2010 + 9

A guide to 2019 and beyond.

29
Mon, Jan 14, 2019 - 9:22am

For each of the past several years, we've written January posts that helped to serve as a road map for the year ahead. Though crystal ball-gazing is an inexact science, on balance we've done a pretty good job with these forecasts. As 2019 dawns, we thought we should give it another try today.

Let's begin with where we've been...

After the election of Trump in November of 2016, a narrative was quickly assembled and shoved down our collective throats. This narrative included a strong dollar, a bursting of the bond bubble, a roaring stock market and falling gold prices. We felt this was mostly garbage and we wrote about it here: https://www.tfmetalsreport.com/blog/8103/questioning-generally-accepted-...

Heading into 2018, the establishment theme was a strong dollar that would drive the US economy and stock market forward. Again, this was all supposed to lead to falling gold prices. We didn't buy it and instead listed three, primary themes that would drive events through the year. You can read all about it here: https://www.tfmetalsreport.com/blog/8755/three-themes-2018

So, how'd we do? Again, on balance we did quite well. Yes, the stock market rose in 2017 but the dollar fell, the bond market bubble did not burst and gold prices gained more than 10%. And last year, despite all of the dollar bullishness that permeated and drove most markets, the dollar index only gained 4.6% and, by late in the year, the Political Risk that was listed as Theme #1 was definitely taking hold and driving the dollar lower. Yes, the price of gold fell in 2018 but, in the end, the decline was less than 3%...a far cry from the doom and gloom so many generalists had predicted.

Thus here we are in 2019 and the time has come again to post some long-term projections. What excitement will the year bring and how will all of this impact gold and silver prices?

Well, if you're a member of this site, then you likely already know where we're headed with this. If you're not, then perhaps the title of this post gives it away. To put it succinctly, the year 2019 will closely resemble the year 2010 in regards to the economy, the dollar and Fed policy. Most importantly, these factors will all combine to drive gold and silver prices to their best year since 2010...when Comex gold rose nearly 30% and Comex silver rose by an amazing 83%! We may not be able to duplicate these gains in 2019 but we're going to do pretty well, that's almost certain.

And why do we say this with such confidence? Again, the answers lie in the macro similarities to 2010. To wit:

  • The US economy began 2010 in a recovery mode from The Great Financial Crisis. The mainstream media banged on incessantly about "green shoots" and GDP growth was positive. In fact, Q2 of 2010 saw GDP grow by 3.7%, Q3 was +3.0% and Q4 was +2.0%.
  • The Fed had initiated the first QE program to monetize the debt in March of 2009 but it was completed in 2010. It was generally considered a one-off and a success...and also never to be needed or repeated again.
  • And the dollar rose as the US economy was perceived to be recovering faster than the rest of the world. The dollar index posted a 2010 gain of 1.5%.

For the just completed 2018,

  • The US economy was reported to have grown nicely with gains of 2.2% in Q1, 4.2% in Q2 and 3.3% in Q3.
  • The Fed hiked the fed funds rate every quarter to the point where this overnight rate is now at 2.50% and the full yield curve is essentially flat.
  • And the dollar rose as the US was perceived to have the strongest developed economy. As mentioned above, the total gain for the dollar index in 2018 was 4.6%.

Turning back to a decade ago, the US never made it to renewed prosperity in 2011. After peaking in Q2 2010, the US economy began to visibly slow and the dollar began to decline with it. Similarly, a funny thing happened on the way to higher interest rates and balance sheet normalization in 2018. Just as in 2010, the US economy began to slow and the dollar began to decline.

And now here we are, with a sense of deja vu all over again. Under similar circumstances, the Fed reverted to their original intentions in November of 2010 and announced what was dubbed "QE2", a second QE program that promised another $600B in bond buying. This plan allowed the Fed to buy even more garbage securities from their member Banks as well as monetize an additional $300B in US debt. The market reaction was swift and consequential by late 2010.

Through 2011, the dollar fell sharply and a crisis of confidence grew to the point where US gridlock, government shutdown and debt ceiling debates led in August 2011 to the first S&P downgrade of US credit quality in history.

