GOLD: APPROACHING THE EDGE OF INSTABILITY

 

Gold is only just beginning to attempt a fourth breach of the old highs.  This is not really very impressive considering the value of the dollar has broken down significantly since gold made it first top back in 2011 after the MBS crisis of 2008.  At that time the Fed showed it was willing to bail out the economy at the then massive cost of a 3 trillion dollars given away to the banks that caused the crisis.

This engendered a newfound respect for the Fed.  Somehow.  It was thought it showed the Fed was able to bail out any crisis no matter how big, so your money would always be safe in the US banking/brokerage system,

The covid crisis hit and the Fed bailed that out with ten trillion dollars given away to the largest banks, brokerages and bond holders.  They again showed their awesome power to save the day.

Now all that money creation has created the most out of control inflation we have experienced since the 1970's.  But in the 1970's the US economy was burdened by NO DEBT.  No BURDEN NO DEBT (as Bob Marley once sang).  Now we have 32 trillion dollars of Federal Debt, and another 200 Trillion of unfunded liabilities.  Along with many hundreds of trillions of Corporate Debt Financed near Zero percent that will have to be refinanced soon.

What's A Fed to do?

Well, raise rates up to 5 percent to attack the inflation.  It's beginning to work in the sense that the rate of inflation is coming down - but the prices that are already devastating the vast middle class are still rising - just a bit more slowly.  Meanwhile the hundreds of billions financed at zero percent are beginning to show serious cracks.

And suddenly the Fed has a million critics.  They waited to long to raise.  They raised to high.  They have no plan.  They are data dependent but all their data is backwards looking.  ETC ETC.

The main thing is that Economic Proffessionals who used to praise the Fed to the skies have turned on the Fed.  

This makes the Fed's ability to control the economy - and the gold price - more difficult.

And the competing Central Banks in China, Russia, the Middle East are working against the Fed by buying gold hand over fist.

So as gold makes its fourth attempt to break out the Fed's ability to control the gold price through dumping massive sell orders on the Futures Markets through the Bullion banks is being challenged in a way that it has never had to contend with before.

Add to that a major hot war in the the World's Oil Producing center and Instability begins to seriously worry the world's financial proffesionals so the potential for a gold breakout becomes that much more likely.

And you can bet your bottom dollar that whoever becomes President in 2024 will install a Fed dove to try to jumpstart the economy - and then inflation will really soar.

So there is much that would lead one to believe that new highs for gold are in the near future.  

And those highs are likely to confirm the Fed's inability to control the economy which will lead to a virtuous cycle for gold and a frightening cycle for most everything else.