Ann: Quarterly Activities Report September 2015, page-19

For the next few weeks the FED is leading for the POG. What it will be, nobody knows. For me one thing is normal though. At some point in time interest rates must be higher than 0%. Perhaps when the first increase in many years is behind us, people will act a bit less nervous about FED-policy.

Because of the nervousness about the Fed, the POG is suffering. I have red all the stories about Gold not paying any dividend or interest etc. All true, but Gold for me stands for 2 very important things: it is a wealth storage facility and in a runaway inflation environment is also gives protection. The latter is certainly not the case at the moment. But for me higher inflation is in the cards for the coming years. Higher than the current level anyway. By january the base effect in calculation the inflation tells me that the "oil-shock" falls out of the equation. Wage settlements are higher in the US and Europe than the previous years. So the signs are green for a higher level of inflation. How high we will see. For the longer term there is one thing what bothers me and this is the following: the biggest beneficiaries of the financial crisis of 08/09 are governments with debts. They can (re) finances their debt at absolute dismal levels. The US hardly pay any interest for the new debts at the moment. But what will happen if that changes. At the moment the percentage of debt vs GDP in the US is around 103%. More importantly is that 70% of that debt will have to be refinanced within 5 years and 50% even within 3 years. I make the following assumption: for the next 3 years the US government will have to pay, on average 1,25% more for their refinancing, and for the years 3 to 5 they will have to pay 2% more. This is not a crazy assumption if you listen to the FED. What will this mean for the US economy in terms off costs: so 50% will cost 1,25% more, costing the government 0,5 x 1,25% = 0,625% of GDP (GDP is about the same size as the total debt outstanding) or 0,625% of the growth of the US economy will be eaten away by higher interest payments. for the years 3 to 5 the equation is : 0,2 x 2% = 0,4% of GDP. In total more than 1% of GDP growth. After year 5 the 1,25% higher interest on the 70% will be 2% higher etc. And because the debt-ratio is still rising in the US, what will happen if interest rates will settle higher than the 2% increase. The message is clear: a big chunk of the US growth will be needed to pay for the higher interest bill. I don't' know what that will do for the faith in the almighty dollar, now that the Yuan is on the edge of becoming a world currency as well. Another question what bothers me is that the US government is adding more debt to the already high pile of debts. It is my opinion that they will not be able to bring down the 103% by much in the foreseeable future perhaps they will never succeed in this. This is exactly the reason why I am so bullish on Gold for the longer term. In my humble opinion gold is the only real money there is around (and by that I mean physical Gold not ETF's). You can store you're wealth savely in Gold (store it somewhere where the government can not get their hands on it like the US did in the 1930's), it will protect you for any kind of crash. At least it has been doing for the last 5000 years. And in a runaway inflation environment is will also protect your wealth. So although I am disappointed in the price performance of Gold in the last few weeks, I think the fundamentals for Gold (and also Silver) are not damaged at all.
Coming at the end of my story I will make one last remark: Gold is priced in USD. It has been decreasing for the last 4 years (after a bull run before that I know) but the amount of printed dollars in the system went through the roof. It is only a matter of time before this will be reversed. You better have some portion of your private portfolio in Gold or Silver, or even better some gold miners with no debts on their balance sheet.