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Risks to the Narrative
It’s been nearly eight and a half years since December 15th 2015, when the FED ended its ZIRP (Zero Interest Rate Policy) era and hiked interest rates by 0.25%, as the economic recovery and risks of deflation faded out.
Gold’s price was $1,083 and one month later, in January 2016, my wife encouraged me to begin publishing my journal and my market observations in written form. The idea of Wealth Research Group was born; it took shape and began to cover the epic ascent of gold and silver right off the bat.
I’ve been discussing precious metals for years and made one huge purchase of physical Gold Eagles in September 2018, when the price had dropped the most since the bear market years, hitting $1,180, and I was able to scoop up coins.
Again, after the March 2020 end-of-the-world sell-off, gold dropped to $1,300 and silver to $12/ounce, and even though I didn’t add physical, I did trade mining stocks.
Now, with gold at $2,268/oz, the question is whether the train has totally left the station and the ship has sailed.
After eight and a half years from the 2015 bottom, is it over for gold bulls?
The answer is that the BEAR YEARS are over, so if you’ve patiently added to your stake, now the results will begin to roll in much faster than in the bear years. The opportunity isn’t over by any means; it has changed, though.
Because the bear years are officially over and the market participants all see gold trading at an all-time high, the dynamics of the trade must be seen in a new light.
RISKS to the NARRATIVE
- Gold bull markets end in euphoria.
I see no signs of it right now. ZERO. One of the best signals of a feeling of lack of disciplined buying is when bullion dealers tell you they are overwhelmed with speculators.
Call your local shop and ask about the daily traffic. My boots-on-the-ground reporting says there is nothing to be excited about in that regard.
Secondly, look at the price of silver; in the late stages of a precious metals bull market, the gold/silver ratio reaches 50:1, not over 80:1, as it is today.
- Powell has stated the FED’s narrative and the market has agreed, which does put us in a risky situation in the near-term, because at the first sign of data that questions this, the market will freak out.
The narrative of the FED is that it won’t ruin the U.S. economic boom, in order to bring inflation back down to 2% swiftly.
In other words, the FED has shifted to dovish after two very hawkish years.
Courtesy: Zerohedge.com
When we get closer to elections, both candidates will make overarching promises (Biden on jobs and Trump on tax cuts), but if the market begins to see worrying signs about the national debt, which is soon becoming the government’s largest expense (interest payments surpassing entitlements), then the uncertainty will grow.
What, then, are the important principles to keep in mind?
Between now and when the market narrative is questioned, gold is on a tear and dips are opportunities, whereas once the bull thesis is weakened, trim.
It’s a beautiful time for precious metals after more than eight years.
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