Fox in the Henhouse
Over the weekend, I read a lengthy and detailed analysis from a money manager who oversees over $200bn for a sovereign wealth fund; he believes gold is going to fall quickly this year into a bear market ($1,650 or lower), as rising rates will bring with them higher real yields.
My inbox was also flooded with such clickbait inbound mails like “GOLD CRASH: GET OUT NOW!” – not too different from the one I chose to use today, in order to get your attention on this matter, so that you can judge the matter for yourself, because I’ve rarely seen so many bears within the BULLS CAMP.
Gold is a highly emotional asset class for a reason; gold stackers and gold bugs own it, because they don’t trust fiat currencies, so as long as government prints more currency, they keep buying more ounces. It’s not a cyclical decision for these investors, but a lifestyle one and those of them that throw in the towel, do so because they believe the banks can’t be defeated, which means prices will remain suppressed for good.
Gold stackers want to ready themselves for the inevitable collapse of trust in government-issued debt and deficit spending, which, in their eyes, is inevitable.
To see so many bears within that specific loyal stacker camp is an interesting phenomenon, which reminds me of a fox in a henhouse.
On the flipside, I see Wall Street legends, investors who rarely put gold on their radar, calling it the surprise investment class for 2022.
The reason they are bullish on gold is because stocks are going to have a rough year. In fact, while you’re reading this, the NASDAQ may be collapsing again, entering an official correction.
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When I was just a kid and my mother used to introduce me to her friends, she’d praise and compliment my manners and good behavior, sometimes saying that I was smarter than Einstein, funnier than Eddie Murphy and could cure cancer blind-folded.
The point of the above joke is that a mother isn’t the objective barometer of her child’s capabilities…
If you want an objective opinion and analysis of gold and its price trajectory, you can’t get it from a permanent bull, who has kept saying the world is coming to an end from 1982 until present.
Just like you wouldn’t take a mother opinion of her child at face value, because she loves him dearly and sees the situation from a particular point of view, you would much rather ask someone who isn’t emotionally attached to a child about his merits, so would I take Byron Wien’s overview much more seriously than I would take the forecast of a well-known gold bug.
For gold bugs to actually lower expectations and turn bearish would be like asking a mother about her child and hearing her reply with his problems and issues; if that occurs, you know she means business and we have to remember that no one told Byron Wien to include gold in his report, yet that’s what he did.
For a full calendar year (2021), inflation has been the most talked-about financial topic in the world; I don’t think that ANYONE thinks inflation is not a pressing issue — it was all politicians wanted to talk about with Chairman Powell, and yet, gold ABSOLUTELY SUCKED in 2021.
What could have been more discouraging for gold traders than that?
We believe that weak hands have left the gold sector, perhaps for good, after what transpired in 2021; many have questioned its stance as an inflation hedge… The rest of them are fleeing right now, out of fear that FED policy would raise interest rates much higher, leaving no sellers to liquidate, once the hikes actually begin in March.
Gold’s place in the world has been put up for debate, and I can’t think of a time when so many just don’t see what “the deal” is with gold, who then predict that tighter economic conditions will lead to the end of the gold rally.
I can hardly think of a better bullish set of circumstances, with expectations nearly driven into the ground and, between now and March 15, the price pressure could allow for one of the best buying opportunities since September 2018.
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