Guest Post: "Gold -- It's Time To Pay Attention", by Mike Krieger of LibertyBlitzkrieg

23
Thu, Feb 4, 2016 - 11:08am

I've gotten to know Mike over the years so I consider him a friend. Though his primary focus now is documenting the loss of civil liberties and the advancing tyranny of government and central planners, he's still an excellent financial analyst. Therefore, this piece he published yesterday regarding gold should definitely merit your attention.

GOLD – It’s Time to Pay Attention

The last time I shared my thoughts on gold, a subject I had previously wrote about constantly, was all the way back in July of last year. That post was titled, 4 Mainstream Media Articles Mocking Gold That Should Make You Think. Here’s an excerpt:

There are many reasons why I stopped commenting on markets, but the main reason is that I started to recognize I wasn’t getting it right. In fact, in some cases I was getting it spectacularly wrong. Whenever this happens, I try to isolate the problem and fix it. In this case there was no fix, because much of why I was no longer getting it right was rooted in the fact that my heart, soul and passion had moved onto other things. My interests had expanded, and I started a blog to express myself on myriad other matters I deemed important. Providing relevant market information needs intense focus, and my focus had shifted elsewhere. I recognized that I wasn’t intellectually interested enough in centrally planned markets to provide insightful analysis, and so I stopped.

Years ago, Martin Armstrong was saying that nothing goes up in a straight line and that gold would experience a severe correction before beginning its real bull market. We are seeing his prediction unfold before our very eyes. What he also said is that as gold approached the $1,000 per/oz mark or even below, everyone would proclaim that “gold is dead” and start making comically bearish statements. In a nutshell, negative sentiment would plunge to levels not seen in years, if not more than a decade. We are starting to see this now.

I didn’t write this article to “call the bottom in gold” or anything like that. I merely want to flag these four articles due to the hyperbolic nature of some of the statements made (they are exhibiting pretty much exactly the same behavior as the gold bugs they mock do). I do think that something is happening on the sentiment front that warrants we are closer to the bottom than the mid-stages of a bear market.

Fast forward six months, and gold has been more or less flat. Nevertheless, a lot has changed in the interim and it’s time for an update. Specifically, the multi-year fundamental outlook has turned far more bullish, while sentiment remains depressed. Yesterday, following multiple back-to-back messages about gold on Twitter, someone asked me for my bullish thesis, I wrote:

But there’s more to it. A lot more. First, let’s look at the improved fundamentals. Gold bugs will exasperatingly proclaim that fundamentals have been great for the past four years yet the price plunged anyway, so who cares about fundamentals? To this I would respond with two observations. First, large institutional investors and sovereign wealth funds have been anticipating a rate hike cycle for a very long time now. They didn’t know when, but they expected it. The fact that the gold bugs never believed this is irrelevant; what matters is that big money believed it, and it was perceived to be very gold negative. In their minds, this anticipated rate hike cycle would confirm that things were getting back to normal, and if things are normal you don’t need to own gold, right?

The problem is that this assumption is quickly being called into question. Sure the Fed hiked rates once, but it is starting to look more and more like a policy error. Meanwhile, other major central banks around the world are going in the opposite direction, toward negative rates. I am a huge believer in market psychology, and the psychology dominating the minds of most institutional investors over the past few years has been that things were slowly getting back to normal. This has weighed on institutional demand for gold in a big way, and been a meaningful factor in the bear market (manipulation aside). If this psychology shifts, the shift back into gold could be very meaningful.

While that backdrop is interesting in its own right, what may make the move into gold that much more explosive is the lack of alternative investments. Let me explain.

Very wealthy people in the Western world do not like gold. In fact, if you talk to them, most will sneer at you with a combination of disgust and bewilderment at the mere suggestion of buying physical gold. These people will scour the planet for every and any alternative they can find before buying any gold, and this bias has been evident globally over the past few years. We have seen mansion prices and luxury real estate generally soar to unforeseen heights across the globe, and we have seen tremendous bull markets in equities. Similarly, competing “safe haven assets” such as sovereign bonds have rallied to the point many of them offer negative returns. Specifically, the FT just noted that negative yielding bonds now account for one-quarter of the entire government bond universe. Think about that for a second.

