds protested late Friday outside the government finance buildings in the low-income neighborhood of Ettaddamon over new taxes levied by the departing government described as necessary to fill yawning holes in the country's budget.

Mass Protests Grow

The military-dominated regime that seized power in Egypt in July 2013 has escalated its attacks on freedom and democracy in the country. A series of pronouncements were issued in late December, including the banning of the country's largest political movement - the Muslim Brotherhood. By all evidence, Egypt's economic and military elite are taking the country back to the darkest days of the rule of former dictator Hosni Mubarak or even farther into the abyss.

SYRIZA to block new president in a bid to force elections 

The possibility of Greece holding snap general elections by early next year grew on Friday after SYRIZA leader Alexis Tsipras made it clear in Parliament that his party would oppose any candidate put forward by the government to take over from President Karolos Papoulias when his second five-year term expires in early February 2015.
“Understand this: The next president of the republic will be elected by a parliament in which SYRIZA and the forces that are fighting against the [EU-IMF] memorandum and destructive policies will have the majority,” said Tsipras.

My view:

As the destructive policies of dollar debasement continue - consequences are growing throughout the globe.  Food inflation is triggering riots in the Middle East as grain becomes unaffordable for many on limited incomes.  And despite all the talk of recovery in the US, the unwinding of Quantitative Easing is being done at a rather moderate, even reluctant pace.  What will be of interest to watch for in the next six months, is to see if the Federal Reserve continues to taper or backs off its plan as the economy weakens.

Europe is another contributing factor to deflationary forces at work around the globe.  Greek politicians are voicing their opposition to further austerity, and even to the Euro itself.
Who can blame them with unemployment above 27% and a shrinking economy for the past six years.
At some point, the debt Greece carries will be defaulted on.

For several years the debt to the EU has been far greater than their ability to repay.
Soon, perhaps by early next year, a political opportunity will arise for Greeks to cast off their Euro task masters for a return to the drachma.

With a debt beyond 300 billion Euros, a Greek default will have a huge negative impact on European banks and even those institutions beyond the Atlantic.

The danger is a disorderly default that plunges the world back into another financial crisis.
Europe's undercapitalized banking system is the first area of vulnerability for financial contagion. But with new "bail in" rules around the globe, Mom & Pop bank deposits are at risk, particularly if they are over the deposit insurance maximums.

In a lead up to the inevitable, it is my view that the safe haven of gold, and by extension, gold stocks, will benefit tremendously.

After all, where do you put your money if you don't trust the bank, and have lost faith in government promise currencies?

The oldest form of money is my bet.