Taking Gold Candy From A Fiat Baby

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Published : December 07th, 2021
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Category : Gold and Silver

Britain lost the Battle of Yorktown in 1781. After 80 years, there was the US civil war, in 1861. About 80 years later, on December 7, 1941, Japan attacked Pearl Harbour.

Today, December 7, 2021, is another 80year anniversary for America. Does more conflict lie ahead?

Well, the US government and central bank still refuse to abandon their vile fiat money system and replace it with gold. So, rampant debt growth, corruption, and loss of citizen freedom continues.

Socialism’s greatest pillar always has been, and always will be, fiat money.

The long-term dollar versus gold chart. A move through $1923 would fully activate the bear flag pattern.

That would usher in the next leg down for the nation’s fiat “poster boy”. It’s a morbid journey, with a destination that looks a lot like Hades.

Leveraged homeowners took a Corona-oriented hit, but a scenario of rising interest rates would be much worse.

The long-term T-bond chart. A huge top pattern is likely forming, but an inflation-related meltdown is likely still 4-5 years away.

Leveraged homeowners and mortgage investors should be able to weather the early part of a rising rate storm, but what about the stock market?

The current bull market for US stocks began in 2009. The technical and fundamental drivers of the market are clearly deteriorating.

The Fed is potentially entering an inflation-oriented tightening cycle and the Dow is overbought. Note how far above the 60month moving average the Dow is, with the MACD indicator rolling over ominously.

It’s a classic three-stage bull run, and in 2022… it’s probably done!

The important Dow versus gold chart. I call this the “Time Chart”. Here’s why:

For the past fifty years, the Dow has remained below its 1971 highs for about 80% of the time. The only period when it rose above its 1971 highs versus gold, was during the silly speculative bubble in the 1990s!

Also, stock market investors generally sell stock regularly, and pay tax on their gains. The number of Western investors who have held the Dow (or any stock market) for decades is very small, whereas the number of Asian investors who calmly hold gold for the long term is enormous. The bottom line:

The stock market can rally higher, but for investors, there’s now far more real risk than potential reward.

Gold bugs envision a day where money managers sell the stock market and buy their miners. That day came in the 1970s and it’s coming again, but not until the money managers see the Fed hike rates repeatedly… and those hikes fail to stop the rise of inflation.

Still, the miners are becoming a more solid investment than the stock market, and many of them are free cash flow cows.

The daily gold chart. My 14,7,7 Stochastics oscillator is more oversold now than at any point in the past two years!

With India and China recovering from Corona, citizen demand for gold is set to recover too.

That’s going to help gold push towards its all-time highs, even if there’s a pause in the US inflation theme.

Also, in 2015 most gold bugs were nervous (or in denial) about a Fed rate hike from Janet Yellen. At that time, I predicted a hike… and a massive gold price rally! That’s exactly what happened and when Jay Powell tapers his ludicrous QE program, an even more important gold price rally should occur.

The enticing GDX daily chart. Note the incredibly positive positioning of numerous oscillators.

I don’t think I should say that making money in gold stocks right now is as easy as taking candy from a fiat baby… or should I? It likely is that easy, and I invite gold mining stock enthusiasts around the world to consider joining me with some modest-size buys!

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Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am-9am. The newsletter is attractively priced and the format is a unique numbered point form, giving clarity of each point and saving valuable reading time.
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