Gold Nosedives; Expect More Turbulence

The Public Hates Gold

Have you asked your co-workers, family members and good friends what they’re doing with their money lately?

Let me save you the awkwardness, if it’s a touchy subject…

They’re NOT buying gold coins or silver bars, they are not putting money in the market, and they’re certainly NOT looking for real estate deals.

Like bears, they’re flocking to the sweet honey of money-market accounts, missing the thunderous roar of the river that’s nearby, where salmon can be caught and eaten.

Honey (money-market accounts) is indeed nothing to be ashamed of; for over a decade, the public has been complaining that banks weren’t paying any interest on savings and here we have money-market accounts dishing out 5.2% or more.

The public can’t get enough of them, throwing more and more cash into these:

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Courtesy: Zerohedge.com, Bloomberg

For $5.5TN to move to money-market funds, the public has to take it out of the banking system, which means that banking institutions need to restrict lending and raise capital by loaning it themselves, which then causes higher interest rates and so on and so forth…

In other words, the public is totally indifferent to making anything over 5% right now!

In our portfolio, we’ve showcased in 2023 over 20 different companies that are up between 20% and 40%, but most would never dream of risking their savings in the market.

With their cost of living rising, they want to be sure that when their next auto payment, mortgage/rent, healthcare bill or planned vacation is due, they’re good for it.

This is before they even begin to consider that recession might cause their stock compensation/options in their employer’s firm to be worthless and that their hours might be cut.

The public is filled with anxiety and fear and that tells you one thing, which is that the bull market in stocks is REAL.

No one is out there fantasizing about huge gains or throwing money at growth stocks; everyone wants SAFETY.

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Courtesy: Zerohedge.com

Do you know who NEEDS inflation? The government does. As the matrix of interest rates has drastically changed from ZIRP to 22-year high yields, the government is drowning in interest payments that are rising and creating a giant hole in the deficit spending.

Last night, I asked ChatGPT if the national debt was an imminent crisis and the answer was that it wasn’t, but that it is unsustainable.

What I didn’t like to read were the ways offered to shrink the debt and make it more balanced, namely, the government will need to reduce spending (how?), raise taxes (let’s see) or a combination of both.

Courtesy: Zerohedge.com

Disregarding ChatGPT for a minute, let’s look at the previous times debt was this high and how the U.S. was able to lower the burden:

• During the Civil War, the federal government wasn’t able to spend as it does today, so we can’t really compare it to the present.
• WW1 was a time that required a wartime economy and we can’t really compare it to today.
• The same can be said about WW2.

We think Covid-19 is not comparable, neither is the GFC; today’s issues aren’t stemmed in crisis, but in the troubling norm.

For the United States to lower spending, it must reset its social entitlement (which it won’t) or increase its productivity.

Gold is tumbling and might drop below $1,900/oz soon, because inflation isn’t dropping fast enough to justify cuts and the jobs market isn’t slowing fast enough to allow rate cuts. Higher-for-Longer is becoming consensus and that is hurting gold in a big way.

Best Regards,
PortfolioWealthGlobal.com