Gold shines again as the chatter about 3,000 USD gold per ounce grows louder.
Frankly, the landscape is looking dicey on all fronts. Storm clouds are gathering over the economy. The cooked job numbers can no longer hide the growing number of well-paid corporate job losses. In total, more than 136,000 tech layoffs have occurred in 2024 from 429 companies. Last month August, there were 27,000 job cuts in tech companies alone. Moreover, 28% of tech leaders anticipate further layoffs, and in the U.S., 25% of tech executives say they expect to implement layoffs in the coming year. The US consumer, the world’s largest, is tapped out.
US Household consumption has been in a year-long squeeze with even the dollar stores struggling. So business is seeing its steepest decline in investing at a 1.0% annualised rate last quarter, the largest decline since the fourth quarter of 2015.
“US Household consumption has been in a year-long squeeze with even the dollar stores struggling”
WIN INVESTING
Gold shines as the economy hits the ground with a thump
Gold, the greatest and oldest bet against failing state and monetary policy stands out as a champion of wealth preservation.
In a piece entitled, The Great Gold Rally, Darren Winters wrote that “the ultimate haven asset, gold could take a moon shot.
The shiny metal is up 18.7% year to date, easily surpassing the treetops and well above all the indices.
The Fed is like a weary Emperor who sees the barbarians from a distance making headway.
To the east, the gold bugs have regrouped, trying to take the upper ground and gearing up for a great gold rally. To the west, is another emerging rebel, the crypto tribe regaining strength and advancing on the Fed’s debt-fuelled money system. Directly behind the Fed is that ever-pressing fear of stagflation, where the currency has been debased, due to monetary policy lunacy,” Darren Winters wrote in August 2019 when the gold price was hovering around 1,450 USD an announced, and Bitcoin was approximately 10,000 USD a coin, the latter is up X6 and the former X2.
“Gold, the greatest and oldest bet against failing state and monetary policy stands out as a champion of wealth preservation”
WIN INVESTING
Gold shines when savers and investors lose faith in fiat currencies
So gold and all other non-debt assets shine because, at this stage, inflation is no longer driven by demand, keeping in mind consumption and investments have all declined in a shrinking economy. US consumers are broke and business investment has fallen off the cliff.
Argentina and Venezuela all have hyperinflation in collapsing economies because inflation is due to failing currencies, where excessive debts are supported by increasing the supply of the fiat currency, backed by nothing tangible. Why would a rational saver, or investor want to store their savings or investments in a currency backed by nothing, created with nothing other than strokes on a keyboard? Those who trusted the monetary authorities, bought 10-year treasuries for pitiful yields in 2019 and laughed at the gold bugs were not laughing in the worst 2023 Treasury bond market crash in history.
Could Bond yields be the mother of all value traps?
“Whether the Fed cuts too little too late, starting its loosening cycle, probably has little or no barring on the gold bull rally”
– Win Investing
Gold shines particularly in economic and financial crises in the backdrop of a worsening geopolitical climate
Russia-US relations, made worse by the Ukrainian war, have not been so conflictive last seen since the 1962 Cuban missile crisis.
So gold shines in times of economic and financial crisis and rising risks of war
Whether the Fed cuts too little too late, starting its loosening cycle, probably has little or no barring on the gold bull rally.
If the Fed is too tight for too long, a banking crisis could worsen, and gold shines, and if it is too loose, ditto.
“Us old peasants know gold and silver will protect you when everything is collapsing” – Jim Rogers
Gold could now be a safe bet, irrespective of future monetary policy
Old-money family dynasties have retained their wealth, keeping it intact during wars and economic crises by investing a third of their wealth in land, another third in Gold, and the final third in fine art.
In the last four years, policymakers have implemented unprecedented loosening to unprecedented tightening, admittedly lockdowning the global economy and creating copious amounts of currency, also unprecedented in history, putting tremendous stress on the central bank system of fiat currency. The financial fallout from such radical swings in monetary policy is evident, being the worst bond market crash in history in 2023, the root cause of five known bank failures that year.
When gold shines, it is a sign that investors are growing wary or lacking confidence in the central bank’s monetary policy and the administration’s fiscal policy.
The US Debt Clock ticks into uncharted territory, with the national debt hitting over 35 trillion dollars. Interest on the debt is almost one trillion dollars, which is more than the US annual budget for national defence.
Creating currency to pay for the interest on the debt is what game over looks like. The Fed funds rates of 5.33% have almost broken the system, and the diminished purchasing power of the currency is manifesting itself in collapsing living standards for the populous.
The mainstream media disguises the crisis as a cost of living crisis, due to inflation. Consumers need to consume less, wages need to be held down, and greedy corporations should not overcharge.
But when you give a tiny elite group of people the right to create currency and another group the power to decide where to spend it, you no longer have a free market but a planned system run by apparatchik.
“Us old peasants know gold and silver will protect you when everything is collapsing,” said Jim Rogers.
Gold shines, and given the status quo, why should we expect anything different moving forward?
