Dear Reader,
Today I want to talk about a big story that broke in The Wall Street Journal…
The article announced this April has been the worst April in the market since The Great Depression, 1932.
We have survived!
The worst April since The Great Depression.
Take that, Grandpa!
So today I want to talk about the price of gold.
A lot of folks have written in asking what I think about gold.
The truth is, gold has done well this month.
Gold just hit an all-time high at $3,500 an ounce as the market experienced its worst April since The Great Depression.
It’s unbelievable.
And my answer is, I’m still bullish on gold.
Because what’s driving the price of gold is the debasement of our currency.
It’s fiscal spending, basically.
We talk about this in Midnight in America with the bond market.
We also talk about gold.
Gold was dead for decades.
On Wall Street we used to kind of make fun of all the old gold bugs.
They’d be like, “oh, gold’s coming back.”
Inflation was so low and dollar debasement was so low nobody really paid attention to them.
But gold started to show some life during Trump’s first presidency.
He added $7.4 trillion in debt and it started to show some life there.
Then Biden added $7.2 trillion in debt, and gold started to really march up.
Of course, right now it’s looking like Trump is going to add between $7 and $8 trillion in debt.
The budget being pushed looks like it’s going to have around a $1.5 to $2 trillion deficit for the next fiscal year.
So gold will likely continue its march while all this is happening.
As long as we keep spending more than we can afford, the effects of that are going to be inflationary.
They’re going to degrade the value of cash, and that makes gold a very attractive alternative for foreign central banks, foreign corporations, and individual investors, like many of us.
Until we get the fiscal spending under control, gold looks likely to keep appreciating.
There are a couple of other recent factors, though, that are really driving gold higher.
One has been, basically, the “sell America” trade, which is what it’s being called now.
Foreigners are rushing out as fast as they can, selling stocks, bonds and dollars. Which is very unusual.
They’re just pulling money out of America.
To give you an idea how serious that is, this is the sixth time in American history that those three assets have fallen at the same time.
Usually, as I talked about yesterday, when the stock market gets hammered and people get scared, they rush into bonds and U.S. dollars.
But that’s not happening here.
The “Sell America” trade is on in full force.
So, what are people doing with all that money?
They’re hunting the globe for opportunities but there’s a finite amount of opportunity in foreign markets relative to the depth of the American capital markets, so they’re buying gold.
[They’re also investing in private market opportunities at the highest rate in years - here’s our favorite: “Nvidia’s $20 Trillion Bet” - coming offline soon!]
We continue to see tariff policies pushing other central banks into gold.
Because, again, if you’re a foreign central bank and you’ve been lending the U.S. government money every single week, every time it goes to the debt markets looking for buyers…
You may decide as a way to negotiate tariffs, I’m not lending you guys money this week. You need to realize what I’ve been doing for you. You’re talking about a goods deficit, while we’re financing your budget deficit. Every single week. So maybe we’re going to stop doing that.
So they go to gold.
Tariff policies are driving that.
And, we can’t let Biden off the hook here.
His freezing Russian Central Bank assets when the Ukraine war broke out, crossed a line in a lot of ways.
Which incentivized people, especially bad actors, to really push into gold.
It pushed China to go to a lot of Southeastern Asian nations to get them to de-dollarize, which means drop the U.S. dollar as the reserve currency.
So there’s been a lot of that going on. We wrote a report on it here with our top de-dollar picks.
We’ve been making a lot of policy mistakes in recent years, across both administrations.
Bottom line here - I expect gold to keep going higher.
As always, things could change tomorrow. But for today, looking at our policies and our deficit and our spending, I don’t see any reason gold won’t go higher.
Have a wonderful Wednesday. See you tomorrow.
Post a Comment
Post a Comment