There is a whole lot of hoopla over the fact that gold is back up to $1,300. Well, almost back to $1,300. The algos have erected a wall at that level and so far gold has not been able to penetrate it. How can that be when articles are appearing like this one that states, “A Record Number Of Investors Are Hedged For A Crash.”
"Investors see little reason to ‘buy in May’ unless the 3Cs – credit, the consumer, and China – quickly surprise to the upside."
Wouldn’t you think that gold would be high on the list of “hedges” against a stock market crash? Apparently not, not when gold can’t even climb back above $1,300. Gold and silver are just not on most people’s radar. And that makes them an ideal investment for the “Contrary Investor” crowd. But even they don’t seem terribly interested.
Here’s my prediction: When the
big money
boyz finally figure out
why
gold is
the best asset
to own in troubled times, there will be a tremendous surge in buying and the price will reflect it. Old habits are hard to break and buying stocks and shunning gold and silver are, at this point, a decade-old habit.
It used to be that investors considered gold and silver, especially the ETFs and stocks, as the “hot” investments. Now, it’s the Cryptocurrencies and the pot stocks. They are the “hot” investments. I received an Email the other day with the headline, “Bitcoin is going to $100”. A prominent investment service is sponsoring a podcast on how to cash in on Cryptocurrencies. And another writes, “Cryptocurrencies are here to stay,” and a couple even suggest that they have replaced gold as the best hedge against a falling dollar. Once again, Bitcoin and a host of other Cryptocurrencies are being hyped as solid “investments.” Me, well I just don’t get it. They make me very nervous. An “investment” should be a safe place to put your money. Are Cryptocurrencies safe? Not according to this Reuters article which states “$950 million last year stolen from Cryptocurrency Exchanges.”
Gold and silver may move up or move down, but they are safe investments, if you take the necessary precautions. Number one on the list is to store them in a non-bank vault like Brinks. No one is going to steal them and they are insured. The same cannot be said for our central bank’s gold. Until they allow an independent and complete audit, you should assume it ain’t there.
West Point stays silent on 11 ‘deep storage’ compartments, while parading its working stock vault.
Tariffs are stealing the headlines now. Trump has lit the fuse on a trade war with China. Forgetting the fact that it is us, the American consumer, who will foot the bill. China will lose business, but we will pay more for all the products we buy from them, as much as 25% more. Have we learned nothing? We tried this once before, in 1930. It was called the Smoot-Hawley Tariff Act. They were responsible for the Great Depression.
Supporters of the tariffs say necessary to level the playing field. We buy far more from China then they buy from us.
And that’s what happens when you abandon the Gold Standard. We could not have massive trade deficits with China and the rest of the world if we were still on a Gold Standard. Gold was used to balance trade. If you imported more than you exported, the difference was made up in gold. If you ran out of gold, you were forced to cut your imports or increase your exports. We would never have had the trade issues with China prior to 1971. When the dollar replaced gold as the world’s reserve currency, we were afforded the luxury of running massive trade deficits, for decades, with no penalty. We financed China’s economy by paying for their cheap products with printing press currency. They used the export dollars to buy our Treasuries, which kept our interest rates low. A win-win. Now, Trump wants to change the rules of the game. Who will win? The owners of gold, that’s who.
"...
it is wholly legitimate,
and entirely prudent, to
question the infallibility of the Federal Reserve
in calibrating the money supply to the needs of the economy."
I think this headline was a bit premature. Trump can’t let this happen. Gold will be held in check and the stock market will hang in there until after the election in 2020.
Additionally, gold is surging in value against the yuan...
This pretty well sums it up….
The global stock markets have long since been "free markets". The Central Banks dictate everything. In the U.S., the stock market is the economy, it’s not a result of the health or sickness of the economy. In order to maintain the illusion of confidence in the US dollar, and the illusion of strength in the US dollar, it’s in the Central Banks best interest to manipulate and suppress precious metals prices. This is clearly gross manipulation, but according to the Bretton Woods summit, this is all perfectly legal. Based on the expansion of the M1 money supply since 1971, gold should be fairly valued at $17,000 per ounce.
If you take the gold/silver ratio into account, silver is even more distorted. Is this fair? Of course not, but it is the reality. The most likely event that will cause precious metals prices shoot up is a confidence crisis and collapse of the US dollar. This is where it is ultimately heading as the Petro/Yuan gains traction, the opening of the Silk Road, and the loss of the US Petrodollar's status as the global reserve will be the cause.
When Eric Sprott, founder of Sprott Inc. and billionaire precious metals investor speaks, I listen. Here are a few of his recent comments.
“Fear is finally making its way back into the financial markets and pushing gold higher.
The outlook for gold works against the market and that’s why it is up this week because the markets have been down about 3% across the board and there is fear coming back into things here.
Investors hear conflicting things about the economy and inflation all the time, which drags gold prices in different directions.
Egon von Greyerz predicts gold will go to $10,000 and beyond. He urges his readers to keep at least 25% of their net worth in gold. And here are some of the reasons why. For starters, since 1971 the dollar has lost 97% in purchasing power and even at today’s level, the dollar is massively overvalued. Gold from $300 in 2002 to $1,920 in 2011 was just the first leg. 2007-9 was a rehearsal – the real event is still to come. He says,
So the metals are soon ready to start the most spectacular bull market that the world has ever seen. This market is like a coiled spring and we will see rapid moves to the upside in both gold and silver. The first target for gold, which could be reached quickly, is $1,600. Silver will probably go to at least $25 at the same time.
The risks in the world are now of a magnitude that any serious investors, who wants to avoid a total annihilation of his wealth, must reduce his exposure to all the bubble assets, stocks, bonds and property, as well as to the banking system.
Egon von Greyerz
My long-standing target for gold of $10,000 in today’s money and much, much higher in inflationary terms, is now more probable than ever. But I hope it will never be achieved. When gold goes to $10,000, it won’t be under the same circumstances that we saw in the 1970s. Gold then went from $35 in 1971 to $850 in January 1980 – a 24x explosion in very different conditions.
Our friend Jeff Clark has written a terrific article on silver. He is extremely bullish on silver because of a change in the supply/demand fundamentals. He says, “
Supply and demand in the silver market are going in different directions. I cannot find a period in modern history where supply and demand were so out of balance than now.
With the setup currently in place, the wick that leads to silver’s rise sits precariously by a roaring fire.
Jeff Clark
The data is in: based on a review of reports from multiple consultancies, the silver market has officially entered a supply/demand imbalance. The structure now in place sets up a scenario where a genuine crunch could occur.
The silver price has been stuck in a trading range for five years now. But behind the scenes, an imbalance has been forming that could potentially lead to price spikes based solely on the inability of supply to meet demand.
