🔴 What Extreme Monetary Policy Means for Gold (w/ Greg Weldon)

🔴 What Extreme Monetary Policy Means for Gold (w/ Greg Weldon)


Now it’s one thing and one thing only pain avoidance the deepest pain a debt deflation Europe potentially staring down the barrel of that gun right now. So what do they do? Well, what if they were to actually raise interest rates? Oh my god, you get say a hundred a 200 basis point deposit rate Now all of a sudden fixed income is fixed income again You’re paying investors, you’re paying depositors to put money in the bank and on the flip side the ECB using the LTRO Program is able to establish a borrowing rate for banks that say minus 100 or minus 200 Say you had a symmetrical minus 200 plus 200 two-tiered system You know a deposit rate against the borrowing rate for banks Now the thought process goes so far as to suggest what would happen is that this would facilitate? banks making loans to consumers and businesses at minus 50 basis points essentially Paying consumers paying businesses to borrow more money I mean negative interest rates the thought process was that’s going to be a you know A penalty dynamic that will force consumers to go out and spend money. It’s not how it’s happened It sucked money out of the system. So in this case this kind of setup while dramatic while Huy on steroids would have some desired impact if your desired impact is to kind of push for a reflation But at the same time, yeah You know on the back end of that, you might get some severe reversals in some of the markets like the deposit rate futures Which are pricing and rate cuts? If you hike rates You’re gonna have a massive opportunity to be short those contracts Something like the bonds would probably get hit too and yields would start to rise The flip side would be stock markets would probably love this idea you know at least for some time period it would be a honeymoon for the stock markets and Really when you come back down to it. This might be the most bullish thing I’ve heard potentially if it were to ever come to fruition The most bullish thing for gold and I’ve heard in 35 years of doing this against that backdrop The view on gold is very positive and it’s even positive to the degree that the last six to nine months haven’t been negative because if you look at the dollar and the dollars trading And a half the dollar is bidding to kind of break out here in a short-term basis and get back to the highs from 2016 Closer to 104 on the dollar index the trade weighted dollar index is he’d been even stronger and against that backdrop Gold has not cracked If you overlay these things gold would be trading more rolling the lines of 1100 maybe as low as 1050 given where the dollar is that D linkage is Huge because what it tells you is if the dollar is the strongest currency out there and gold is appreciating in dollar terms That means gold is appreciating against all paper currencies. That’s the sweet spot for gold That’s what you have right now in fact the gold Adjusted value of the dollar index simply the dollar divided by gold really not rocket science is on the verge of a major Breakdown into what has already been a secular breakdown So it would be a fresh leg down here which would mean, you know, obviously Gold’s already broken out above this 1375 level that was key resistance and if you lay out the technical structure on the long term basis even going back to 1971 when Nixon delinked gold, you know from the dollar officially This has kind of been a four wave setup. All right wave one two wave three was into the 2011 high the most recent correction to the lows around 10:50 lo and behold it’s almost a perfect 50% retracement of the entire blue move from 1971 to the 2011 high and I remember specifically You know just watching this very closely back when gold was under pressure into you know Late 2014 and into the 2015 low the number of days that you got below that 50% retracement and then closed back above it The number of kind of tailed reversals like on a candlestick chart that you might see Below this 50% retracement level just belied so much demand there It was uncanny to watch the math and to watch how it played out You know in the manifestations of the market movements to where it held that level more recently There was some questions around gold You know was maybe gonna break 1260 again and could have had a real another significant hundred 150 $200 decline and it didn’t Do that so When you throw all this into the mix let alone you take places like Angola Pakistan Colombia Uruguay lose Becca Stan Kazakhstan, I mean gold in these currencies record highs in almost every case so a lengthening list of currencies against which gold is at record highs including the Aussie dollar for example Including you know some major currencies Swiss Swedish Krona will be another example and then you look at the you know The dynamic around how the dollar is playing out in this context again You know you kind of go back to if the ECB is gonna pull some you know QE on steroids rabbit out of a hat here. Okay, wouldn’t it make sense? that gold is kind of appreciating at all paper currencies because Essentially what you really have going on here at the end of the day the most base case at the instinctive level is a growing uncertainty fear and even mistrust around all paper They’re just gonna keep printing more and more paper. Every time there’s an issue around dis inflation deflation Well, you know at some point there is a level of uncertainty and anxiety around all that paper and it is io u–‘s currencies sovereign Debt, it’s all saying it’s an IOU and you know It’s kind of cliche but it is powerful and it’s true the dynamic around gold Being kind of an offset to all of this paper that they just keep printing

4 Comments

  1. Gold does not APPRECIATE. The debt notes, counterfeit currency, computer credits, depreciate. Debt notes, computer credits, are not money. Only gold is money. All else is credit. J.P. Morgan. 1907.

  2. Great incites into gold's Fibonacci retracement in 2013/14 and how it plays into the fundamentals we see on the economic front. Thank you Greg.

  3. Great stuff. I hope commentator read these comments and respond!

    Wonder what should be investment vehicle/s for gold?

  4. The Fed cannot expand credit year after year without default and correction. Will it be the consumers or the business that crack this time or will it be both at once? Either way, during the write offs and recession, gold is the asset to hold.

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