King World News:
"Since the global credit meltdown of 2008, governments in the Western democracies have stepped in to stabilize the financial and economic system. Their strategy has been to substitute sovereign for private credit. Unfortunately, changing the wrapping does not alter the contents. This approach bought time, but now time is running out as sovereign credit itself is under attack. Stress is most visible in Europe, but the U.S. is implicated because the Fed is complicit in measures to shore up the European banking system through dollar swap arrangements. The contagion is not limited to a few peripheral states in Europe that have spent beyond their means. In our opinion it is a fundamental ailment common to democratic societies, reversible only through a financial and economic crisis sufficient to galvanize public will.
"What this portends for 2012, we believe, is unfortunately, further turbulence in the financial markets, anemic economic conditions, and ultimately, overt and undisguised monetary debasement. The flashpoint for gold and related equities will, in all likelihood, occur when central bankers and political leaders cave in to market stress. In the absence of economic growth, mob clamor for money printing to ease the burden of debt that is destabilizing markets and economic activity seems likely. Therefore, maintaining precious metals exposure while this painful correction winds down would appear to be the most advisable course of action. When the policy dilemma becomes so obvious that central banks begin dumping dollars for gold, it may be too late to replace positions. Gold has a history of shaking out all but its staunchest holders and making losers out of sold out bulls."