Fiat for crooks & gold for citizens
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Apr 18, 2023
- As gold gyrates in the $2000 zone, the dollar (basis USDX) has arrived at the key round number of 100, and bitcoin has reached the huge $30,000 resistance zone.
- Is it time for a major reaction for gold and crypto, and a big rally for the dollar? Perhaps, but it's a war cycle (2021-2025), so surprise is the major theme.
- Investors should own some fiat and lots of gold, to handle this theme with a yawn.
- It's clear that the vast majority of India's 1.4billion gold-oriented citizens want no part of the American government's deranged war mongering and global meddling schemes.
- They are independently pushing forwards with economic growth and trade… and celebrating the good times with relentless purchases of gold!
- Charts are important, but capital allocation to an asset class should relate more to fundamentals than to charts.
- The US fear trade for gold is exciting, but the actions of the citizens of China and India are important too.
- GDP growth and oil imports are picking up in China, and that's putting citizens there in a positive mood.
- What about governments? Well, Chinese and Indian governments are only token buyers of gold, and the US government buys none. The bottom line: Rupees, yuan, and dollars are the fiat monies of government crooks and gold is the honest money of citizens.
- For a look at the dollar via the USDX. Double-click to enlarge. The dollar has arrived at the key 100 area. Whether a rally happens now or later (with gold at $2080?) is unknown.
- What is known is that professional commercial traders on the COMEX are sellers into the gold market rally, and leveraged gambler funds are buyers.
- Double-click to enlarge this short-term gold chart. Investors should consider booking some partial profits alongside the commercial traders here, rather than trying to sell everything into a final fear trade oriented top. It's akin to mowing a lawn… with a smile and a yawn.
- When a bigger reaction begins, the $1960 area can be bought in modest size (with no stoploss), and $1940 can be bought in bigger size (with a stoploss). The round number of $1900 is also important, and I will be a buyer at all three zones, if a reaction takes gold there.
- For a look at another key gold chart. Double-click to enlarge this weekly gold chart which features what I'll suggest is the world's most important trendline.
- This trendline links the highs of 2011 (Indian gold duty ramp-up and QE peak) and 2020 (Corona crisis). The world's most important trendline needed to be respected, and a breakout above $2200 likely heralds the start of a rally to $3000-$3500.
- Citizens of the world should hope the imminent breakout is related to the love trade and not the fear trade, because if it's the latter, it likely means the US government is taking its maniacal meddling to dangerous new heights… and ruining millions of citizens with ever-more macabre schemes to maintain its global hegemony.
- Double-click to enlarge. This horrifying chart shows the dollar against gold over the past 50 years.
- The dollar does have occasional rallies against gold, but this chart shows why fiat is the failed money of government crooks, and gold is the ultimate currency for honest citizens of the world.
- What about the US stock market? Double-click to enlarge. Measured in gold currency, the mighty Dow has failed to produce any sustained gains over the past 50 years.
- There have been great rallies, but all the gains have been lost. Note the period of 1980-2000; it was a good time for stocks, but most of the gains came in the last five years (1995-2000), when the public finally bought. Most investors made no sustained fiat profits, and obviously none measured in gold. The bottom line:
- Most investors are better off ignoring the US stock market and focusing on gold. Gold is the ultimate currency for the most prudent savers. While there are times to sell some gold and invest the proceeds in the stock market, those times are incredibly rare.
- What about gold and silver mining stocks? I urge all potential mining stock investors to go visit a mine to "kick the tires" and get a feel for the ups and downs of running a mining company. From there it's mostly about buying the miners at the key buy zones for gold, and selling some very quickly with juicy profits!
- Double-click to enlarge this enticing GDX chart. Note the "M" (momentum) and "V" (value) zones on the RSI and Stochastics oscillators. When the reaction happens, these oscillators should be in sync with the key buy zone prices for gold. There was big volume near the March low, and there's no sign of "blowoff" volume yet. That's positive.
- It's unknown whether GDX rallies towards $40 (gold $2080?) now, or the recent weakness morphs into a bigger reaction that sees gold trade at $1960, $1940, or $1900. Those are my current key buy zones for GDX and for individual gold/silver stocks. These are exciting times for mining stock investors and gold currency savers alike, and only a modest amount of patience is required!
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.