Gold and the charts

 

I'm  not a huge  believer in technical analysis.  I think you find an investment with massive cyclical tailwinds, buy and hang on,  Like Gold: massive global printing of paper money in the form of massive debt that must be serviced creating massive printing needs creating ever more debt.  Add to that a Central Bank buying regiem as the world de-dollarizes, add to that the rise of Greedy Violent and highly erratic Madmen taking over both Werstern and Eastern governments - and mix in two hot wars - well you get the idea.

But just on a tehinical basis. Gold looks amazing. It has not risen straight up - though if you're not paying attention that how it seems.  But in reality it is rising in a series of reverse head and shoulder patterns, that sometimes evolve into cup and handle patterns,  

This is amazingly bullish as it is technically quite sustainable.

This current upward thrust to new all time highs is a marvelous reverse head and shoulders pattern that looks like it could have much farther to run.  And even if it just flattens out for some time here that would make a beautiful cup and handle pattern,

You can see the myriad reverse head and shoulders on the charts above.  The top is longer term.

GOLD AND TARRIFS

 

It's looking increasingly like a regime of Tarrifs will become the economic policy of the United States.  It's shocking that only 90 years since the last regime of Tarrifs - Smoot Hawley Tarrif Act of 1930 not only destroyed the US economy but put the entire Global economy into  a decade long depression.  

Who would want to repeat that?

Someone who has no coneption of US or Global History.

Someone who doesn't understand that Tarrifs are a massive tax on the US consumer.

However, there is a much more pernicious effect of Tarrifs at this moment in US history.

The US enjoys a mighty economic privilige: the US dollar is the GLobal Reserve Currency.  What this means functionally is that we can print money to pay our own debts - AS LONG AS THE REST OF THE WORLD WANTS TO BUY OUR DEBT.

But suddenly for the first time since World War II, much of the world does not want to buy our debt.  In fact they are selling our debt and using the proceeds to buy Gold.  They are replacing the dollar ar their primary resesrve with GOLD.

ENTER TARRIFS..  This becomes a major incentive of CHINA to rapidly increase their dedollarize campaign  and lead the dedollarization camapaigns of the rest of the BRICS+ countries which now include: Brazil, Russia, India, China, and South Africa New members: Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates And 17 other countries are applying for membership.

GET IT? 

Not everyone does.  

In fact neither candidate for president seems to have any idea this is happening.

But when the tarrifs raise the cost of everything, they will also raise interest rates as other countries 
head for the exits and refuse to buy our debt.  

So the Fed will have to buy all our debt while prices are rising.

And this will make the regeim of Tarrifs into perhaps the dumbest most destrutive

economic act in the history of the US, and perhaps in Global history.

But it will be great for gold!

A STRANGE CORRECTION

 

Well, it looked like a correction.  Then the gold price popped back up tp $2650.  The problem for those waiting for this correction to get in - is that the Central Banks of the World aren't waiting for a correction. 

 They're buying.

It used to be that the Fed could manufacture a good correction simply by backing the JP Morgan trading desk which would dump as many sell orders as necessary on the Future market in the thin evening session and then in the morning everyone long would panic sell into it creating a huge downwared move.

Now, they still try it but whatever size the JP Morgan trading desk can throw at Gold, the Central Banks of China, Russia, India, Indonesia, Poland, Mongolia, Czech Republic, Mexico etc simply say the equivalent of "Goody, Cheap Gold,  I'll take some of that!"  And the price pops right up.

It used to be you could even watch the COT (commitment of trader) reports and see when the commercials were net shot and the small traders were net long and predict a good move down.

But the Central Banks don't appear in those reports.

The game has changed.

It doesn't mean gold can't correct.  Everything does eventually.

It just means all the old ways of predicting the Gold movemnet are out the window.

Because the Central Banks of the world don't want to depend on the US Dollar when the US dollar is 

A) Drowning in debt.

B) Has been weaponized through Tarrifs and Sancations.

C) Is under the control of a potentially erratic, aggressive and unpredicatble Government.

This is not my opinion.  This is the open assessment of the BRICS+ Nations that are leading the accumulation of Gold while aggressively de-dollarizing their economies.

That doesn't mean the dollar will cease to be the Global Reserve Currency right away.  That's not possible with a Eurodollar market 5 times the size of the US dollar market.  But All of the dollar Reserves is held in the form of DEBT.