So what we are looking at is a far stronger fundamental backdrop for gold, coupled with an investment landscape in which almost all the alternatives look overpriced and unattractive. While wealthy Westerners will be dragged into the next gold bull market kicking and screaming, dragged into it they will be. They may not like gold, but they like losing money even less. This will create the buying power so desperately needed for a new gold bull to catch fire, and many people will be caught off guard. Personally, I think a new bull market in precious metals will be birthed with the next 12-months, and it’ll be a big one.

*Note: I think it is beyond obvious that all financial markets, particularly precious metals, are actively manipulated by Central Banks around the world. Recognition of this fact does not help one determine when the psychology of markets and related price action will change, which is why it was not addressed in this article.

Finally, in case you missed it the first time around, you should check out the July 2015 article: 4 Mainstream Media Articles Mocking Gold That Should Make You Think.

In Liberty,
Michael Krieger

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  23 Comments

tyberious
Feb 4, 2016 - 11:25am

2nd

2nd

legacyelectric
Feb 4, 2016 - 11:29am

Thurd

Come on Charlie: I left 4th for ;you

Lintltj5
Feb 4, 2016 - 11:34am

First!

First!

Btw, I think yesterday was a nice little shot in the arm for morale.

The mood here over the past few months has been noticeably more sour and snippy than I can remember since Ive been here. Noticeable, but not overwhelming. It is understandable given the state of economic/political/social affairs and the complete denial of reality. Keep stacking and stay positive. Good things come to those who wait.

Feb 4, 2016 - 11:35am

Taking Charlie's spot

Vault subscribers, please be sure to check yesterday's podcast thread for a whole bunch of comments and charts on today's action.

abguy4
Feb 4, 2016 - 11:48am

Much appreciated

That short article is filled with Honest soul searching, not just left-brain analysis.

Much appreciated at this time when we all need a little hand-holding, and dare I say commiseration.

tyberious
Feb 4, 2016 - 12:13pm

Bix

We are in a very scary time in the process of taking down the Bad Guys as it involves taking down the entire Global Monetary System. It's the only way to level the playing field. The only way to make sure that the Bad Guys are dead and gone.

It's the only way.

But there is a plan to restart the system and includes returning to a gold/silver standard in the US. The US Minted gold and silver coins are all ready to be distributed to the public based on a "fair" allocation methodology invented by Alan Greenspan. This allocation system is based mainly off your Social Security balances but factors in other important variables so everyone will get enough to "start again."

Just look at the pictures in this Federal Reserve Bank of Boston publication and you will see for yourself what they have planned (watch for gold coins!)

Banking Basics

https://www.bostonfed.org/education/pubs/bankingbasics.htm

This publication was posted on the very same day as the Road to Roota materials from the Fed Boston.

I have posted my latest Friday Road Trip for Private Road Members here:

https://www.roadtoroota.com/members/Friday_Road_Trip_252016.cfm

Marchas45
Feb 4, 2016 - 12:55pm

That's It !!!!!!!! Turd

I want my Fiat back. You shouldn't be competing with your Turdites. Lol Keep Stacking

Angry Chef
Feb 4, 2016 - 1:03pm

Russia Accepts Yuan Is Now China's Biggest Oil Partner

This is an item that has flow under the radar in the MSM. Not so much here in Turdville where many astute observer resides.

Goodbye Petrodollar: Russia Accepts Yuan, Is Now China's Biggest Oil Partner

I'm trying to put the pieces together. We had Rob Kirby come out and say in recent interviews that over a trillion dollars of US Treasuries have been sent back to the Fed for redemption. But no change recently in the dollar other than it initially strengthened. Rob K. surmises that only the ETF could have absorbed this much cash. We observe Douche Bank and Glencore melting down. Now I ask how much exposure do the TBTF Banks have to these entities and what does their OTC Derivative book look like ? We also got word that Credit Suisse is heading into the toilet. We have record low inventories at the COMEX if we're to believe the COT reports. And what about the shale and oil Junk Bonds melting away as well ? But most importantly from my perspective is the article above.

With seemingly everything burning all around us. Doesn't Russia and China agreeing to accept Yuan spell the end of the petrodollar standard ?

Feb 4, 2016 - 1:05pm
Angry Chef
Feb 4, 2016 - 1:20pm

Does Anybody Know Where I Could Find an Article...

Referencing the trillion dollars US Treasury sent back for redemption over the last 18 months that Rob Kirby has spoken of recently ?

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