Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

PowerShares DB US Dollar Index Bullish (UUP), iShares Silver Trust (ETF) (SLV): Why Gold Will Continue Its Plunge

Have you been long gold or silver since 2008? If so, you might remember how long it took for quantitative easing, or QE, to sway these precious metals to the upside.

iShares Silver Trust (ETF) (NYSEMKT:SLV)

As the Federal Reserve created more money, you waited and waited for gold to move higher, unconsciously clenching your fists whenever you looked at the ticker, and frantically chasing fantasies of financial freedom in your mind. It was a logical investment, yet nothing transpired. Finally, after about one year, gold and silver gathered momentum, and acted as unstoppable freight trains for years — only to eventually smash into a steel wall.

Gold now remains a mystery to many people. But if you look at it from a logical perspective, it’s not difficult to figure out.

Upcoming gold and silver movement

Even if you’re long and strong SPDR Gold Trust (ETF) (NYSEMKT:GLD) or iShares Silver Trust (ETF) (NYSEMKT:SLV), take a moment to step outside the situation and look at it objectively.

The gold trade is more based on fear of upcoming events than actual economic catastrophe. People are confused about precious metals and their potential because they’re anticipating hyperinflation. But the Federal Reserve has been fighting against deflation, not inflation. In a deflationary environment, gold will decline along with almost everything else — including all commodities, stocks, real estate, gas prices, and food prices. At least the latter two are positives.

Since it’s only a matter of time before the effects of Federal Reserve monetary stimulus wear off, deflation is inevitable. Believe it or not, this is a good thing for the long-term economic picture. Most people want the economy to grow naturally and sustainably. All propping up of markets by artificial stimulus and speculation must come to an end in order to get to that point. As deflation becomes a reality, gold will continue to plunge.

Important points

Deflation is the key to gold’s downward movement, and that’s why it’s such an important point in this article. For anyone unfamiliar with deflation, it pertains to a decline in demand for goods and services.

Even if Ben Bernake sees the stock market getting hammered and opts to re-enter the game by announcing more stimulus measures, another important point must be considered. Many companies now cut their employees in order to increase profits, putting their cash toward stock buybacks and dividends instead of hiring. These companies are looking to take care of their shareholders, as opposed to their employees.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.