Three Things Every Gold Investor Needs to Know

10 Sep

Three Things Every Gold Investor Needs to Know

Reasons for Higher Gold, Echoes of the Last Stock Bubble, and China Stocking Up!

As gold continues to consolidate its remarkable 2020 gains and build a base for its next leg up, we’ve spotted three things that help provide a window on what’s ahead.

Number 1:

First, we’ll share the fundamental observations of a Bloomberg analyst who sees the possibility of gold reaching s high as $2,583 in 2021.  

Bloomberg Intelligence’s Eily Ong:

“Gold consumers’ adjustment to a higher price for the metal, along with greater investment demand, is a recipe for the precious metal’s potential price acceleration in 2021.  

“Market sentiment for gold is likely to strengthen on dollar wobbles amid rising geopolitical risks in a lower-for-longer interest rate environment. Central banks and investors may absorb the market surplus as they seek gold for portfolio diversification and possibly as a hedge if inflationary pressures return on the substantial stimulus measures injected amid the global health crisis. …”

We speak “analyst,” so let us translate.  Basically she is saying a weak dollar in a dangerous world, and prolonged interest rate repression by money-printers and central banks moving to gold to protect themselves from inflation and continued money-printing are reasons for higher gold prices next year.

That’s right, as far as it goes.  

She might have thought to mention, as another analyst did, that “a globally synchronized currency devaluation is coming.”

Number 2:

In our last post, we mentioned Stanley Druckenmiller’s comments on CNBC this week in which he said he expects the annual inflation rate to rise to as high as 10 percent in the years ahead.  

One more thing from his comments that we’d like to get on the record.  He took aim at the Fed and Chairman Powell and their massive money creation driving the current stock market bubble, by reminding viewers of the previous bubble, the housing bubble engineered by Alan Greenspan: 

“And I just want all you guys cheering him on to remember the Maestro in 2005, and how that worked out.”

“Look, everybody loves a party, but inevitably, after a big party, there’s a hangover, and right now we are in an absolutely raging mania.” 

Number 3:

And finally, you know how Communist regimes love their five-year plans.  Lenin and Stalin made them a daily part of the failed Soviet economic life.

Now we have a peek at China’s next five-year plan, beginning in 2021.  It calls for China to stockpile commodities in amounts sufficient for any crippling supply disruptions.

The plan calls for building its reserves of oil, agricultural commodities, and strategic metals.  

China’s interest in amassing gold reserves is already well-known.

The commodities boom that began in 2000 was primarily driven by China, along with other BRIC nations.  

It was a powerful component of the bull market that lifted gold and silver prices to all-time highs in 2011.  

Here we go again.