But it does mean that Gold has much much further to run vis a vis the US dollar - and all other currencies.  Because it is becoming the Global Reserve Currency that is NOT A UNIT OF DEBT.  It is a PURE ASSET.  It has no counterparty risk.  (And it can not be eroded by simply printing more units of debt - like the US dollar.)

So everyone has a choice as to what reserve currency they employ.  

Debt or a pure asset.

That includes every private citizen.

That includes you.

GOLD'S LONG AWAITED CORRECTION

 

Gold has finally started its long awaited correction.  It has barely taken a pause since it launched from under $2000, had a brief snooze in the $2300 area and then hit its current level of around $2600.

The Chinese announcement that they would pause in their massive stimulus campaign sent all commodities reeling.  And the fact that Israel has not yet hit Iranian oil fields or nuclear facilities has fanned  the eternal hope for a cease fire that has tempered bets on gold and oil. 

But also, just technically, Gold is due for some kind of pullback.  Many Americans are hoping against hope it is a major pullback.  Because either their technical models have been calling for one for a very very long time or - most likely - because they missed the entire run up.

Yes, most Americans have missed the entire run up.  It has been fueled by Asia - China and Japan and India,  Both by Asian Central Banks and Asian consumers.  Throw in Russia and many of the Mid Eastern Sovereign wealth funds and you have the recipe fot this type of move.

And now many Americans are hoping for a big pullback to provide and obvious entry point into this rabid bull market.

Maybe they'll get it.  But the markets rarely ring a bell (as the old saying goes).  Maybe this time will be different.  And maybe gold will simply dip a bit and then launch higher.

We'll see.

But a few things are completely obvious:

1. Israel will hit Iran.  Iran will retaliate.  Things will get much worse before they get better.  That conflict has no solution other than complete victory by one side or the other.  Because both sides have told us that is their position.  And it's not really relevant that those not directly involved (Like the US or the UN or Europe or Russia, or some 18 year old at Harvard) may have another opinion.

That sucks for humanity, but it's good for gold.

2. In the US both candidates have promised unequivically to explode the deficit.  The bipartisan policy center estimates that the Republican budget will increase the deficit by 8 Trillion (over what base?  Who knows.) and the Democrat budget will increase the deficit by 5 Trillion.  But that doesn't take into account things that have not been budgeted for like: Getting involved in the the 2 existing wars.  Dealing with the Immigration crisis.  (In the Republican case creating concentration camps for all the immigrants and then eventually deporting them which should add many many trillions).  Dealing with the massive natural disaster crisis that is developing from climate change,   (For which neither side has anything budgeted to address.)   And dealing with the massive homeless crisis that is affecting all US cities in red and blue states.

And it doesn't take into account the Global depression that will certainly result fromTarrif Wars.

This budget crisis which is really a DEBT CRISIS - sucks for humanity.  But is great for gold.

3. The Asian central bank purchase of gold is a prelude to a gold backed settlement currency to compete with the dollar.  We know this because the BRICS+ countries have told us that that is their intention. We don't know how this will play out but it will be dollar negative and gold positive.

4.  The US investor has not yet caught on to this megatrend that will last for at least the next few years.  When the US investor (That is to say the gambling class of the worlds' largest economy) catches on gold will recieve a massive boost.

So - enjoy the pullback while it lasts,  Whether it's a scary dip or a mild dip - it's a chance to buy cheaper gold.  Take advantage while it lasts.

I doubt anyone will ring a bell when it's over.

GOLD: ANOTHER ALL TIME HIGH FOR THE ANTI MEME STOCK

 

Gold just made another all time closing high at $2625 spot.  This is still without much public participation.  How can we know?  Simple: check inflows into the ETF'S like GLD, which are anemic to non existant (The stock rises because of derivative exposure not people buying gold) - and check both availablity and the premium over spot on the big bullion sites like APMEX.  Everything is available in quantity and the premiums are historically tiny.

It's still the Central Banks that are gobbling up gold.  Because the central banks know that the dollar is being destroyed by Deficit Spending and Money Printing.  And they are preparing the ultimate de-dollarization play: the launching of a competing settlement currency.

