We have all the signs of a temporary bottom forming in gold right now, and this includes gold mining stocks. My data is pointing this way and we should find out soon. I think we have a decent bounce, then one more big decline next year in a deflationary spiral, then we will finally be off to the races.
Many will think that Donald Trump has something to do with stopping gold from moving higher with all his new policies and “smart” people who are being put into office. This of course remains to be seen. I did have some points to make though about all the people who have called the gold markets long the entire way down. Remember, I sell gold and I have been negative on it while many other popular book writers and newsletter pushers stayed with the same mantra of either dollar crash, hyperinflation and higher prices for gold.
Who writes a gold newsletter that is bearish? Not many. Richard Russell who I used to subscribe to and follow taught me a lot. Most important, and what puts me in check sometimes, is what does price action say? Price action never lies. The dollar I have been bullish on for years saying it would put pressure on gold, back when the Euro was over 130 and Yen in the 70’s in various 2012 articles. What most gold bugs who sell gold miss is their call for the dollar to crash. They don’t understand that for the dollar to crash, the Yen and Euro (primarily) would have to move higher. The Yen has the world’s largest Debt to GDP. The Euro had issues with Greece (forgotten about) and a banking system that did not go through cleansing, and only recently compounded with refugee and other terrorist activities and a bit of a deflationary bout (they are rebounding a bit). I figured out that hyperinflation can’t happen with our type of economy (we’re not Zimbabwe with high unemployment of 50% and a crappy economy). Shadowstats calling for it every year was the same old story, along with Gerald Celente’s call for a market crash every year, and Peter Schiff the same about the dollar (although I love listening to both of the latter two speak) and lately I’ve written about Jim Rickards. I’ll even throw the Lew Rockwell crowd into this group because I actually went to Rockwell’s scholars conference and been to a few events and the mantra is all the same. Lastly, I hate doing it because I know what he stands for with many, Ron Paul, who I have met twice as he too doesn’t switch sides to say all is ok right now with the dollar (as it is screaming higher).
What causes all of these to be on the wrong side? Or more importantly, why have they been wrong?
The answer to me is this;
If I give you $250,000 and told you that I will charge you zero interest and you won’t have to pay it back for years, you’ll spend that money in your local economy and it will grow. Your friends lives will enjoy your wealth because you are buying the drinks at the bar and everyone is happy. For years.
Obama in 2008 while running for office called George Bush “unpatriotic” for increasing the National Debt by $4 trillion. What does that make President Obama who has raised the debt by $9 trillion? Trump wants to add a trillion more but has “ideas” on how to fix things. Congress hasn’t met a bill they can’t pass to add to the debt.
But all countries are doing this! Pricing one currency against another isn’t the issue here. So a stronger dollar is an “Illusion of Wealth” if you will. There will be consequences, but what those guys above miss, and what I wrote about in my book, is this game can go on for awhile because people still believe in the Fed and the dollar. These guys discounted the Fed. I don’t. The Fed hasn’t even done helicopter drops yet to fight deflation which is what I am expecting. We’re still partying like it’s 1999, but in reality 1980 when Reagan unleashed the spending tidal wave. There has been no stopping it yet.
Where do we go from here? Can gold go under $1,000 and lower? Answer that by first answering when will the Fed lose credibility? They said they were going to raise rates 4 times this year and raised once. They say now 3 times next year and I will call their bluff again. They “talk the talk” and have no action and no consequences, but everyone still listens to what they say and now to what Trump says and he hasn’t even hit office yet. I have to look at the other side always and play devil’s advocate with myself. It keeps me being respected as a writer, not mocked like many others.
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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