Big Picture on Gold: Prepare for a Long-Term Downtrend

The Decline of Gold in the Context of the Impending Collapse of the Global Financial System Built on Fiat Currencies May Sound Counterintuitive, but Let's Think About It.

Let's start with how money appears in the economy. Copilot to the rescue! New money appears when someone takes out a loan from a bank. The bank issuing the loan, say for $1,000,000, must transfer a small part of the deposits, let's say 10% of the loan amount, to the reserve bank and enter $1,000,000 into the system. This introduces new, previously non-existent $900,000 into the economy. This money starts circulating in the economy and turns into GDP. Part of this money goes to salaries, and part goes to investments, including gold. Thus, the more money there is in the economy, the higher the overall price of goods.

What happens when the loan is repaid or defaults? In such a case, the $900,000 completely disappears from the economy, leaving less money for circulation, thus putting pressure on prices in general.

Looking at the fact that US bond yields are rising despite the Fed lowering the rate, I can assume that fewer and fewer countries and investors are willing to buy them. The yield will rise, while more and more loans will be defaulting, thereby reducing the USD money supply, which will lead to deflation.

The price of gold negatively (inreverse) correlates with the real yield (nominal yield minus inflation). With rising yields and collapsing inflation, gold will fall. The gold chart shows an ascending diagonal, which most often resolves with a wild move in the opposite direction. What is needed for this is the collapse of the dollar-based credit system via defaults.