So Gold is not a meme stock.  It is not Gamestop.  It is not Invidia which has real earnings and sales but it sells a product for which there is little real productive value at this point.  It is not Bitcoin which has no use  but soars or falls purely on investor sentiment.  It is not Apple which has wonderful products though each year it comes out with the exact same product with a few pointless bells and whistles and expect to sell it all over again to the same people who bought it last year.

No - gold is the anti-meme stock -  It is a reserve currency used by central banks to secure the liquidity of their central economy.  It is the currency of last resort.  When there are no more lenders, when the printing press (electronic though it may be) stops printing money that people want to use - the Central Authority still possesses a currency that anyone anywhere will accept in return for real goods.  Simply because they have done so for thousands and thousands of years.  It provides the ultimate fiancial stability.

Gold is the anti meme stock.  It has only use value.   

But then gold can have what Karl Marx would have called fetish value.  That is to say what we call Meme value or what used to be called vogue, trend, craze, rage, mania or fad value.  At times of stress in the system investors and traders do flock to gold.  It just hasn't happened here in the US yet.  Because here in the US we have been feasting for so long on the value that has accrued to us through the use of the world's reserve currency that we can not recognize this moment of stress that almost everyone else in the world can see.

Our government was nearly overthrown in violent revolution just a few years ago and we've totally whiteswashed the memory.  Two hot wars are raging in oil and grain producing areas that could metatstasize at any moment yet they have already moved out of the news cycle, as everything does after a few weeks of coverage.  Then it gets boring and old - to US viewers.  Becuase we're special.  Nothing touches US because we have the worlds reserve currency.

But as the world dedollarizes (while we sleep) eventually we wake up one day and realize the dollar is losing value at an alarming rate.  And it makes no difference who is in the whitehouse or who is at the Fed or what the next transformative technology is changing the world.  Because there are just too many dollars being printed and distributed to too many people for it to retain any real value over time.

And then things which are just annoyingly expensive now will be prohibitvely expensive.  LIke houses, and education and food.  We're close.  But we have no attention span.  Anyone who promises to fix the problem will be believed because we want to believe.  

But what is the solution to a debt based currency when we are drowning in debt and when any slowing of the debt produces a recession - that can only be cured by more debt?

When the average Amercian understands that this is the problem and not immigrants or blacks or jews or muslims or women with no children or strangers eating our pets then they will realize that there are only two solutions: Change the economic system which will require years of difficult adjustment or protect yourself with your personal reserve currency of last resort.

And then Americans will buy gold.  And the price will shoot ever higher.  But then the availability of REAL GOLD BULLION will disappear and the premium over spot will shoot up to 10,20, 50, 100 percent and more.  

Then Gold will become a meme stock.  Everything has its moment.

DIVERSIFICATION WITHIN THE GOLD UNIVERSE

 

Let's say you're one of the very few Investors who have bought into the Gold story. 

Though this is, at present, a story that is very much driven by Central Bank purchasing, and very few US investors have bought in - YET - let's say you're in.  But you're not sure exactly what to do to maximize the value of your position.

It's like any other investment.  You need to diversify within the Gold Universe.

How?  You prepare for the various scenarios in which gold will be needed.

These scenatios include:

A. Inflation.  This is guarnateed by the central bank driven, deficit spending driven, global economy.  Real inflation (as calculated by the metrics the government used back in the 1980's before that fancey hedonic adjustments) has been at between 15 and 22 percent for the last four decades.  Anyone alive spending money who is not a billionaire is sure to have noticed.

B. World War which ruputures supply chains, ratchets up inflation, and increases the chance of real terror inducing disruptions.  There are two significant hot wars going on where Russia. China, and US all have vital interests in the outcomes.  And it is certain China will  move on Taiwan before long.  So 3 vital hot spots that couls easilty metastasize.

C.  A strong man Autocrat seizes control of the US govenment, and takes control of the Fed which will cause a flight from the dollar, especially in the quadrillion dollar derivatives markets.  And when everyone tries to sell at once - financial markets head into crisis.  Again, the only thing keeping the world in the dollar is confidence in the Fed.  It takes a lot of heat from a lot of places.   But no one doubts that they're trying to keep the value of the dollar steady.  If an autocrat takes over the Fed, that confidence will die, and so will the dollar and this will cause havoc in the financial markets

So how to prepare?

A.  Physical gold.  You need some.  And you need it where you can get your hands on it quickly.  A nearby bank vault.  A hole the ground in your back yard.  Somewhere safe, nearby, accesible.

