THE BIG SELL OFF

 

G0ld has crashed from about $2750 to $2550.

Is it over?  Who knows.

At the start of the year most overly bullish analysts predicted that gold could go as highas $2500 this year before embarking and the real upswing at the beginning of the bullish cycle due to commence in 2025.

So as brutal as this drop has been we're just back to this year's most bullish projections. (By analysts like Felix Zulauf, I mean, not some BOZO on the internet.)

Some "analysts" confuse - as always - correlation with causation when noticing the drop timed with the election.  Then they tried to retrofit explanations like the Trump Pease dividend or the Trump return to American Exceptionalism.

Delude yourself all you like.

Or look at the math.

The tax cut extension will add 5 trillion to the deficit.  Normal operation of the government will add another 2 trillion.  That's without mass deportations that should add at the least another trillion.  And without the expansion of the military which should add another trillion.  And the addition of at least 2 new government cabinet level departments - the Orwellian super costly "Department of Government Efficiancy" and the massive expansion of ICE that should add another few trillion more to the budget.

SO we're talking about Many Trillions of new spending while CUTTING TAXES, and crushing revenues - all as the FEd cuts short rates - and LONG RATES ARE SHOOTING HIGHER.

This has never happened to the US before.  EVER.  LONG RATES RISE AS THE FED CUTS!!!!!!

It is happening because nonody is buying our debt but us.  That is the definition of monetizing the debt.  That is the cause of massive inflation, slow growth: STAGFLATION.

It is simple math.

And if you think a Peace divident will offset that you're smoking chronic.  Because Trump has already given carte blanche to Netenyahu.  And he has promised carte blanche to Putin.

Hard to see where the peace comes from there.

Maybe it will come by Magic.

Maybe.

But then maybe 1+1 will continue to equal 2.

If so, whereever gold ends up  in the short run, in the long run it's going much much higher.

GOLD AND THE ELECTION

 

There is one enormous economic factor affecting the future of gold that nobody in th Political Sphere is talking about.  

Nobody.

But it affects the future of gold in particular and all US economic activity in general more that  anytbing else happening in the realm of Global Economics.  And the policies of neither a Democrat or Republican administration are taking this massive Global Economic Factor into account.

All of our economic woes stemming from massive deficit spending and perpetual negative real rates have been masked for the last 50 years by that fact the we have had the world's reserve currency.  So no matter how much debt we incur the rest of the world needed to buy our debt in order to have dollars as a settlement currency for oil, copper, lithium, and every other commodity.

This is ENDING.  Because of the lunacy for Tarrifs and Sanctions every country has decided to ditch the dollar as a reserve currency.  Nobody is buying our debt.  Because nobody wants to hold dollars that can be confiscated.

That is why the long dated treasuries are rising even as the Fed is cutting.

But it is a gradual process.

UNLESS we double down on tarrifs and santions.

Then the rest of the world will double down on ditching the dollar.

It is not a simple unwinding because the Eurodollar market is vast.

However, it is the most destructive process to our economy we have encountered since WWII.

And it means that inflation will reignite while the yeilds back up and up and up.

Unless somebody in our government gets their head around this.  The US dollar is screwed.

And gold will go to the stratosphere.

Unfortunately nobody running seems to have any idea what I'm talking about here.  Plenty of people in the fincial community do.  It's hard to understand why the disconnect is so great.

But gold knows.

HOW TO UNDERSTAND THE GOLD BULL

 

GOLD BULL FROM 600 BC

How to understand this rocket up move in gold?  Normal.  Things in the gold market are absolutely normal. The Fed has lost control of the Gold market, which they had systematically supressed for years as the economy loaded up with mountains of debt.  Every time they try to crash gold the central banks of the world stept in and buy.  They just don't have the muscle to compete with that.

So gold is moving according to unrestricted market forces.  Normal.

And old measures like COT releases and Elliot Waves and whatever bizarro trading methods you think can predict gold movements are all out the window.  Because we are now in the End Game of fiat currency.

MMT -     Modern Monetary Theory - which basically says that you can print as much money as you want to fund whatever you want was once a fringe left wing joke.  Now it has been embraced by both parties.  Print Print Print.  That is the mantra of Republicans and Democrats alike.  And Europeans.  They're in the same boat with the Euro.  As is Japan with the yen

It used to work better here because we had the world's reserve currency wherein we would print debt and the whole rest of the world would buy it thus subsidizing our profligacy.  They needed it as a settlement currency for oil, and all other commodities.  

But that game is rapidly eneding as the BRICS+ seek to aggressively de-dollarize.  They have stopped buying our debt.  In stead they buy GOLD.  And they craft intercountry settlement agreements for commodities - and goods - that cut out the dollar.  And Gold is the stabilizing currency behind other settlement currencies.

This is the NEW REALITY

And it is only just beginning.  Becuase of the collassal stupidity of our politicians from both parties we are about to elect a president - no matter from which party - who has ZERO understanding of this new dynamic.  They talk about Tarrifs and Sanctions.  They talk about closing our borders and demonizing other countries.  They talk about ending Global Trade.  All of which causes the BRICS+ countries which accounts for 40 percent of GLobal GDP and a much higher percent of the Global Commodity Trade to DEDOLLARIZE at ever faster rates.

And as they dedollarize the Fed loses control - not only of the GOLD market - but much more importantly to the LONG END OF THE BOND MARKET.

When they cut - as they must - regardless of inflation because they have to bring down spriraling Debt Service costs - the long dated bond yeilds RISE.  Not fall.  Rise.

This is the ultimate catastrophe for the US economy.

If you don't understand this you really should do some work to understand it.

Because it is the key to everything that will follow.

Including the continued Ascendency of Gold.

It won't be straight up day after day.  (today it's down big time - take advantage gold in on sale)

But it will be straight up Year after Year.

Until a new monetary system is agreed upon - Globally.

That will take a while.

A good long while.

Meanwhile the GOLD BULL WILL RAGE,

GOLD SOARS AS REPUBLICANS REVEAL THEY ARE ALL IN WITH MMT - JUST LIKE THE DEMOCRATS

 

The Republican Candidate for President revealed he is all for scrapping pretty much all taxes - at least those on corporations, firemen, policemen, everyone in all branches of the military including national guard, coast gard etc, as well as on tips, anyone working overtime, social security, and pretty much everything else.

So, with no income, the Federal Government must simply print up trillions and trillions to pay for anything and everything especially all those concentration camps for the evil immigrants, subsidies to all oil drillers, deportation programs and an greatly expanded military.

Add to that a massive Tarrif program that will raise the price of everything stoking massive inflation and killing global trade while the President takes over the Fed and drops rates back to Zero.

It's no wonder gold is making new highs every day.

It's hard to imagine the Democrats being a whole lot more fiscally conservative.  Escpecially when many of them have expressed the opinion that MMT works just fine.  So at least everone agrees on that.  At least everyone in US Politics.

So I really wouldn't worry about much of a pullback in gold until someone with a modicum of common sense decides to run for office in this country.

Don't hold your breath

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.