May
25
2016

Current Thoughts for 5/25/2016

By: Doug Eberhardt Category: Current Thoughts on Gold and Silver Tags: , , , , ,
Gold was weak again today but silver was a bit bullish. The dollar was actually down a bit but still holding steady at 95.40. We saw miners get hammered early but then mount a very nice run into the afternoon as the overall market did quite well today.  In Doug Eberhardt’s perfect world we have a higher stock market and lower gold as then my forthcoming book Illusions of Wealth will allow for the best advice possible on what to do next with your hard earned money.
Question:
Doug, How has gold, historically, performed in a stagflation environment? I ask that because it appears that wage growth is coming back. I just read the other day that a local employer will be increasing wages 4%. That may not sound like a lot. But, that employer has been giving only 1% – 2% raises and even no raises in years past.
Answer:
We have had wage growth since the 2007-2009 crisis but it is still below the 2000 era and I don’t see signs of improvement in too many areas except for those where states have mandated a minimum wage increase (the lower end of the spectrum). http://www.advisorperspectives.com/dshort/updates/Median-Household-Income-Update
GDP growth is at a 2 year low. http://www.cnbc.com/2016/04/28/live-bank-of-japan-holds-fire-yen-soars.html
Gold needs money to velocity to pick up and we’re just not seeing it. It also needs the dollar to move lower and I can’t justify that when it is priced in countries that are worse off than us (part of the illusion).Eventually the markets will understand this illusion and what the government is doing to the economies of the world and run to gold. Inflation will pick up and a return to the super-inflation years of the 1970’s, but first we must fend off the coming contraction, assuming I read my tea leaves correctly.For the short term, the dollar helps with any movement analysis in the precious metals.
Question:
Monetary velocity is at a 35 year low ( speed at which money is used/turned over..which is a sign of economic health).. capacity utilisation is at an historicity low…empty factories not filling the empty warehouses…The printing exercise has served only to inflate Wall Street and postpone the property mkt crash.. The underlying economy is stil weak and the country gets further into an unmanageable debt with every day. At some point the USA WILL DEFAULT on its debt, it’s mathematically certain. The Chinese are not going to buy the needed 200 TRILLION dollars needed to fund the debt and promised funding the Government is obligated to….if rates go up it will just speed up the crash as it will make payment of the US debt that much harder…buy Gold, Silver…keep some physical metals and keep 3-4 months cash somewhere safe ( not your bank ) as you may need it when the ATMs stop working( Like Greece last year )… May be worth getting in some tins of food too….if and when it hits the fan the shelves will be empty very quickly.
Answer:
People do still have faith in the Fed, and that is also buoying the markets despite no real movement of money (MV). The Fed is looking to raise rates but some on the Fed reveal the truth like Bullard recently. The Fed to me is pretty clueless, but they are good at talking the talk like they did all last year. Why should they change? The market trades on the Fed, not reality. Till it can’t. Then you’ll see gold fly.

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About Doug Eberhardt

Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534

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