Dollar is up a bit in early trading overseas in Asia. Gold and silver are coming off of their highs from Friday. Still looking for $1,400 or close and if we get there, great and if not, great. Want to see if we have one last spike up or if last week was it. Still watch the dollar to lead higher in the weeks to come or dip a little if gold is moving towards $1,400.
Want to post a few comments from Seeking Alpha that I have made in the past few days below. Also, I did get out of DUST with a 7% return and posted the live exits on Seeking Alpha.
The article had the headline Gold Headed For $1500 And This Time It Really Is Different and I had to take exception to some of what he said, but we agreed on deflation.
Doug Eberhardt , Contributor
J Clinton Hill, I actually like the fact you make a statement about gold and can provide a good “deflationary” take that I haven’t seen. I do see this as adding value to the discussion.In 2009 we had a nice deflationary contraction taking stocks and gold down 30% minimum as the dollar rose in value as the safe haven along with treasuries. Gold then shot up only to get hammered down through the end of 2015 as the dollar continued to gain strength with treasuries.Outside of interest rates going negative in some countries who really don’t buy a lot of gold compared to those here in the U.S. (ECB, Switzerland, Sweden, BofJ and Japan primarily), most of those currencies have appreciated against the dollar and thus those currencies priced in gold hasn’t fared as well as those in the U.S. (GEUR), the Gold/Eur fund from Dennis Gartman was flat up until Brexit compared to where it was Nov. 2015 and was actually lower for most of the year until the Brexit vote. (GYEN), the Gld/Yen fund is actually down from March when gold had most of its run higher in U.S. dollar terms.While interest rates play a part in what the Fed may or may not do, and I lean on the side of “not do” and have been a fan of TLT for sometime now, wouldn’t the dollar rise in deflation and put pressure on gold in U.S. dollar terms if the deflation were to take further hold?Thanks in advance for your thoughts.
07 Jul 2016, 01:19 PM
Doug Eberhardt , Contributor
J Clinton Hill, based on what you wrote I believe we think alike. How things progress possibly different, but you mentioning the European bad loans and China’s shadow banking tells me we are similar.I just finished a book called Illusions of Wealth which will be out soon (get proof copy today). I make the case for a deflationary credit contraction followed by money velocity finally kicking in gear and inflation which can lift gold to the “undreamed of” prices Richard Russell used to speak of. A lot more to it (book is 444 pages long, lol) but glad to see similar points of view abroad, which I believe many here in the U.S. don’t address.Curious what others might have to say as well.
07 Jul 2016, 03:49 PM
Most of us who follow Gold for many diverse reasons have an opinion on what might influence the price of Gold.I consider Gold to be a form of money… probably the only one that is not easily replicated or printed out of thin air. As other forms such as the Dollar, Yen and Euro have their currency adjusted in value through central bank shenanigans, Gold value is based upon market sentiment and cost of production.Therefore, when other currencies are diluted or destroyed because of various causes. the stability of Gold value is enhanced, and inversely when the other forms of currency is provided stability, the price of Gold is diminished. Wealth is denominated in currency value and the price of Gold varies ….. all dependent upon the alternative value of the currency it is quoted against.As currencies fluctuate in value, so does Gold, and if one wants to speculate in profiting from a movement in price, then take a close look at what is moving the price of the alternative currency.
08 Jul 2016, 10:21 AM
J Clinton Hill , Contributor
Author’s reply »
Fantastic and congratulations! I’ll check out the book. Sounds interesting.Love Richard Russell… I am an early disciple of his and started subscribing to Dow Theory Letters back in 1994. Learned a lot from that man…Cheers…
08 Jul 2016, 11:28 AM
Doug,….. I had no idea who Richard Russell was until your mention of him…. So I went digging.Found this :“The end of capitalism will be due to the unbelievable amount of debt that is currently being created. This will create monster inflation that will destroy every currency. The only currency that cannot be destroyed is gold. When investors realize this, we’ll have the makings of the greatest bull market in gold ever seen.”Ahhh,….. Ok,…. So he’s one of those “Bring on Armageddon so we can get filthy rich on gold” types,…. Which on the surface of it puts him in the same bucket as the Schiff’s et al of the world.It really matters little what is purported from a purely academic point of view because in the real world it will never happen,…. & if it ever did,…. Gold & all the trappings that are supposed to go with it will be the last things anyone left alive will be considering.In terms of the article as written,…. I do agree with the $1,500 figure, but not based on Fibonacci retracement or anything as ludicrous (to me anyways) as that.I think the $1,500 range is achievable by Q2 2018 because that is a sustainable figure,….. Incidentally,…. A good many of the PM producers I consult to have these sorts of numbers plugged into their forecasts as well.Just my take on it.:)
08 Jul 2016, 11:52 AM
Doug Eberhardt , Contributor
Main Street, it’s easy to take one thing someone said and assume his point of view with a “little digging.” I’ll take his 40 years of writing over most, especially when it comes to gold but also his PTI which was proprietary to him, and called the moves in the stock market better than he could using Dow Theory.This is what he wrote about the phases for the gold market;The first or initial phase is the early accumulation phase. This is the phase where wise and seasoned investors enter the market at or near the bottom, when many stocks are selling at great values after having been battered for months by the preceding bear market. Here gold is selling below value.The second phase of a bull market is usually the longest and most deceptive, containing many secondary reactions. During the second phase the retail public shows interest and enters the market carefully and sporadically.The third or speculative phase of a bull market is characterized by a wild and wooly and ever-increasing entrance by the retail public. This phase is characterized by hot tips, hype and pure greed.