As you'll recall, the dollar prices of gold and silver skyrocketed. As 2010 began, Comex gold was trading near near $1100 per ounce. By early September 2011, it reached $1920. Comex silver was even more crazy. It began 2010 near $17 and was still just $18 in early August. However, the crisis of confidence brought about by the reversal of Fed policy (QE2) and an epic short squeeze of The Banks in early 2011 led to a peak of $48 by late April 2011. Yes, that was a nearly 150% gain in about eight months.

Can this happen again? Of course it can. A better question is will it happen again? And now we get to the point of this post.

As laid out above, economic conditions and Fed policy as we begin 2019 are very similar to what we experienced in 2010. This alone should get your attention. However, consider all of the additional extenuating circumstances at present:

  • Political discord in the US is at levels unseen for decades with the very high likelihood of congressional investigations and even impeachment of the president. Not only will this serve to create massive legislative gridlock, it will also derail any hope and confidence the American consumer may have for the year ahead.
  • Falling consumer and business confidence will lead to economic slowdown, lower tax revenue at all levels and falling home prices.
  • All of this leads to an exacerbation of US government debt levels. With trillion dollar deficits projected through the next decade (and these are based upon 2+% economic growth!) the US national debt will explode along with the interest costs to service this accumulated debt.
  • And this will matter in 2019. The total debt in 2010 was just $12B and there was hope that the US could "grow out of it". The next recession will finally bring with it the realization that that's not possible.

Ultimately, The Fed will be forced to reverse their current policy of rate hikes and balance sheet reduction. Will they hike the fed funds rate again in March? I have no idea and, frankly, I couldn't care less. They will either not hike in March and begin a move toward rate cuts and QE by later this year OR they will hike fed funds in March and begin a move toward rate cuts and QE by later this year. So what's the difference?

Comex gold and silver have already begun to decipher the situation and THIS is the reason they have begun to move higher after bottoming for good back in November. Oh sure, the stock market weakness of December helped with a few extra bids, but that influence was minor compared to the awakening that gold and silver have had to the pending Fed changes and fiscal crises of 2019.

We've often stated recently that the calendar year of 2019 will see Comex gold and silver post their best gains since 2010. Of this we are completely certain. Will these gains be 30% for gold and 80% for silver? Maybe, but probably not. We were early by about six months in projecting the economic turn last year and we may be early by six months in projecting the Fed's turn in 2019, too. However, what IS certain is that The Fed will eventually be forced to reverse course, just as they did in 2010, and when they do, the reaction in Comex gold and silver will be even greater than in was in 2011.

Why? Because this time there will be no reversal of course and confidence. The Bernanke Fed was able to convince the world that the $1T of QE3 in 2013 would be beneficial and lead to a stronger dollar versus the ECB's euro and the BoJ's yen. Confidence in the dollar returned and the metals fell dramatically. Not this time. Eight years down the road have led us to a place where, once the realization sets in that the central banks have no broad plan and that all they can do is create fiat currency, the Comex metals will soar and then remain on an upward trajectory for the foreseeable future.

Of course now, don't go thinking that this will be easy and that The Banks will simply stand down and allow prices to run. Experience has taught us that that will NEVER be the case! Instead, expect Comex precious metal prices to resume the typical bull market pattern that we witnessed from 2002-2011. Price will move two steps forward while Specs accumulate longs and Banks issue shorts and price will fall one step back as the inevitable "Spec Wash and Rinse" occurs. However, the overall trend and momentum will be undeniably higher for all of the reasons laid out in this post.

So, go now and begin to plan accordingly. Diversify your portfolio by following the lead of the Chinese, the Russians and many other sovereigns with dollar reserves. Perhaps you might accumulate a few mining shares after doing some thorough research and due diligence. And, most importantly, add to your stack of physical precious metal while you still can and while prices remain at these affordable levels.

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  29 Comments

Jan 14, 2019 - 9:27am
silver66
Jan 14, 2019 - 9:37am

First

First first of 2019

I wonder if the goldcorp/newmont acquisition will spark buying in the juniors

silver66

Maestro
Jan 14, 2019 - 9:37am

Technically speaking

Gold!

