The precious metals bull market that started around 2000 is still in full swing. Despite a few temporary setbacks which, on closer scrutiny, were all caused by some sort of manipulation (either central bank and cartel intervention or surprise increases or decreases in Comex margin requirements) the overall upward trend continues to be intact. There is a lot more to come in precious metals price increases, both nominal and real. The unsustainable levels of government debt around the world have not decreased a tat and Keynesian world improvers only have one set of tools (or, to borrow from Mr Bernanke over at the Fed, a “technology”), called the printing press. Central planners have no other way than using it to put off a full-blown economic collapse for an additional few years. Even if they do, and even if they succeed, it means just more “kicking the can down the road” and some sort of major correction still needs to come. Until it does, a continued or, in a not-so-good scenario, even abrupt price increase in gold and silver is only natural.

Economic history shows that throughout the millennia the markets have always sought equilibrium (for this is what markets do). With respect to government debt and money supply, this equilibrium would need to be between money supply and real assets as represented by paper currencies on one hand and precious metals (or similarly durable, storable, divisible and fungible assets of any kind — though historically there are few of those).

It is therefore expected, that precious metals will have to have a value equivalent to all other valuables in the market, namely paper currencies, stocks, bonds, derivatives etc. As the latter do not have any intrinsic value and are only worth what the market thinks the should be worth on a sunny day, these can significantly fall in value while assets with intrinsic value just continue on having that intrinsic value. The most likely and easy-to-understand scenario, therefore, would be some sort of zeroing-in between a major stock index and the price of gold. Historically, this is exactly what has happened every time since there are useful data on stocks available (which is back to roughly the 1850s and, thus, includes all the major economic crises during the last century from the 1920s to 1980 on an international and beyond on a more local level).

To get an idea of how long the current precious metals bull market is bound to run, it may be advisable to look at the DJIA and gold per ounce in USD to be equivalent. While there are other factors to be used as a filter to yield a more precise result, current market numbers show that there is still a long way to go before numbers are at that turning point. Holding on to ones precious metals up to that point will provide the best cover against losses from paper currency devaluation and a very good starting point for moving in to the next asset class once its time has come.