This will be most important for scenearios B and C.  Any breakdown in social order and you need physical gold.  And any breakdown in the financial order and physical might be your only savior.

B. Electronic gold: GLD is the biggest and  most liquid tracking stock.  This is not gold.  They own some gold along with a heavy dose of derivatives.  So in scenario A you can make money of this vehicle and it is far more liquid than physical gold.  I use it.  It's great.  In a true A/B crisis though I'd sell it in a heartbeat.  Because the derivative market can seize up in  a heart beat.

C. Collector Gold.  This market is real.  You can't really rely on experts though, except to explain things to you as you learn about it.  You have to know what you're doing.  But it's well worth learning because the market is big, real, liquid.  The trick is you have to buy and sell through dealers and auction houses.  So you have to pay retail or pay the hammer fees at auction.  Don't let this daunt you.  As the price of the dollar is destroyed through Fed/Treasury printing schemes and through a government drowning in debt that has totally given up on fiscal responsibility the value of collector coins like all hard assets keeps rising.

The trick here is to always remember its a DEMAND DRIVEN market.  Something can be rare and interesting but if nobody cares, the value won't rise.  You have to monitor the market and see what's in demand.   Then you have to get to know and understand areas that interest you and areas in which you have some familiarity through study or heritage or aesthetic appreciation.  Take the time. Learn.  It's worth it.

D, Other types of precious metal etc: Silver, Platinum, Diamonds: all of thse can work.  The problem they are all at the mercy of investor demand.  Gold is the only thing used by Central Banks as a reserve currency.  That is a very major underpinning of the market.  And for this reason, in a real crisis - only Gold is as good as Gold.

Gold is the real de-dollarization play – Nassim Taleb

 

De-dollarization has become a trending topic amid the rising strength of the BRICS bloc and surging U.S. debt. But according to one analyst, while many are focused on competing currencies or digital assets, the real de-dollarization play is gold. 

 

“People are not seeing the real ‘de-dollarization’ in progress,” essayist and mathematical statistician Nassim Taleb said in an X post. “It is not [about] trade settlements. Transactions are labeled in USD, as an anchor currency, but central banks (particularly BRICS) have been storing, that is, putting their reserves, in Gold.”

 

“Gold is up ~30% y-o-y,” Taleb highlighted. 

 

Luke Gromen, founder and president of Forest for the Trees, responded with the following chart, noting that “It's quietly been underway for 10 years; got much louder post-2022 sanctioning of Russian FX reserves.”

 

 

As Gromen mentioned, chatter about de-dollarization has been on the rise for the past several years. The decision to freeze Russian assets after the country invaded Ukraine served as a wake-up call for those who held large portions of their reserves in U.S. Treasuries.

 

Geopolitical and financial analyst Angelo Giuliano posted the same chart as Gromen, saying, “De-dollarization is happening.”

 

“Instead of buying US debt, countries are buying GOLD,” he added. “The US dollar Ponzi scheme is collapsing...the US exorbitant privilege to print endless amount of paper toilet currency is over. Gold hit an all-time high today [Sept. 12]. +30% yearly performance. Only the beginning.”

 

X user The Parabolic responded to Taleb’s post by noting that “The emerging monetary order can be summed up using Jevons' 3 key functions of money: store of value, unit of account, and medium of exchange.” 

 

“It is a historically odd and an aberration to have USDs/USTs serve all three roles,” they said. “Between 1922 (Genoa Conference) and 1971 (Nixon shock), the Anglo powers removed physical gold as the international store of value. They replaced gold with  government promises (banknotes, bonds, etc.), and the resulting debt-based system is extremely unstable, requiring ongoing quick fixes to not blow up.”

 

Taleb “shows that while the USD instruments can function as a medium of exchange and unit of account, their role as a store of value is being questioned by some of the world's largest economies,” The Parabolic said. “BRICs et al wanna take us Back to the Future.”

 

And touching on Taleb’s point that transactions are labeled in USD, author Richard Turrin noted that the “dollar's high percentage in trade settlements is increasingly meaningless,” as “1) Gold holdings show reserve storage, and 2) Migration of trade to alternate currencies isn't captured on SWIFT statistics.”

 

“The US will tout the USD's high percentage use in trade all the way to the bottom,” Turrin said.