2012: The Year of Massive Price Increase in Metals

I've been following multiple investment newsletters and blogs from people who all have very different ideas as to why the prices of precious metals and other commodities are the way they are.  Some think there is a big conspiracy out there of big banks pushing down prices, others think that it's just a part of a much larger centuries old global economic cycle, and others just follow their own technical chart analysis.  Usually, these people tend to conflict as to what is going to happen next until recently.

All of them say that this year 2012 is going to be a spectacular year in terms of price movement of metals and commodities to the upside.  Could it be?   The last time I saw this agreement across the board was back in 2010 mid year when Andrew Maguire first broke the news about the CFTC meeting affirming that bullion banks were ridiculously over leveraged.

Without listening to anyone else, my guess would also be yes simply because the Fed stated that in 2014 they will let the interest rates rise and the massive rounds of money printing.   I think a lot of people are going to be hesitant about what those 2014 interest rates will bring and this will cause a dramatic shift in prices everywhere. Whether prices go up or down,  I don't think the impact will be light.  One thing for sure is I expect a wild ride for the next few years!   If interest rates do rocket to 20% like they did in the 1980s, then bonds are going to start looking mighty attractive even if the threat of hyperinflation becomes more real.

Another interesting thought that occurred to me recently is how the idea of the world returning to a gold standard seems less and less probable.  Some people argue that there simply isn't enough gold out there for gold to be a global currency which I don't agree with.  This argument assumes that literally people are going to need a piece of gold in their hands.  A more likely scenario of a world on a gold standard is that currency would be based off of some fraction of gold but to me even though it is technically possible to return to a gold standard, it would not be in China's best interest.   The biggest most powerful player in the world won't let anything happen if it's not in their interest.  If the rumors are true that China has only a tiny amount of gold compare to its fiat currency holdings then returning to a gold standard would mean disaster for them because Western central banks hold a lot more gold than they do. China would be right back at square one economically.

Instead what China will do and has been doing since 2009 is to continue to push for the reminbi to become a global currency and continue international trades without the dollar as a middle man.  From the looks of major trade dealings going on between the Asian countries it looks like that may soon become a reality.  This means good bye dollar value!!  Forget conspiracy theories about big banks pushing down metal prices, you should diversify away from the dollar anyways because it's no longer going to be the world's reserve currency.  This is not something that can be voted on and debated on.  If countries don't want to trade in dollars, there's not a thing the US can do about it.  The US used to be able to bomb those countries who didn't want to use the dollar but not anymore. The US is broke.