Gold
Get’s Respect
gold as of 6/25/19
$1431.60
Gold bottomed December 16, 2015 at $1050.
"Somebody"
Finally Cares About Gold
Lower real interest rates are gold price-positive. And not only are real rates falling right now, there’s currently $12 trillion in negative *nominal* debt trading worldwide right now:
On Tuesday, Mario Draghi apparently went rogue on his fellow policymakers and launched into a swan song version of his all-time hit “Whatever it takes”.
The next day, Jerome Powell at the Fed confirmed his willingness to ease and let the market know he stands ready to cut rates multiple times over the next year.
That — plus a downed US drone patrolling the Iran border — poured gasoline on gold, which spiked as high as $1,410/oz, finally breaking free of the $1,350 ceiling that had blocked its advance for years.
On the fundamental side, more and more experts and pundits are waking up to what PP has been saying all along: the central banks have painted themselves into a corner they don’t know how to get out of. So they keep using the one tool they have, hoping for a different outcome (and yes, perhaps pushing all of the wealth into the hands of the 0.1% *is* their desired outcome).
But that strategy is based on perverted logic; it can’t be sustained. You can’t print prosperity. There’s only so far asset prices can rise while real wages remain stagnant. Housing prices can’t long stay above people’s ability to put food on the table, even with <3% mortgages.
There’s a point at which more stimulus no longer has any effect.
So it’s quite likely a nasty deflationary downdraft lies in our future.
While this may initially cause gold to drop in price, the metal should fare much better than the pantheon of risk-assets falling from their current all-time bubble highs.
As we often say in our live presentations: “In a bear market, expect to lose money. The trick is to lose a lot less than everybody else”.
DYI: Gold
finally get’s respect. There was a
comedian by the name of Rodney Dangerfield who made an entire career out of how
in life he never got any respect from anyone not even his wife.
Since gold peaked back in 2011 moving into its
bear market not just dropped the price of gold this bear man slaughtered
precious metals mining companies dropping up to and many past the 70%
mark. Ouch!
DYI’s Dow/Gold Ratio averaging formula was systematically
taking money off the table as gold [plus the mining company shares] went on its
meteoric rise. Of course what little was
left was smashed. With the constant sale
of gold shares during this time DYI’s averaging formula’s was buying stocks,
long term bonds with the remainder in cash [short term notes]. What little was lost in gold was more than
made up by those gains pushing us further and further into the profit zone.
So here we are today with our averaging
formula’s producing our model portfolio.
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