The only real money in the world is Gold. It has been the currency of civilizations for 1000’s of years. When fiat paper currency was introduced, it would initially be backed by gold to provide a basis of value.
Paper currencies are nothing but a creation of governments with an intrinsic value of zero, unless it is backed by real money, gold. When fiat currency is not backed by gold, then the only thing that gives it value is the economic stability of the government that issues it.
In the case of America, the government is bankrupt. Our government owes more debt than it can ever repay and our currency is not backed by gold. The only reason our currency still holds any value is because the US dollar is the world’s reserve currency, but because of the gross mismanagement of our economy, the reckless government spending and borrowing, our currency has developed a negative intrinsic value due to the huge amount of excess debt.
Foreign nations are waking up to this fact and are starting to dump their US dollar reserves and use more stable currencies for international trade. This will eventually gain momentum until the fall of the dollar becomes an avalanche. This process is already in motion and gaining speed as I write.
Today I want to show you why investing in gold and its little brother silver, could provide insurance against a collapse of the dollar and the resulting collapse of your stock portfolio.
Below is a partial reprint of an article posted on King World News regarding the world’s gold price compared to the price of gold in US Dollars.
‘If one compares the world gold price to the USD gold price, one can see that there has been a growing divergence between the two since 2014.
A comparison with past bull markets is interesting as well. In our previous studies we have compared the recent correction with the mid-cycle correction between 1974 and 1976…The similarities between the two periods are in particular pronounced disinflation, rising real interest rates and extremely high pessimism with respect to the future trend of the gold price. If one compares the price trends of the two time periods, it can be seen that the bear market since 2011 had roughly the same structure and depth as the 1974-1976 mid-cycle correction (they differ in terms of duration though).
For anyone looking for a roadmap, take a second look at the chart (above) Stoferle included showing the overlay of today’s bull market in gold vs the 1970s. Just keep in mind that conditions are far worse today than they were in the 1970s, so the coming mania in the gold market should be one for the ages.’
So if the bull market today plays out like it did in the 70’s, we have at least another 5 years of bull market to go in gold and silver. Just a 10% allocation into the precious metals market might be enough to protect your stock portfolio from huge losses, but if you want to not only protect your current net worth, but also benefit from huge gains, at least 30% allocation might be a better choice.
The Golden Rule: During a bull market, every dip near or below the 200 DMA is an opportunity to buy.
There is speculation that on Friday, October 28th, the Fed will attack gold again as they release a completely bogus and politically motivated GDP number. If they do attack gold, buy the dip. This will be the last ditch effort to bring the price of gold down before we see a huge surge upward after the election.
The next two weeks before this election is going to be excruciating. Gold has been consolidating as it bounces off of resistance at the 200 DMA. If it can break through and hold, then I expect it to continue moving up from there. It’s still showing oversold conditions based on the Stochastic Oscillator, so we should see a break soon.
However, that being said, I expect our shadow government will try to hold it in check until after the election. Then I think all hell is going to break loose, no matter who wins.
The chart below shows the longer term chart of gold from the bottom last December 2015 to the current October 2016. A perfect bull market channel has formed and you can clearly see how the cycle has completed a top to bottom pattern between the lines of the channel.
The 200 DMA (Purple) was breached in each instance of the cycle bottom, only to rebound back to new highs. This next leg up should break the 200 DMA again and continue upward to the next new high in excess of 1400, although it might take a few weeks to get there.
A similar pattern has formed in the miners (GDX). In fact, the miners have already passed the 200 DMA and are well on their way to new highs.
Next we have Silver Wheaton (SLW) and it also shows that the next leg up has commenced. SLW never breached its 200 DMA, which is very bullish.
Overall, I think we can expect a continued stair step climb to new highs over the next few weeks and after the election, we may see some epic surges as we approach the New Year.
Stock Market: (SPY) (QQQ)
The stock market continues to travel within a consolidating wedge pattern. As the wedge gets narrower, it will eventually have to break out either higher or lower. Typically, it would break in the direction of the wedge trend line or in this case to the downside.
I believe once this break happens, it could create a rather violent move down, like we saw last July. Again the election is key, as I believe the powers behind the scenes are controlling things until after the election.
Energy Stocks: (XLE) (UNG) (USO) (LNG)
Oil made a double top last week and has been retracing ever since. In fact, it broke through the short term uptrend line a couple of days ago.
The fundamentals are not looking good for a higher price, as all the players of the OPEC nations are scoffing at any meaningful production cuts.
The lack of production cuts along with record high reserves is causing investors to think twice about higher oil prices for now.
I see a continued move down from here, so if you haven’t stopped out yet, you should probably go ahead and close your positions until we see confirmation of bottom.
(SLW) January 2017 CALLS
(GDX) January 2017 CALLS
(RGLD) January 2017 CALLS
(SPY) December 2016 PUTS
If The Fed Smashes Gold Friday, Buy The Dip
The U.S. government is going to release a politically influenced GDP number that implies very strong growth on Friday. If the GDP number comes in well above 2 percent growth, that would be used (by the Fed) to attack the gold market.
It Will Be “Dollar Collapse” Not Nuclear War That Destroys the US
The Global Elites Are Getting Ready To Blame You For The Coming Financial Crash The new world order needs a great financial reset before it can take root. In the aftermath, elites will “rescue” as global economic instability erupts…
Washington’s Fighting a Global Economic War – And Losing
During most of the past two decades Washington has aggressively launched military and economic wars against at least nine countries, either directly or through its military aid to regional allies and proxies. US air and ground troops have bombed or invaded Afghanistan, Iraq, Pakistan, Libya, Somalia, Syria, Yemen and Lebanon.