There are two important conclusions to be made from the above chart.
1) The Fear Index remains in an uptrend. Given the ongoing uncertainty about bank solvency and sovereign debts that cannot be
repaid, there is no reason to assume that the Fear Index is about to
reverse course any time soon. It is therefore reasonable to expect
that the Fear Index will keep climbing higher. Given the formula
above, this result can be achieved in two ways. M3 has to decline
and/or the gold price must rise. I expect it will be the latter.
2) Do not be misled by today’s seemingly high price of gold. Even though gold was $1,240 at June 30th and near its record high price,
gold remains good value. Note that the Fear Index is still less than
the 2.49% low it reached in February 1985. The Fear Index is still
less than the 2.60% level marked by the dashed line on the above chart
that I have used to delineate exceptionally low levels reached by the
Thus, gold remains good value and should continue to be accumulated. The Fear Index makes clear that gold’s high price is
simply a result of the debasement of the dollar, and not that gold has