WHY GOLD IS NOW IN A BRAND-NEW BULL MARKET
- Gold is up more than 23% in the past few months This is the best time in 100 years to get the gold.
- First, Central banks hoarding more and more gold. Russia add more than 274 MT in 2018. It’s also fourth year in a row that Russia had added at least 200 MT and it’s country ‘s 13th straight annual increase. This rapid rise now puts the country is fifth place among central bank gold reserve behind U.S,-Germany and France. Turkey and Kazakhstan each add about 51 MT to their reserve last year 2018. Even China ,which has not increased its gold reserve since 2016 bought 10 Mt in 2018. Why is this happening ? The answer is clear. The world’s central banks continue to prepare for a colossal economic disaster.
- Second ,Gold supply is being squeezed on both ends. On one side, gold discoveries are hitting record lows with mining costs skyrocketing 412%. On the other side, countries like China and Russia along with the central banks are buying gold at a furious pace.These supply squeezes will launch gold prices.
- Third , technical indicators show long-term and short-term bullish signals, including gold holding support when the technical say gold should be much lower.
- Fourth , gold is hitting all-time highs in other currencies including the yen and the peso. Meanwhile, the dollar is hitting levels that are due for a pullback.
- Fifth , we’re less confident in stocks. 2018 saw two major corrections, plus we are due for a recession as we’ve crossed the standard 10-year historical time frame between recessions.
- Last, and most important, gold companies are consolidating at a rapid pace, including the top one and two gold producers making billion-dollar moves
- Gold is commodity. Which means the price of gold is fundamentally controlled by supply and demand. Because of this, gold prices are cyclical. They go through periods of extreme euphoria, and periods of extreme pessimism.
- Gold is unique among commodities-and these spikes up and down are often more pronounced than most other commodities-because gold is also a store of value.
- Gold is the go-to go protection against bad monetary policy. Gold is the ultimate hedge again inflation…a safeguard against economic and stock market volatility … a refuge during period of instability. Gold has long been the ultimate “chaos hedge,”.
Between the ongoing trade war, geopolitical tensions, and new signs of economic weakness, global uncertainty is surging
When the Fed starts to cut rates, you want to own gold.
- And it has from $35/oz in 1971 to over $1,527/oz now. What cost $35 in 1971 now cost over $ 1,500 now.
- Dollar was no longer “ as good as gold “ and that gold price would inevitable go-up. There’s an inverse relationship. When the dollar falls…gold goes up. When dollar rise, gold goes down. And the dollar has steadily fallen for the past century.
- An Inverted Yield Curve
• But often , the drops can be anticipated and acted upon before if happens. And what I founded is that there is ONE reliable economic indicator that historically sends the price of gold skyrocketing- in a little a 5 months. It is an inverted yield curve.
This event has only appeared 6 times in the past 50 years. And a recession has followed. Every Single. Time. It flashed before recession in 1973…80…81..90..201 and even in December 07.
And this is extremely important to understand…because is just happened again on May 23/2019.
An inverted yield curve means during normal times interest rates on the 10-year Treasury are higher than interest rates on the 3-months Treasury. Which makes sense, when you think about it.
When you you’re looking your money up for longer periods of time ,you want to be compensated for the risk that goes along with that, so you expect to receive more on your money. Again, that’s how it’s supposed to work. That’s how it works in normal times….However, every so often-and again, it has happened just 6 times in the past 50 years years-it’s the exact opposite. So….every so often the 3 month Treasury will yield MORE than the 10-years. And when that happens ,you have what’s called an” inverted yield curve”. As you can see…an inverted yield curve has happened before EVERY recession of the past 50 years. When it happens, a recession would be as little as 5 months away. And ,again, this is extremely important understand… because the yield curve just inverted again back on May 23- about 3 months ago…So we could be looking at a recession here in the U.S. as early as October but also could come in 2020.Most people understand why a recession would difficult for the U.S. economy and the stock market as a whole.. but how does this tie with a prediction about gold? Because this metric-an inverted yield curve-is really the first part of the “perfect storm” we see for gold price to day.
Gold Price After Interest Curve Inversions
Initial Inversion Date- Months until Gold’s Peak-Gold’s Gain
June 1, 1073 05 57%
December 1,1978 13 356%
October 29,1980 Fed interest rate hike killed gold’s rally*
May 22,1989 9 18%
July 19,2000 5 5%
July 20, 2006 16 34%
May 23 ,2019 ? ?
Average 10 months 94%
As you can see, on average … the price of gold shot up 94% after the yield curve inverted. So it essentially doubled.
- In 1980 the Fed raised interest rates as high as 20% to combat the inflation that came a few years after Nixon decision to remove the U.S. dollar from gold standard. This drastic move also stopped gold ‘s rally. But I don’t think this is some thing we have to worry about now. WHY’s That ? Well, look Fed can’t even hit the 2% inflation target it has set for itself. And President Trump has made it clear over and over again…. He wants interest rates to go much LOWER, not HIGHER.
As we move forward to a recession ,that’s what they’ll do… lower interest rates again just like they did back in 2008.
