All the financial news channels are talking about gold. Main Street and Wall Street are both turning more bullish. Gold has recently rebounded from almost $1800 to $2000, now pulling back slightly to $1985 to consolidate gains.
Anyone who has dealt with me knows I am not a price prognosticator, and if anything, I have, through my 28 years in the business, been very conservative in my price projections. Why the newfound bullishness (referred to as ‘hopium’ in the crypto space)?
8 Reasons to Believe Gold Will Keep Rising
· Look how well gold has done in the face of an extremely strong dollar. For most of my precious metals career, a strong (or very strong) dollar is a death nail for gold
· Gold doesn’t pay interest. You can now easily get 5.5% on your money in short-term treasuries. Anytime in the past when cash returns “good” yields, it has been bearish for gold, yet it is only $85 off its all-time high in USD terms.
· You may not know that gold is today at an all-time high against ALL major currencies around the world – it has already broken out from previous highs
· Central banks are buying gold in droves while simultaneously expanding their monetary base through printing. Maybe they know something???
· If the Fed continues raising the Fed funds rate, they risk breaking the bond market. Smart money has finished shorting bonds. We might see another 25 basis pt rise in December, but the consensus is that’s the last. The Fed may or will have to pivot if the economy shows overt signs of cracking. Gold will rise when interest rates fall (treasuries don’t look so attractive).
· If inflation remains elevated, gold will do well
· If our proxy or direct entry into these world conflicts (Israel, Gaza, Lebanon, Iran, Syria, Ukraine / Russia, China / Taiwan, and whoever is next) continues, gold will do well. REMEMBER: We have a very myopic view here is the U.S.. But what if you lived in the Middle East, Asia, the former Soviet Union, or Argentina (what a disaster), where would you put your money? In the local currency or gold?
· Gold is private. Christine Lagarde, President of the European Central, is now rolling out a CBDC. Transparency in – Freedom and privacy out.
There are more items I could add to this list.
What Would Cause a Decline?
· If the yield curve re-inverts (the 10-year yields more than short-term treasuries), that will confirm a recession/stagflation/deflation (we are already in the beginnings of a recession now.
· The stock market is drawn down 10-35% – all assets will sell off, including (paper) gold. Investors will indiscriminately go to cash, including their paper gold holdings (physical investors rarely sell). History shows that gold doesn’t sell off as deep and rebounds quicker.
· With 33.5 trillion in current debt and 200+ trillion in unfunded liabilities, and the U.S. becomes truly insolvent in the eyes of our trading partners, could gold be recalled?
· Peace and harmony return to the equity, bond capital markets, the geopolitical landscape, and the debt is paid off – bad for gold, but we would be okay with that.
Conclusion
I believe there is a strong chance we will finish 2023 at $2100 or above and 2024 at $2500 or better.
Finally, please remember that we all want our gold (and silver by proxy) to increase in value. But do not forget the privacy, insurance, and tangibility it offers. It helps to cure insomnia in this insane world.
BONUS: If you have read E.B. Tucker’s excellent book “Why Gold Why Now” (if you haven’t, I would very strongly suggest it), and/or seen E.B. on YouTube, you know that he is both enlightening and entertaining. He has a free newsletter published twice monthly, packed with excellent information (and a little humor). Subscribe here The Tucker Letter
