‘Somebody’ Finally Cares about Gold
The comments below are an edited and abridged synopsis of an article by Adam Taggart
Last August, gold entered a bull market after breaking above $1,200. In 2019, the increasingly dovish/desperate policy retracements of the central banks, which may never normalize their balance sheets, have boosted the bull run.
Lower real interest rates are gold-price positive. Not only are real rates falling right now, there’s already $12 trillion in negative nominal debt trading worldwide.
With recent dovish announcements from the Fed and the ECB, we can expect trillions of dollars to be added to that pile. That lit a fire under gold, which broke the $1,350 ceiling that had blocked its advance for years.
Technically, if gold can hold above $1,385, it has a lot of room to run. Gold has traced out a reverse head-and-shoulders pattern and has now punched through the neckline—a bullish breakout.
Short of a raid orchestrated by the central planners to fasten the cap on gold (a possibility, given the historical record), the yellow metal shouldn’t encounter much price resistance until above $1,500.
Money-printing cannot be sustained; you can’t print prosperity. Asset prices can only rise so far while wages are stagnant. Housing prices can’t stay above people’s ability to put food on the table.
A deflationary downdraft likely lies ahead. While this may initially cause gold to drop, it should do better than many assets. As Taggert says, “In a bear market, expect to lose money. The trick is to lose a lot less than everybody else.”
Even if the central banks succeed in preventing a deflationary rout, it will soon be confetti time for the word’s fiat currencies. Gold should shine, maintaining its purchasing power and increasing in value as trillions of dollars in capital look for safe haven.
The $7-trillion gold market is small compared to the $164 trillion held in stocks and bonds, and the silver market is tiny. If/when a few trillion dollars flee risk assets into precious metals, gold and silver prices will explode.
Position yourself for this predictable outcome in advance, especially since the breakout above $1,350 has occurred. That, combined with the desperation the Fed and ECB have shown, indicate that the big moves for precious metals are now cleared to happen. Things could move quickly from here.
Finally, gold is no longer being ignored. Somebody cares, which is why we’re at the highest levels seen in over half a decade. Just imagine what the price will be like when everybody cares.