What's Going On With Gold Stocks?

The lid was still on the pot as gold reasonably steadily began an upward trend and that resulted in many large-cap gold stocks spiking up.

That held for quite a while with the shorts still trying to push the gold price lower. Some things never change. But a lot of those people were also on margin -- and they had to start selling their traditional stock and bond holdings to meet their margin requirements.

This is no better example of capitalism's two greatest enemies: buying stocks on margin and using leverage either on derivatives, or worse yet, from an individual perspective, on ETFs. People will be in for one hell of a surprise when the X times ETF come crashing down. But I digress.

Getting back to gold stocks: the bad news is that with inflation accelerating, intermediate and small-cap gold stocks have started to move. Great for gold and silver stock investors. Not so much for everyone else.

Meanwhile, in the United States, unemployment is out of control, with over 10 million jobs already vaporized, at least on a temporary basis. Even The Fed is predicting eventual losses of 47 million, or thirty-two percent unemployment. 4.5-10% unemployment right now, with 24 million losses projected for April or fourteen percent.

So, the transition has obviously been made from a deflationary to an inflationary environment. Don't be surprised if consumer goods prices go up by thirty percent in the next month or two. With that will come the rise of bullion and further upward movement in gold stocks. Remember that silver and silver stocks are slumping right now -- even in a period of physical shortage and temporarily closed mines. But that's merely the calm before the storm when both the metal and stocks will hockey-stick forward, what with the current gold to silver ratio currently set at 113-1, down from 121-1 in March. In short, silver capitulation has happened and it's ever so slowly on the way up.

Thus the transition is clearly underway from deflation, to inflation, then to hyperinflation and ultimately to stagflation. Most investors will be decimated in a period where many are already losing their jobs, homes, cars and even worse, their very lives.