Quote from trefoil:
Wow, good stuff. A rarity around here.
Anyway, gold in USD terms did go up in the Great Depression, when FDR devalued the USD from 20 to 35/ounce.
In 2008, as liquidity disappeared, gold did in fact tank. The reflation afterwards was a friendly environment for it though.
No one really knows what would happen in the event of a US default, the proximate event that would cause a death spiral this time around, but my guess is on a rapid rise in interest rates for Treasuries, which would have the effect of causing a major heart attack for the US economy and cause the dollar to shoot up, because the one thing everyone is going to want is cash, and if that's in demand, well, you know. A simple way of saying what you were saying above, I think.
Gold, in USD terms, would rapidly go down, and it might even go down in terms of other currencies as well, as it did in 2008, based on a rapid drying up of liquidity.
Afterwards will be interesting, since the US would no longer have unquestioned credit, and therefore would be unable to re-liquify as before. We could be in a permanent strong dollar/depressed economy state, well for as long as it would matter, which would be the rest of our lives, anyway.
Without reflation, gold would stay down, I think.
