This IMPORTANT Article Has Been Contributed By our friend and market expert, Lior Gantz, of WealthResearchGroup.com
We stand at an inflection point; many countries are EXITING from the coronavirus panic and waking up to the NEW REALITY of life in the post-COVID-19 scare. We are going to FIND OUT how many industries quickly get back on their feet compared to those that are STILL TRYING to adjust to either the restrictive measures imposed upon them that can slow their recovery or the LACKLUSTER DEMAND on the consumer side.
For example, the TSA is reporting a 90% drop in the NUMBER OF TRAVELERS!
The passenger airlines are working on ways to convert their fleets into cargo ones instead. Some industries have been hit in ways that require CEOs to COMPLETELY REARRANGE their revenue streams while others are showing resiliency.
Courtesy: U.S. Global Investors
America MUST RESTORE its consumer confidence, which is what brought it its fantastic TRUMP-ERA BOOM. For now, all we know is that it reverted back to 2014 levels, which means that there’s EVERY REASON to believe that we will experience ROBUST GROWTH in the next few years, but the questions are (1) when sentiment will bottom and (2) how long it will take to pick up momentum on the other side.
Because of the centralized response from Washington and from the Federal Reserve, the risk of OVERSHOOTING INFLATION is very real. This is why gold is just 9% away from hitting a dollar-denominated all-time high.
What STUNNED INVESTORS globally are the comments from hedge fund legend Crispin Odey, who SOUNDED THE ALARM on the potential that some governments will again ban individual gold ownership as part of a RESCUE PLAN to stabilize national currencies.
I’m shocked to hear a London-based investment mogul raise this type of concern!
Courtesy: U.S. Global Investors
As you can see above, though, WE’VE never abused the money supply in such an experimental and DEBT-CENTERED fashion before. It’s truly unprecedented.
In the past 56 days, central banks have been buying $2.4B/hour of financial assets. Translated into a daily routine, this comes out to $57.6B/day. That is enough to buy a 100% stake in PayPal in 3 days. One could completely own Domino’s Pizza in 6 hours like that. In a single day, central banks can buy Colgate-Palmolive. These are ENORMOUS SUMS.
The COVID-19 crisis will wipe out 4 years of GDP growth – for most people, that’s LIFE-CHANGING.
In December 2018, central banks UNDERSTOOD that they were cornered, probably FOR GOOD.
In their attempt to restore NORMALIZED INTEREST RATES, which many Wall Street veterans had complete faith in and thought would only INTENSIFY GROWTH and lead to greater confidence and gains, were completely, utterly 100% WRONG and central banks FAILED.
The Federal Reserve got SLAPPED ON THE HEAD by the markets. Smart Money told Jerome Powell that he was DREAMING, if he thought that after 10 years of zero rates, the bankers could just tell everyone BYE-BYE and get back to real economics.
It was the WORST DECEMBER in ages; for decades, the last month of the year hasn't been THIS HORRIBLE.
Basel-III was BIRTHED, thanks to this market reaction, in our opinion. Central banks understood that investors only value stocks at HIGHER MULTIPLES, since only zero rates work for households, small business and Corporate America. Raising rates, in other words, would prove the failure of our current credit structure.
Raising rates will WITH 100% CERTAINTY lead to a terrible wave of corporate defaults, layoffs and a recession.
The bankers FOLDED TENT on the interest rate hikes and did a FULL U-TURN; the market had said its piece and was STRONGER than central planners assumed it would be.
Four months later, in April 2019, when realizing that rates could NEVER GO UP again, the whole perception of the worth of gold reserves suddenly became clear.
If rates stayed NEAR ZERO from here on, the risk of inflationary shocks will RISE EXPONENTIALLY.
Immediately, they re-designated gold to a tier-1 asset; this is called Basel-III and gold’s spot price was $1,292 on the day it was announced.
A tier-1 asset is measured at its FACE VALUE, since it is a SAFE HAVEN. In other words, gold was RE-PRICED by a factor of 2:1, since as a tier-3 asset it was worth only 50% of its open market price. Instead of $1,292, the Bank of International Settlements BROADCASTED THE SIGNAL that one gold ounce ought to be worth $2,584.
From today’s price, there’s still a 48% UPSIDE POTENTIAL. This is before central banks and Congress just SPRAYED THE PLANET with cash, following the Covid-19 SCARE!
From a TECHNICAL ANALYSIS perspective, the dollar is trading in a triangular range, with a BEARISH MOMENTUM that could break below support by roughly 3.1% from here.
With gold trading for $1,746, a 3.1% rally would put it RIGHT ABOVE $1,800, an important milestone for it.
You can now understand why there are LEGITIMATE CONCERNS that gold will soon be the world’s true monetary unit of account again, not the dollar.
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