CHAPTER 9

Gold’s Bull Market isn’t Over

■ A Win-Win Scenario for Gold Owners

Volatility and price drops may be nerve wracking, but the bull
market in gold is far from over. In fact, it has barely begun.
To understand why, it helps to look at two prior episodes
in the relationship of gold and money that are most relevant to
today. These episodes were a period of extreme deflation, the
1930s, and a period of extreme inflation, the 1970s. History
shows that gold does well in both conditions.
Commentators frequently observe that we are experiencing
“price stability” or “low inflation” based on the fact that the con-
sumer price index has averaged 2% over the past 12 months.
However, this average hides more that it reveals.
The economy is experiencing strong deflationary forces
as a result of weak employment and deleveraging associated
with the depression that began in 2007. Simultaneously the
economy is experiencing strong inflationary forces as a result
of Fed money printing.
The deflationary and inflationary forces offset each other
to produce a seemingly benign average. But below the surface
the forces struggle to prevail with some likelihood that one or
the other will emerge victorious sooner than later.
Inflationary forces often appear only with significant lags
relative to the expansion of the money supply. This was the