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Possible Scenario: Cheaper Precious Metals
Due to More Expensive Dollar
on Behalf of the Euro Crash

Could precious metal prices crash?

Yes, there is a possible scenario based on solid arguments. Platinum crashed in 2008 from a high of above 2,400 $ that it had reached to roughly above 850 $. And this could happen to gold and silver as well.

The most likely timeframe for this to happen is in the 2013-2016 interval.

The dollar will get stronger and partly this will be the reason for precious metal prices to decrease. Gold crash will drag silver prices down - leaving tremendous disappointment in the hearts of many enthusiastic investors.

The dollar will gain strength on the basis of a weakening and then crashing euro currency. The stronger dollar to which gold is tied will crash gold and silver prices.

Here are the steps that can lead to this scenario:

 1. Euro collapse will happen first - Europe is closer to the collapse than the USA. Greece, Italy, Spain, Portugal will drag the entire eurozone down with them. At least one large country will have to collapse financially - that will implicate a domino-effect euro currency crisis (in late 2012 we are already in the early stages of this domino effect)...

 2. Currencies linked to the euro (peripheral and other European currencies) will get strongly hit by the euro crash. Hungary, Sweden, Croatia, the UK will all take severe hits to their currencies. Poland is different, they will be less affected - this is due to the fact that they have intense trade with countries outside the eurozone.

 3. The US dollar will gain strength as a result of losing its strongest rival - the euro. Speculators will invest further into the US dollar. Forex speculators will sell euros to buy dollars, other investors will look for a "safer" (temporarily) currencies and the US dollar will be among the top choices.

 4. The rising US dollar will most likely implicate: gold price drop (and other precious metals will follow), deflation.

 5. The stronger dollar will hurt US exports, but then the US might jump into more QE rounds in order to pay the debt accumulated. If launching QE's (creating more dollars - primarily electronically) when the dollar is on the rise might be a compensatory action and US economy helping and stimulating action that the Fed might push through easier than before. To some extent this will be successful.

 6. But as we know, the US dollar itself a fiat currency without any intrinsic value and the US debt cannot be paid - no matter how many quantitative easing rounds are launched. And euro crash won't propel the dollar high on the long term - this will be a short-lived, temporary gain of strength.

China, Russia, Japan and other major US dollar holders will find a great opportunity to sell many of their dollars during this period. They have long been preoccupied with getting rid of their (risky) dollars that are prone to devaluation. Many countries will seize the opportunity to sell their dollars during this period, but the more they will sell, the less value the dollar will have.

The selling will not necessarily occur on the financial markets. It might as well happen in the form of investments: in technology, industry, but also precious metals.

 7. Eventually the dollar will crash because of the immense debt accumulated, because of the low rate of industrial production, because of the rising joblessness rate, because of the QE-created inflation etc.

The Fed has vowed to keep interest rates low until the end of 2014. If interest rates start rising, inflation will "become more visible" - technically the Fed should increase interest rates. This means a weaker dollar. With no hard asset backing, no intrinsic value, the US dollar will be heading faster down the slope towards hyperinflation. This process will probably occur after 2014.

 8. Precious metal prices will skyrocket, while the US dollar loses its value.

The timeframe to this scenario will be 2013-2016. Most likely the entire 8-step process will occur during this interval. Of course, there will be continuations afterwards.

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