08 Jul 2016, 06:39 PM
Doug,……You used the aspect of his writing that I linked to in your postulation though, hence my focus on it.The whole 3 phases thing is just the same premise that’s been toned down slightly, but the desired result hasn’t changed.Call it what you like at the end of the day but the whole end game of his being the destruction of all currencies with the way being made clear for gold to skyrocket is nothing more than pure fantasy.To digress somewhat though,….. What are your thoughts on a gold standard ?
09 Jul 2016, 01:44 PM
Doug Eberhardt , Contributor
Don’t believe in gold standard. Gold however is the standard. You have a gold standard now if you choose to.In 6 years of writing articles for my site, as well as my first book on gold, I never have promoted a return to such.
10 Jul 2016, 06:21 AM
Doug,….Nice to see you don’t believe in a return to a gold standard. :)I would disagree that gold is THE standard,….. It may well be to you, but not necessarily others who see their “standard” in a different commodity,….. ie: Silver, Rare Earth metals, even Real Estate,…. all for different reasons.:)
10 Jul 2016, 09:02 AM
Doug Eberhardt , Contributor
History shows gold maintains purchasing power over time vs. paper with numbers written on it. Governments are the ones who mess it up. All we are looking for is a currency that is stable. Warren Buffet’s father, a U.S. Congressman wrote in 1948 that a gold standard “constrained” government’s ability to abuse the system. The current monetary expirement is into its 45th year without a relationship to gold. Buffet’s father’s fears though are found in the differnce between the purchasing power of a 1964 quarter and a 1965 quarter, in an ever increasing National Debt Clock, in higher rates, in a Congress that calls a balanced budget 9 more years of increasing the National Debt and 1 year of coming in under budget, and in Rothbard’s book “What Has the Government Done To Our Money.”Gold still provides the insurance for one’s portfolio but government will never relinquish power to gold again. They will start a war before they do that. See China and the Pacific. See Russia. See Middle East.
10 Jul 2016, 09:20 AM
I still maintain that the key here is balance.How much “insurance” would you have today if you’d invested heavily in gold in 2011/12 ?Now,…. A balanced position would be far better placed to cope, but not everyone has good balance.Gold as a metal commodity does not provide an ongoing return,… You have to trade it in order to realise any gains (or losses),…. Weigh this against a good real estate investment that can provide an ongoing return, all while the capital value of that investment varies according to the market.Again,… It’s about balance.Gold,… IMHO,… Is a “luxury” investment item,…. It’s expensive & not everyone can afford the volumes necessary to benefit to any great degree from fluctuations in it’s price.Silver,…. IMHO,…. at a greatly reduced cost allows for higher volume of trade & may actually be a better option for some.I own both by the way, but my portfolio has a far greater % of silver (all in the form of 1oz Maple Leafs) in it,…. Along with stocks & income generating real estate,….. But for me,… I could care less if I end up passing my PM’s onto my children as there is no intent to do anything with them other than add more Maple Leafs to them occasionally. I am fortunate enough to have that luxury, others may not.
10 Jul 2016, 09:50 AM
Doug Eberhardt , Contributor
Easy to pick and choose timeframes tofit your storyline. That’s why I am very specific with my language as I hve been down this yellow brick road before and can presuppose replies. I sais gold maintains purchasing power “over time.”Then you go on to talk about a separate issue of balance by bringing up stocks which wasn’t part of the discussion. Not sure if you are trying to lecture me or what, but feel free to continue the conversation with yourself.My book I mentioned J. Clinton Hill covers all investments, not just gold. Been doing this for over 30 years.Thanks for the conversation Main Street 63.
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About Doug EberhardtDoug 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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J Clinton Hill , Contributor