In November 2003 I found myself sitting at a table in New Orleans with Robert Prechter sitting immediately to my left talking to about twenty people about what he saw coming.
After the round table finished he answered some questions in a very polite and friendly way and then put his arm around his father and strolled off.
His reputation at the moment is mud after predicting deflation of gold $350 way back then, and since. But if you read his book Conquer The Crash carefully, you'll see that he doesn't deny that hyperinflation is a likely outcome eventually, it's just that he emphasises that conditions are inherently deflationary - the Kondratieff Winter, as it were:
Where he got things wrong is that he didn't appreciate that on a purely fiat currency system a price collapse in the precious metals was a hypothesis that rhymed too much with the gold standard era of 1929 and not enough with March 2000 onwards.
But what he said was that even though there would be a deflationary collapse in the gold price, he would advise taking your position in advance in any event, because all bets were off once chaos began and you might not later be able to get any.
As Sinclair says in this latest interview (a MUST listen):
what happened in 2008 might be only a dress rehearsal for what is brewing this time around.
There's no doubt as to gold and silver's ultimate direction, not least because of the bids that are going to come in from the East to underwrite it, but the question is: what kind of merry dance are we going to have to go through before gold $3k, $5k, $12k?
It was baffling in 2008 to see silver and in particular gold drop during a time when one might have thought they would benefit from systemic turbulence. But that is the nature of a deflationary shock, where the air collapses from the bubble before and faster than anyone can print. It was a liquidity event and the flight was to paper cash.
What is going to happen this time around? Will gold and silver be taken down hard in a Prechterian crescendo? If they are, I have no doubt they will bounce back strongly and quickly and make new highs; but it's worth preparing oneself for the possibility, if not the probability, of a hard downturn. If it does happen, it's definitely a downturn that should be weathered with at least part of one's position and not avoided with a view to bottom-picking, because of its likely transient timescale.
I think at heart this is a question not of liquidity or insolvency but currency. When the S hits the F, people's instincts for as long as anyone can remember is to dash for cash. Even from gold. These deflationary interludes may continue that pattern until the time comes when the character of the deflationary moment is a sudden and pervasive recognition that all the midgets, USD and EUR and all the others, are in the theatre and burning.
Are we at that stage yet? I'm not sure. We definitely WILL be at that stage. Maybe it's a sliding scale: more people are going to be holding and moving to gold this time around, but it's not yet a stampede. So gold may not crater; it may simply whimper and stagnate, before rolling on upwards. That's what it's looking like so far. Maybe a shallow correction will be the worst that awaits gold and silver this time around. That's my current thinking, and accordingly I have built a cash position alongside my silver bullion and equities and am looking cautiously at the $27.50-$28.50 area as a potential reinvestment point.
All bets are off, of course, if the equity markets begin to sink and the Fed announces more intervention before the precious metals have broken recent support. Then we're off to the races.