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Msg  257778 of 259795  at  7/17/2022 1:18:42 PM  by

BenTen


 In response to msg 257753 by  Luckyone581
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Re: Gold Outlook

Hi Lucky thanks for sharing the ideas and analysis.  Will share my thoughts below.
 
What seems to me is happening with the price of gold is of course we are talking about futures so the price of gold in the near or not too distant future.  And what I understand is that when the economy is entering into a recession - which it looks like the US now is - stock market is a leading indicator - hearing housing sales have stalled which is expected with higher mortgage rates - is that as the equity market drops and the economy contracts it gets into credit problems in various sectors which can snowball and it becomes a credit issue and in general gold is being sold to back up credit issues by various players and this presses the price of gold.  So maybe traders are working on this hypothesis and this is pressuring down gold prices now.  However...once everyone who needs to or can sells their gold - that is buyers are found for it at a lower price level - this transient will be over - maybe when the market hits a bottom at -50% - maybe when the Fed eases back to zero - and gold prices will recover.
 
What interests now however is that the situation around gold from a macroeconomic perspectice is setting up for a big move up in prices as follows.  Am looking at the chart in the following link - select MAX view - USD gold prices from around 1970 to today...again select the MAX view...
 
 
There was a big move up - multiple years and multiples in value - in the early 1970s - and then again in the late 1970s...the first involved Bretton Woods and the USD going off the gold standard - but the driver as per my understanding was inflation driven by the spike in oil prices in 1973 and also paying off the bill for Vietnam and rising social costs - then a second big move up in late 1970s probably also driven by an inflationary spiral in the US...prices of everything were going up so wages were going to go up therefore you cannot just lower oil prices and inflation drops instead it feeds itself - and to stop an inflation spiral the Fed has to raise rates HIGHER than inflation which is not happening today and cannot happen - so my thinking is there is a reasonable chance that this is where the US and European economy is heading in 2023 and 2024 - inflation is a socialogical phenomenon in that everyone expects higher wages every year and businesses will be raising prices and paying higher wages and so on...
 
If the market sees this scenario starting to take hold this can start a significant move up in gold prices and it can be a move powerful enough to break through futures market control systems and if that happens then you can get to a dutch tulips penomenon where rising gold prices lead to more people believing and so it moves even higher...
 
The big risk and challenge with gold as an investment we see in the chart from the peak just below $500 in 1987 which was only reached again 19 years later that is a LONG sideways and down move...and it can happen again going forward from today...it was broken through only in 2006...my interpretaiton of this phase is that gold does not do anything in fact holding it leads to costs to keep storing it...whereas from 1987 through 2006 you can also put money in a bank account and earn interest over inflation - no longer possible today - or you can invest in growing companies in some way and beat inflation even more so the price of gold lingers - what happened driving the price of gold up starting around 2001 was not inflation but a second factor not seen in the 1970s it was emerging markets lead by BRICs and along with a billion Indians and billion Chinese it takes just a small percentage to want to buy one gold coin each and there goes the entire global production for that year so with this increased wealth globally there was more competition for gold as a storage of wealth or backup investment.
 
So today potentially we still have this underlying global growth factor unless the globalists can push through a global green agenda and population reduction with more viruses or unhealthy vaccines or war and in this case of course there will be less demand for gold.  But so far the global green new deal seems to be stalled with Russia splitting off with India and China forming a new trading block to which more countries seem to be wanting to join than stay with a decaying and dying West so a scenario is still open for continuing global growth in Southeast Asia and Africa...and if Argentina and Brazil hook into the new Russo Chinese trading block and currency then South America could also continue to grow and we have this drive with new gold consumers continuing.  But now also in parallel we might have an inflation spiral starting in North America and Europe possibly creating a run towards gold to hedge against inflation in the wealthier older part of the world.
 
And there is a third and possible new factor - so back to the analysis shared around gold and the USD.  There is a real risk over the next few years that the US dollar and the Euro decay as global reserve currencies and since the gold chart is priced in dollars if the dollar loses value and gold does not then that moves up gold price.  Am not seeing the US dollar losing completely its reserve status but with Saudi Arabia and Aramco and all the Russian oil companies sending their sales forces across the globe interfacing with the refineries in the world and preferring paymings in some new Russo Chinese Indo Currency and payment system and with Russia backing all of this up as a leading supplier of energy and food which is what everyone really needs above all else for living and economic operation we have a new global reserve currency in the making...all of which means the US economy gets hit with more inflation as the dollar loses strength...
 
So to conclude, I have started to build positions in some big gold mining stocks NEM GFI WPM FNV but still lots of cash to add...risk is as I shared above a further move down in equity prices and credit problems lead to much lower gold prices...but I think that the more likely scenario is that a really deep low in gold prices is not found and as the recession takes hold the Fed backs off and by the end of this year we are back to zero interest rates...plus QE...and inflation is still with us...and in this scenario once the credit crisis has ended we could see the beginning of another big multi year move up in gold prices and I would rather be early and waiting around for a year or two than late to a move like this...if it happens...and if gold prices linger then hopefully the big gold miners can gobble up a slew of failed juniors and at least keep their market value stable so I dont lose anything...
 
 
 


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Msg # Subject Author Recs Date Posted
257780 Re: Gold Outlook Luckyone581 6 7/17/2022 2:38:50 PM




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