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Saturday, September 2, 2023



Despite an historic Fed rate rising from 0 to 5.5 in under a year and the concomittant rise fo ythe dollar against all other paper currencies gold is holding in at about $1950 an ounce.  

We have entered into the traditional gold buying season (weddings and festivals) for Chinese and Indians which last from now through February.  But with rates set to stay high for a while and the dollar strong, what could trigger gold's next move higher?

Here are a list of the usual and not so usual suspects that could set us off into the long long awaited gold breakout:

1) First and foremost is the wave of refinancings and servicing of debt that was originally taken out close to 0 percent and now will have to be rolled over and serviced at 7,8,9 Percent depending on the creditworthiness of the borrower.  Because not only are rates much higher, but lending standards are much tighter and the available credit is much tighter.  This rollover will affect thousands of major corporations, the entire commercial real estate sector, the auto industry, and it will effect many millions of overleveraged consumers.  And the servicing of the debt will be a body blow to the US Government. PLUS the imminent debt rollover will affect the multi trillion dollar Eurodollar market in which debt is borrowed in dollars outside the US.

A storm is coming.

The fact that this debt bomb hasn't exploded yet is because the debt has not yet been due.  It comes due in waves starting towards the end of this year.  And that will set off a wave of defaults and bankruptcies that will signal the beginning of the next Fed easing regime.

Gold to the Moon.

2) A Usual Suspect: The infinite capacity of the US politicians to destroy our own economy for perceived poliitcal gain: THE DEBT CEILING.  This comes up again at then end of THIS MONTH.  And yes, I know, they always take it to the brink and then come up with a last second solution.  Until they don't.  Default has become a political game.  The US credit rating has already been downgraded because of this game.  Don't doubt the spectacular stupidty of our political class to take this game to the next level.  Ans yes the FED will step in and print unlimited money to make sure we don't really default.  THAT IS QE.  A return to QE will send gold to the moon.

3) The effects of Foreign Central Bank gold buying and dedollarization.  This is the main reason why during a manic rate hike spree gold has barely sold off.  And when the rate hike spree is done (Now?) the power of this global move towards gold and away from dollars will launch gold higher.

4) The massively distressed state of our Political Class. The politcal divide in this country is so massive, the hatreds so pronounced that nobody is trying to solve any of our problems.  Everybody is in it for personal gain for themselves and their political team.  We are devoid of ideas.  We are unable to debate.  Face it, the problems we have with debt, inflation and a resultant 1 percent trend economy are real, persistent and overwhelming.  And nobody is even addressing them.  Everybody is just looking for a scapegoat.  We know how that movie ends.

Gold to the moon.

Finally, when the Fed is forced to ease, we will have a return to inflation.  Because the rate regime only affects demand.  And much of the inflation is caused by supply dislocations that will only get worse with the global divide between the west and the China/Russia led BRICS block.

And when inflation returns gold will never look back.