That said, we remain skeptical of predictions that gold’s price eventually will surge into the stratosphere (meaning upwards of $2000 an ounce). Although that’s not inconceivable, the odds it will happen must be weighed against the prospect of a worldwide credit deflation that completely wipes out personal savings. And that is exactly what will occur when the $500 trillion (per BIS) derivatives bubble collapses, as it someday must. The implosion would draw its very power from the deleveraging, or marking to market, of the entire, very thinly collateralized $500 trillion edifice of credit money.

In the wake of such a catastrophe, we will see bread lines in towns where starter homes now sell for $2 million dollars or more. Run-of-the-mill Aspen ski chalets listing these days for $10 million will be sold for back taxes after squatters who have been burning furniture to keep warm have been evicted. Impressionist paintings that fetched eight-figure sums will go for low six figures, and "priceless" Bugattis will change hands for less than the current price of a lowly Porsche. Is it unreasonable to speculate that in a world whose economy has been reduced to beggary, gold will fare much better?

Let me explain. Although we fully expect bullion to hold its purchasing power (and then some) relative to all other classes of assets, we don’t expect nuggets and Krugerrands to command the astronomical premiums that some evidently expect. A spectacular price spike in gold could conceivably occur when the panic to exchange intrinsically worthless dollars, euros, d-marks, yens and sterling for something "real" hits full-bore. But anyone who has been hoarding gold for that day should think twice about sitting on it further, since, once the panic subsides, the global economy will be a smoldering ruin, incapable of engendering, much less sustaining, a speculative mania in gold or any other type of investable.

While gold bugs are hardly irrational to view bullion as the ultimate hedge against financial collapse, they need to acknowledge the possibility that if the disaster is as bad as some of them have already imagined it will be, there’s going to be precious few assets left to protect. Instead, there may be only precious loaves of bread to be exchanged for Krugerrands.

For make no mistake, the financial endgame we face has the potential to make the 1930s Depression look like a picnic. Consumer borrowing and cash-out refi’s were non-existent back then, and America, with an economy that was 30% agricultural, was literally living off the land. Nowadays, and for the last few decades, we have been living more and more off the cleverness of financiers who have found ways to create nearly unlimited sums of money from thin air. We predict that all of this "money" will cease to exist one day because of an epochal lapse in confidence broader, even, and more devastating than the one that precipitated the Great Depression. When angry mobs move on Wall Street and the banks as they did three generations ago, only to discover they have been financially wiped out, who will be the buyers of gold for the mythical price of $10,000 an ounce?

In the meantime, from a technical perspective there is no reason to hold back on gold, since it has been doing all of the right things on the charts. Pullbacks have consistently failed to reach their Hidden Pivot targets, reversing in most instances near the predicted half-way points of their CD follow-through legs. And for two, Comex contracts keep making bullish impulse legs in all time frames, from the one-minute bars right on up to the hourlys. As long as such rallies continue to surpass the required two prior peaks in whatever time frame is being considered, we can infer that the bull is in no great need of rest.