(Turd doesn't count)

Angry Chef
Jan 14, 2019 - 9:46am

Catherine Austin Fitts – Federal Government Running Secret Open

Catherine Austin Fitts – Federal Government Running Secret Open Bailout

This has been posted twice in the previous thread. But if you haven't listened to it. Try and wrap your head around this. I think this comment wraps it up nicely:

" Greg, with all due respect I don't think you understand what CAF is saying. Forget about a dollar reset. The fascists, using the Treasury, Exchange Stabilization Fund, HUD, DOD and any agency they choose, have turned the US government into a gigantic money laundering operation. And they maintain two sets of books - the public numbers are a complete sham. Any paper assets held by private citizens are not secure, are likely rehypothecated, and when convenient can be frozen or siezed by these fascists in Washington. There is no limit to how many dollars the FED can create secretly and funnel out through the ESF/Treasury to prop up and bail out any bank, black ops, pet project, mercenary army or paper assets they choose. The missing $21 trillion is probably a drop in the bucket as there is no audit and no honest books for us to examine. In sum, all paper asset pricing in dollars is a fraud and a sham. Any paper assets you think you own, whether it be stocks, bonds, or real estate are pure illusion: they can be repriced or stolen at any time; in reality, you own nothing. To the man and woman on the street I say this: get out of paper, get out of these markets and convert to tangibles in your physical possession - and do it secretly and privately, avoid insurances, records, paper trails. This mass defrauding of the American people by this corrupt government in Washington will come crashing down when the US dollar is displaced from reserve status; this is what China and Russia and the BRICS are setting the stage for: world trade without the US dollar. When this happens, your dollars will become virtual toilet paper and all of your paper assets will go poof ".

If this isn't confirmation that we're living in a Bankster run algorithm Fascist Matrix. Somebody pass the glue.

canary
Jan 14, 2019 - 9:46am
Jan 14, 2019 - 9:53am

this from Mother earlier today

It's possible we saw the last rate hike of the cycle, says former Fed Chair Janet Yellen in a speech at a big retail conference in NYC today. She said she sees low interest rates for "quite a long time."

CC Horses
Jan 14, 2019 - 11:07am

Another good comment CAF / Greg Hunter Interview

Take note that in this “Mad Max World” … Bankster gangs in Russia, China, etc. are increasing their gold holdings … recently the Hungarian National Bank announced a 10 fold jump in its monetary gold holdings … here is how the Hungarian Central Bank described its acquisition (and the rationale for their purchase is worth noting): “The possession of precious metal within the country is in line with international trends, supports financial stability and strengthens market confidence in Hungary. In keeping with the historical role of gold, gold remains one of the safest instruments in the world … (providing) stability and a confidence-building function”!!

lakedweller2
Jan 14, 2019 - 11:20am

First Impression

I have not read anything concerning the following thought. When I heard Newmont and Goldcorp merger, the first thing that came to mind was: Newmont, Godcorp, McEven, Quartermain and Sprott. Think about that for awhile in terms or Barrick and Randgold. Is there a possible polarization of power and assets?

Again, just something to think about.

Angry Chef
Jan 14, 2019 - 11:27am

Trump Threatens to ‘Devastate Turkey Economically’ If They...

... Attack Syrian Kurds

https://news.antiwar.com/2019/01/13/trump-threatens-to-devastate-turkey-...

Two things. Probably not the best idea to threaten the 2nd largest member of NATO with a key military base in the ME with economic devastation. And how is this economic devastation done ? In light of the CAF interview with Greg Hunter. It would seem that the threat of economic devastation is done with dark pools of money with zero accountability to the American citizen. Can we now conclude that America is now run by a rogue element within the Government and Security Agencies unaccountable to anyone or anything. And thus putting the welfare of American citizens at risk of not only Financial devastation but possibly worse ?

lakedweller2
Jan 14, 2019 - 11:54am

Turkey

Think the easy answer: Central Banking.

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