Customer Service 1 (888) 261-2693
Please enter Search keyword. Advanced Search

What Really Makes Gold Go Up? It's Happening Now...

By Dr. Steve Sjuggerud
Friday, July 25, 2008

When Event X takes place, gold soars.

People buy gold for all kinds of nutty reasons... But Event X is what actually makes gold go up. Each time it's happened, gold has absolutely soared. So you simply look out for Event X, and then you buy.

It's really simple, as I'll show. It has nothing to do with end-of-the-World paranoia or complicated statistics...

Event X first happened in 1973-75, and gold tripled. Event X happened again in 1978-80, and gold had its steepest ascent ever, rising from $150 to peak at $850.

The only other time we've seen Event X is, well, now. And once again, gold has been soaring.

How high can gold go? Our two historical examples suggest that gold simply keeps going – almost infinitely. In short, as long as Event X is in place, gold just keeps going higher.

So what is Event X? It's simply when interest rates fall so low, they don't keep up with inflation. As long as we're in that situation, gold goes up. The logic is incredibly simple... As soon as people get paid less interest than the rate of inflation, they're willing to own gold (which pays no interest).-

I made a chart of it, so you can see what I'm talking about. When the blue line crosses above the black line – when inflation rises above interest rates – gold goes nuts. Right now, inflation (as measured by the Consumer Price Index, the "CPI") is at 5%. The other major measure of inflation (the Producer Price Index, the "PPI") is running at an astounding 9.2% a year.

When Inflation Rises Above Interest Rates, Gold Soars

Today, we have the same inflation figures we saw in 1981-82. I don't know if you remember 1981... It was the last time inflation (as measured by the PPI) was this high. Even the CPI is currently at October 1982 levels of 5%.

With inflation running so high in the early '80s, interest rates on even "boring" Treasury bonds were more than 10%. But today, interest rates on Treasury bonds are only around 4%.

Right now, inflation is (conservatively) running at 5%. And Ben Bernanke is flat out telling us there's more inflation to come. Last week, he said, "Inflation seems likely to move temporarily higher in the near term." Yet somehow, Treasury bonds pay just 4%. When you add it up, you're actually losing a percent a year by holding Treasuries now.

Most of the time, gold doesn't do you much good in your portfolio. Since gold pays no interest, big investors choose to park their money in high-yield bonds, where the interest more than covers the inflation rate.

But now, putting your money in bonds doesn't even cover the rate of inflation. Sure makes gold look attractive...

When Event X takes place, gold soars. Event X is here now... Buy gold if you don't own some already.In my newsletter True Wealth, we're buying gold. Not because we believe in the end of the World – but simply because Event X is here again. It makes rational sense for gold to soar.

Good investing,


Market Notes


Betting against oil is a moneymaking activity right now. After all, you've got the government on your side.

Here's the latest from the boobs in Washington DC: The market needs more government "help" to operate properly. So Congress is looking to cap how much money hedge funds can have in the oil markets.

How successful will the government be at driving hedge funds out of the futures markets? We don't know... but crude's $20 drop in the past few weeks tells us the meddling will send prices lower. Our guess is another $20 haircut is in the cards. The market loves to catch everyone off guard...

Just as investors were shocked when oil climbed from $70 to $140, most investors will be shocked if oil slides from $140 to $70. As you can see from today's chart, crude could do exactly that and still be within the confines of its long-term uptrend.

Recent Articles

  • House Prices to Soar AFTER the Fed Raises Rates
    By Dr. Steve Sjuggerud
    Friday, August 29, 2014

    Yes, the Federal Reserve should raise interest rates next year. But no, that does not mean that the housing market is doomed.
    In fact, the opposite is true, based on history...

  • What the 9th Inning of This Bull Market Will Look Like
    By Dr. Steve Sjuggerud
    Thursday, August 28, 2014

    This was the first time I'd experienced "The Ninth Inning" of a major stock market boom. I sure got the full experience...

  • Why Stocks Should Run Higher From Here
    By Brett Eversole
    Wednesday, August 27, 2014

    Right now, a stock market extreme is pointing to higher stock prices from here...

  • When It's Okay NOT to Listen
    By Dr. Steve Sjuggerud
    Tuesday, August 26, 2014

    How can you be at the top of your game if you don't even know what the top of your game looks like right now? If you don't even know what your peers are doing?

  • "Non-Reportable" Gold
    By Dr. Steve Sjuggerud
    Monday, August 25, 2014

    "If I hold gold at a bank in Switzerland, is that reportable to the IRS?" That little question sure kicked open a can of worms...