The Mainstream’s Got It Wrong
The comments below are an edited and abridged synopsis of an article by Jim Rickards
Gold has taken a hit this year, no doubt about it. But it’s not all doom and gloom: Some perspective is needed. If we go back to the beginning of the current bull market on December 16, 2015 (when gold bottomed at $1,050), the yellow metal is up over 60% even at today’s beaten-down price.
That bottom occurred on the exact day that the Fed started their lift-off in interest rates after seven years stuck at zero. Rickards urged investors to buy gold then. Those who listened are sitting on huge gains even after the latest drawdown.
Savvy investors know the dollar price of gold is volatile. They keep their eye on the long-term trends and long-term drivers of the gold price. Sophisticated investors don’t sweat the dips. They see the occasional drawdowns as a great entry point and buying opportunity.
Up for discussion: Nothing new here; the mainstream scenario; perspective; the alternative scenario; and gold wins either way.
What comes next? The realization that we’re not re-inflating will take time to sink in. It will emerge from the data over the next six months.
Congress will halt multi-trillion deficit spending packages, despite Democrats’ belief that the US is ready for another trillion-dollar package. By mid-to-late 2021, the economy will slow, interest rates will resume their long-term downtrend and gold prices will soar.
“The worst situation for gold is the one we have now where rates are going up, but there’s no actual inflation. If I’m right about inflation, then rates will come back down, and gold will rally. But, if inflation actually does appear, guess what? Gold will go up, because it always does in inflation.”