Levels on XAUUSD over the next several years.
What I find most intriguing is that gold reversed course almost exactly as the Fed started tightening credit to the economy beginning Dec. 15th, 2015. Conventional wisdom would state the opposite, that as the economy heats up and the Fed manages credit conditions appropriately, you'd see flows out of safe havens like gold and into more speculative stuff like equities.
I do not believe the Fed manages credit conditions appropriately. I think they keep rates artificially low, allowing system-wide bubbles to grow, and then tighten credit too sharply (1). Since 97% of currency in circulation originated from bank loans (2), any regression in growth is enough to cause a systemic freeze as loan repayments overwhelm loan creation, causing a liquidity crisis as that 97%'s demand for cash soars in order to repay outstanding debts and remain solvent. Ironically it's banks refusing to continue extending credit to other banks that is the core of this issue, freezing the loan creation process and thus the overall economy. The only way out is to lower rates, or when you can't cheapen credit any further inject cash directly into the economy, which is what happened in 2008 and will happen again once the Fed begins to pause on their current trajectory.
Gold reversing right as the Fed started tightening credit to the economy is, in my opinion, global markets calling the Feds bluff on normalization. The Fed will most likely have to pause their balance sheet unwind much earlier than anticipated, which de facto marks the end of economic growth as people stop taking on more credit and demand liquid cash to remain solvent, which also includes a market sell off (possibly in UST as well) as people liquidate whatever they can to raise cash.
Gold will likely remain relatively flat mid term, bouncing between 1500-1300 as markets are selling off due to demand for cash, much like it behaved pre and post '08. Once the Fed and other central banks reverse course and start easing/printing/buying whatever is when you'll see gold soar to new highs. My target to take profit on my miners is later 2019-2020, after the Fed has paused a few quarters.
Just to conclude, it is liquid cash that is king when a highly leveraged economy begins stalling out. Debt-burdened DEflation is very real. A checking account + short term treasuries should be a majority of your portfolio, followed by things like gold and equities, real estate etc that have a muted correlation with the central banks monetary policy (as opposed to things like FANG).
(1) Good bit from the CEO of BB&T on the Fed's arbitrary policy decisions, making it difficult for banks to forecast lending conditions. From Cato's 36th conference on monetary policy:
vocaroo.com/i/s05s7OaacyJ6
www.cato.org/events/...-monetary-conference
(2) www.bankofengland.co...n-the-modern-economy
What I find most intriguing is that gold reversed course almost exactly as the Fed started tightening credit to the economy beginning Dec. 15th, 2015. Conventional wisdom would state the opposite, that as the economy heats up and the Fed manages credit conditions appropriately, you'd see flows out of safe havens like gold and into more speculative stuff like equities.
I do not believe the Fed manages credit conditions appropriately. I think they keep rates artificially low, allowing system-wide bubbles to grow, and then tighten credit too sharply (1). Since 97% of currency in circulation originated from bank loans (2), any regression in growth is enough to cause a systemic freeze as loan repayments overwhelm loan creation, causing a liquidity crisis as that 97%'s demand for cash soars in order to repay outstanding debts and remain solvent. Ironically it's banks refusing to continue extending credit to other banks that is the core of this issue, freezing the loan creation process and thus the overall economy. The only way out is to lower rates, or when you can't cheapen credit any further inject cash directly into the economy, which is what happened in 2008 and will happen again once the Fed begins to pause on their current trajectory.
Gold reversing right as the Fed started tightening credit to the economy is, in my opinion, global markets calling the Feds bluff on normalization. The Fed will most likely have to pause their balance sheet unwind much earlier than anticipated, which de facto marks the end of economic growth as people stop taking on more credit and demand liquid cash to remain solvent, which also includes a market sell off (possibly in UST as well) as people liquidate whatever they can to raise cash.
Gold will likely remain relatively flat mid term, bouncing between 1500-1300 as markets are selling off due to demand for cash, much like it behaved pre and post '08. Once the Fed and other central banks reverse course and start easing/printing/buying whatever is when you'll see gold soar to new highs. My target to take profit on my miners is later 2019-2020, after the Fed has paused a few quarters.
Just to conclude, it is liquid cash that is king when a highly leveraged economy begins stalling out. Debt-burdened DEflation is very real. A checking account + short term treasuries should be a majority of your portfolio, followed by things like gold and equities, real estate etc that have a muted correlation with the central banks monetary policy (as opposed to things like FANG).
(1) Good bit from the CEO of BB&T on the Fed's arbitrary policy decisions, making it difficult for banks to forecast lending conditions. From Cato's 36th conference on monetary policy:
vocaroo.com/i/s05s7OaacyJ6
www.cato.org/events/...-monetary-conference
(2) www.bankofengland.co...n-the-modern-economy
Seriously TradingView needs to fix this issue with charts not saving between sessions. It has been a recurring issue for years. I guess it's still a benefit to them because now I'm forced to publish my longer term predictions. Couldn't be bothered with shorter term stuff since it's amplified r/r that inevitably becomes spam.