You're finished punk! You're ROADKILL! At least that's the meme you're supposed to believe and I bet that even some of the hardened gold bugs are withering under the relentless beatdown of precious metal prices over the past four months. That's right FOUR MONTHS. A once promising rally in gold and the precious metal's stock shares is now in shambles for the beleaguered believers in Bali. It seems like yesterday when the "believers" had returned to post here in the comments and renew their old acquaintances as the price of mining shares appreciated 4, 5, even 20 times off their lows in just a matter of a few months in a move that caught even the most ardent gold bug flat footed. So what changed?
Donald J Trump was elected President and the greatest rate increase in history is about to unfold. Amazing how these epic events can influence the fundamentals in the yellow metal. I know its a waste of time to bring up the fact that we still have Trillions and Trillions and Trillions of debt that is mathematically going to destroy ANY possible return to interest rate normalization.....but I digress.
What I really wanted to touch on today is HOW this will play out in a simple way that even I can understand. This is all about extend and pretend. There is no "FIX" in this game. It is all about wealth EXTRACTION during the extend and pretend phase of this game. So how can you tell where we are going. WATCH your grocery shelves. WATCH your prices on everything you use. Lumber, food, gasoline, education, medical care and medicine........YOU get the picture. In the interim if they can keep these prices somewhat CONtrolled they can extend and pretend with massive money printing with each "crisis" that rears its head. The increase in prices/wages will mean the VELOCITY OF MONEY is increasing and the CONfidence in holding that fiat in your possession is rapidly diminishing. WHEN that begins they will not be able to stop it. It will RAPIDLY spread through all markets, engulfing the world in a panic. The much vaunted "bond vigilantes" will then have their day, but the sucking sound from hell will even overwhelm them as their fiat bond base implodes.
“Flation” is guaranteed in the next few years. We will see inflation, stagflation, hyper-inflation and deflation. Many of these flations will happen simultaneously. Currently we have major monetary inflation combined with asset inflation. Credit growth and money printing have in recent years benefitted the ailing banking system but have not yet reached consumer prices and therefore there is no ordinary price inflation. In 2017, velocity of money is likely to increase, leading to stagflation, which is higher prices without growth. But as the problems in the financial system deteriorate, hyperinflation in most major economies is virtually a certainty. The build-up of debt and derivatives in the last quarter century guarantees that desperate governments will print unlimited amounts of money in a frantic attempt to save the financial system…
In summary..... we are not there. As long as they don't have runaway INFLATION then DEFLATION can be "managed" by money printing......ie the Dollar/Euro/Yen. Derivatives can still be managed by the CBs and the World can proclaim its "all good". Again its NOT deflation that will limit this game.....it is INFLATION and until that starts to get onerous, they will print.
For me right now it is simple. I think in the near term...(next few weeks) they will take some air out of the Dow and bring gold up as they reverse their trades and the smart money that's been taking down the miner shares and gold will start another intermediate up move in the miners. Then again.......maybe they won't.......gl