Everyone knows that when the Fed "pivots" the gold price and all finacial assets should skyrocket. The reason is that with so much debt in the system and so much embeded inflation, tight money is bound to cause liquidity crisis and a pivot will come as a result of crisis and not achieved obectives.
This will result in the return to highly inflationary loose money.
But the markets keep churning in a fairly directionless way as traders look for clues.
The problem with so many investors is precisely that they are "traders" and not investors.
This is especially true for gold.
If you are a trader you are looking at all sorts of micro economic signals that show where the Fed might be headed. CPI, Housing Starts, Consumer confidence, PCE, MI, M6, credit spreads, blah blah blah.
Or worse you're reading technical indicators. That is a true fool's game.
And you're scouring the Fed minutes for clues. Following minute changes in the dot plots. Listening to the speeches of regional Fed heads for hints of dissent.
That's great. Everyone needs a hobby. And the stuff can be fun. At least I find it fun. To a point.
But the only way to make money in gold is to have a broad macro understanding of the overall direction of the quantity and flow of Debt and Money (which are two sides of the same coin) Nationally and Internationally.
The rest is noise. If you don't understand what that means, find out. It's not that hard.
Basically it has to do with whether central banks are tightening or loosening overall, and who is receiving the funds and what they are doing with them.
To this end everyone is looking for a Fed "pivot" right now. That means they are looking to see when the Fed moves from tightening to loosening monetary policy.
But nobody will ring a bell.
The truth is this: The minute the Fed and the Treasury agreed to bailout SVB - the "Pivot" happened. Because Trillions were injected into the financial system. And trillions more were pledged. And they will be provided as needed. And they will be needed
It doesn't matter if we get a few more quarter point hikes. It doesn't matter how tough the Fed talks. It doesn't matter what happens with the "dot plot." It doesn't matter what the month to month Employment readings say. Or the CPI readings.
All those things can affecty the markets on any given day.
But all that really matters is that rates, having hit about 5 percent, were as much as on over-indebted economy could stand and it began to break. Rates can go no higher without massive bailouts that will dwarf the scale of the 10 trillion dollar covid bailout, or the 3 trillion dollar housing bust bailout, or the Trillion dollar S and L bailout.
In other words we can not control inflation in the long run with as much debt as we have amassed in the system, wihtout breaking the system.
Get your head around that - or go broke.
That's all you need to know about the overall direction of gold.
If inflation soars gold will protect you. If we break the system gold will protect you.
If you try to trade it, you'll lose your position as there are huge traders out there who can push the paper price 100 dollars in a few minutes on any given day. The real bullion price rarely reacts to these paper raids. But if you are trading GLD or Gold Stocks, or gold futures you will lose your position.
For the average gold investor you buy as much real gold as you can stomach and sit on it.
Or you buy gold coins and medals if you understand that market. They will benefit greatly from the appreciation of the bullion market.
Or you buy any intrinsically valuable Hard Asset you undetrstand. It will appreciate in the same way for the same reasons.
If you can't afford gold you buy silver. It acts the same way in this situation.
And silver has been catching a bid - even on days when gold is down. That shows people are intuitively grasping all this.
If you agree with the macro premise, you only need vison patience and conviction - and a little disposable income.
No comments:
Post a Comment