No One is Ready…
We’re going to create a full synopsis of the incredible CPI report that came out, but today is dedicated to explaining just how bullish we are on gold, even as many bulls are throwing in the towel and are frustrated with 2022’s gold performance.
Gold has risen in all of the last six rate hike cycles. As it stands, gold is not doing much in the current one!
The main reason for this is that gold makes the lion’s share of its rate hike cycle gains AFTER the Federal Reserve dials down its aggressiveness.
In other words, once Jerome Powell begins to tone down the need to keep hiking, the gold sector will take off.
In light of this historical database, let’s look at exactly what this all means:
- July 27th – The Federal Reserve is going to raise the FED Funds Rate to 2.25%-2.50% after another 0.75% hike, a truly aggressive policy response by all accounts.
This will take the FED Funds Rate to above neutral (2.00%) for the first time since December 2018. We believe that at those levels there will be even more pressure on the stock market than in 2018.
- September 30th – GDP numbers will come out and reveal the U.S. economy to be in a technical recession.
I say technical because the economy is still growing, but when compared with the GDP growth of 2021 when we came out of the nightmarish healthcare recession, the growth looks far weaker but is still historically robust.
At that point, we believe the political and FED talk will refocus itself to fighting the recession, not inflation.
When you zoom out and understand where we are compared with historical valuations and ratios you cannot be serious about contemplating a gold bear market. It is clear that gold has bottomed with the November 2021 “Inflation is not transitory” speech and we’ve embarked upon a Dow Jones bear market that could easily see gold DOUBLE and reach at least $3,300.
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This cannot be overstated: gold is VERY CHEAP.
We believe that the recession fears will turn into recession policy in Q4 of 2022, and that is the catalyst that will send gold above $2,000 once more.
Gold performs well in recessions while stocks falter.
- November 8th – We believe the political tides will change, and that will be the catalyst for gold.
The midterm elections will show the country has lost faith in Biden. By that time, we may even know who the Republican candidate is for presidency.
Courtesy: Incrementum AG
When you realize that inflation is resetting valuations of stocks much more than it will impact gold prices, you will see that gold has a chance to hit $3,300 in this cycle!
The biggest thing to remember is that inflation is out of control and the government has NO ANSWERS yet.
It’s extremely difficult to truly understand that the global economy is in reset mode. People are still buying the dip in stocks, not giving up on the NASDAQ, but we believe that gold is the mother of all opportunities.
Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!
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