Based on the date of the initial inverted on May 23 ,when the price of gold was at $ 1,284/oz.it would put gold around 4 ,2500 am ounce. In the past few weeks , Goldman Sachs…Citigroup.. and Morgan Stanley have ALL raised their target for gold as well.
‘ I am certainly long gold” Jeffrey Gundlach the Bond King ,who manages more than 130 billions, certainly said.
“ If I had to pick my favorite trade for the next 12-24 months, it would be gold.It has everything going for it Legendary Trader Paul Tudor John
“ While I am not sure exactly when or how the paradigm shift
will occur…I think that is highly likely that sometime in the next few years. .and I believe that it be both risk-reducing and return enhancing to Consider adding gold to one’s portfolio “ Billionaire Ray Dalio founder of Bridgewater Associates -one of the biggest hedge funds out there….these guys manage $ 160 billion…..
“ If we see real yields on the 10 years Treasury fall back below zero., I expect gold will surge to move than$ 2,500 an ounce very quickly… on its way to $ 10,000 /OZ Porter Stansberry
It seems aggressive. .but who knows ? Porter’s a smart guy. He’s made a lot of bold predictions over the years that turnout to be correct. So he could be right.
After all several times gold even more than doubled after the yield curve inverted.
Back in the bull market of 1978-1980 for example ,gold soared 356% after the curve inverted. If this happened to day, it would send gold to $ 5.850.
During the last bull market in gold…from October 08 to September 2011…gold went up 166% If that happened to day, it would send gold to $ 3,415. Either way , I think it’s safe that a double from $ 1,284 to $ 2,568 is within historical norms…especially now that looks like Fed is back in easy-money mode.
Most people doesn’t feel like we’re entering into recession like it did back in 2000 0r 2007 because
- Unemployment is a record lows.
- The stock market has been hitting record highs Everything we’re hearing on the news seems positive the economy . That ‘s absolutely right but if we look a little deeper below the surface , we will find that the numbers aren’t quite as good as the headlines would make us believe.
Myself and my business partner pull some numbers recently.. and we think people be shocked by what we found.
How Can the Economy Be ‘ NORMAL’ WHEN ……
- Earnings growth dropped 12% year over year in the second quarter in materials and technology sector…
- Automobile sales have dropped off a cliff…
- Manufacturing is weakening…
The Purchase Managers index is about to drop below 50
- ( indicating a contraction).
- Leading economic indicators are plunging…
- Consumer confidence continues to fall-and is now as its lowest levels ever-despite stocks making headlines for historic highs…
- China pushed the Yuan below 7-1 to offset President Rump tariffs, which marks the official start of the trade war.. There will be no winners except gold.
The Fed is going to keep cutting rates trying to stop an economic slowdown…and I think the outcome is inevitable.
The real reason gold prices are going to go much ,much higher is because the Fed is ramping up these easy-money policies.
They are pumping more money into the markets ,using artificially low rates…and THAT is going to make gold prices soar.
It’s all being set in motion by the Fed’s recent rate cut.
I’ve got some other numbers here…showing just how good gold can be following this first cut.
RETURN FROM FIRST RATE CUT
Jan 3, 2001 1Year 2 Year 3 Year 4 Year 5 Year
Gold 4% 31% 55% 60% 99%
S&P 500 – 14% -33% – 18% -11% -6%
Sept 18 ,2007 1 Year 2 Year 3 Year 4 Year 5 Year
Gold 18% 39% 76% 146% 145%
S & P 500 –21% -30% -26% -21% -4%
Which is why ,yet again ,I am so confident that a double in gold is within historical norm at this point. Potentially even more,
because things are different this time around. It’ s “perfect storm” for gold.
Gold traditionally has also been one of the best defenses against monetary “shenanigans”… And after showing some small signs of restraint over the past couple years, the Federal Reserve and other central banks are suddenly full-on “dovish” once again.
This shift has resulted in an explosion in negative-yielding debt, which just passed a mind-boggling $15 trillion this month…
Finally, in addition to positive fundamentals, gold’s “technicals” are looking positive as well… After five years of failed attempts, gold finally staged a major breakout in June when it soared above $1,400 an ounce. Gold has continued its uptrend since then, touching $1,500 earlier this week. And silver now appears to be breaking out, too.
The rally has continued since then…
In fact, both gold and silver hit fresh multiyear highs today. Gold touched a fresh six-year high above $1,550 an ounce, while silver rallied above $19.50 an ounce for the first time in three years.
We continue to believe significantly higher prices are likely over the next several years.
However, in recent weeks, we’ve also been warning you that the odds of a correction – and potentially a sharp one – are rising.
Our biggest concern has to do with sentiment…
In short, some of the most reliable sentiment measures we follow are hitting extremes that typically precede at least a short-term pullback.
One of these measures is the weekly Commitments of Traders (“COT”) report, published by the U.S. Commodity Futures Trading Commission. The COT shows the real-money bets of different groups of traders in the futures markets.
We pay particular attention to what speculative traders – also known as the “dumb money” – are doing. These folks are often wrong at extremes. When they get extremely bullish, it’s typically a bearish signal for the market, and vice versa.