Could gold turn out to be the perfect trade investment with the systemic transition of democracies in play?
Many of you awake at the keyboard sense that we are living through historic times. Through our optics, we see a controlled demolition of free-market democracies, which is being replaced with a new political and economic system, known as state capitalism. The World Economic Forum, a global elite organization, hinted about this coming change when its members enlightened their audience in the 2020 conference about a great reset and a build-back better plan.
“Could gold turn out to be the perfect trade investment with the systemic transition of democracies in play?”
The global elite’s reset agenda was brought to light during the height of the pandemic global lockdowns, which was a wrecking ball for many small entrepreneurs, high street retailers, and businesses whose activities are outside the digital economy. The lockdowns accelerated the brick-and-mortar meltdown and a work from the home trend. Put simply, lockdowns accelerated the digitalization of everything, which fits well with building back a better ideology with elements of sustainability.
History teaches us that systemic transitions usually occur during upheavals, such as wars, revolutions, blood shedding, and human misery. Out of the ashes, a new system emerges.
But to date, we have had a peaceful bloodless transition, which leads us to believe that gold could be shaping up to be the perfect trade.
“The lockdowns accelerated the brick-and-mortar meltdown and a work from the home trend”
The crux of this piece is that we believe gold could be a perfect play because this systemic transition is accompanied by a change in central bank monetary policy
Put simply, unprecedented expansion of the money supply M2 is bullish for gold in the long run. Unprecedented monetary easing is lubricating this frictionless transition to state capitalism.
Ray Dalio’s Bridge sheds light on how monetary policy is evolving in his piece entitled, “It’s Time to Look More Carefully at “Monetary Policy 3 (MP3)” and “Modern Monetary Theory (MMT.)”
“I believe we will have to go to Monetary Policy 3, which is fiscal and monetary policy coordination that is of a form that we haven’t seen before in our lifetimes but has existed in various forms in others’ lifetimes or faraway places” – Ray Dalio
“I believe we will have to go to Monetary Policy 3, which is fiscal and monetary policy coordination that is of a form that we haven’t seen before in our lifetimes but has existed in various forms in others’ lifetimes or faraway places,” wrote Ray Dalio.
Reading between the lines, Ray Dalio refers to a state capitalist system where the state plays an increasing role in the economy. So, we believe the public deficit of G7 advanced economies will continue to go much higher as it is sustained by central bank monetary policy.
So Universal Basic Income UBI, a tool to suppress a population from uprising, will be financed with MMT. If you think the money supply has taken a moon shot it is still on the launch pad.
The Fed no longer wants Fed watchers to keep an eye on M2, which is another reason why gold could be a perfect trade
The Federal Reserve, the world’s central bank by default, does not want investors to monitor M2. The Fed shutting down its money supply data is alarming.
We noted that the money supply and population growth are positively correlated and there is no way central banks could reduce the money supply in the age of unfunded pension liabilities and declining worker participation rates.
Two trends rising M2 and the rising public deficits could make gold a perfect play
“are we seeing the dam starting to overflow as gold prices keep building momentum near price support levels which could make gold the perfect trade?” – Win Investing
But there are also more reasons why gold makes a perfect play
The US National Debt of 29 Trillion and 226 trillion in global dollar-denominated debts means that USD and Treasury yields cannot go too high.
Notice that the US Dollar Index (DXY) is nearing its 52 weeks high of 96.16 and when the DXY goes over 100 the massive 226 trillion in global dollar-denominated debt become more expensive for international borrowers to service the debt, bearing in mind foreign borrowers have to sell their local depreciated currencies and buy dollars to pay the interest and principal on the loans. So, the Fed wants to prevent its shareholders, a banking cartel, to be left holding worthless loans in the event of a wave of international bank loan defaults
Moreover, the treasury ten-year yields also need to be suppressed at a level that makes it attractive enough for foreign buyers to keep buying treasuries so that the US government can fund the ballooning deficit spending.
So, the current Fed central planned system, let’s not kid ourselves and call it a market, the DXY, and the treasury 10 yr yields are kept at a sweet spot, where the USD price is serviceable for dollar-denominated loans and yields are higher enough to attract foreign buyers of treasuries.
But when you throw inflation into the mix, the Fed price planning becomes dicey, and you realize why gold could be a perfect trade. So, the gold price is being suppressed because gold, a true safe-haven asset, is a rival to US treasuries. Meanwhile, the Fed is suppressing yields so the US government can service the debt and equally keep DXY at a sweet spot.
Here is the zinger, could gold be the perfect trade, similar to Soros and Druckenmiller’s perfect trade, which broke the Bank of England in 92’
Euro is coming under pressure from negative real yields, and the euro is starting to fall. Moreover, GBP got hit as the anticipated BoE rate hike never materialized, bearing in mind the UK economy is too fragile to take rate hikes despite soaring inflation, not to mention Brexit and capital outflows.
The demand for gold is a natural force building up, and any dip is a buying opportunity. So, the more the Fed suppresses the price of gold, the more investors buy the haven asset. Meanwhile, inflation is soaring, which is pushing yields near zero and negative territory. If the dollar overheats, it triggers international loan defaults.
So, are we seeing the dam starting to overflow as gold prices keep building momentum near price support levels which could make gold the perfect trade?
Think about it. What if the Fed, like the BoE in the early 92 ends up giving way to gold’s true price discovery, which triggers forced short liquidation, thereby driving gold price sky-high and making gold the perfect trade.