The reasons for bullion’s so-far failure to discount the coming repudiation of fiat money are not complicated, although they would not have been intuitively obvious even as recently as six months ago. For one, there was the short-squeeze on dollar debt. Although we raised the prospect of this years ago based on our trading-floor experience, it was considered a loony-bin scenario until very recently, when it became apparent to a vocal few that the dollar could not possibly be rising so steeply because of mere flight-to-safety concerns. For gold bugs, the short squeeze rally evinced by a fundamentally worthless dollar turned logic on its head. The hard money crowd had been rightly preparing for the dollar’s collapse since the early 1970s, when Nixon closed the gold window, and here was the buck, inexplicably rising as though paper were indeed more valuable than bullion.

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