Which is it?
Gold is sending both mega-bullish indicators, historical behaviors, which occur before extreme moves higher and others, just as forceful, which happened before years of underperformance.
Let’s go over them and look into which of these is more likely to occur.
Before we start, let’s clear the air about de-dollarization, because even though the natural process is that the U.S. is shrinking in population, compared with the rest of the world and today, its demographics are less then 5% of the global headcount, the U.S. dollar is incredibly resilient and remain, far and away, the best fiat currency in the system.
Weaponization, through sanctions, does shine on it in negative light, but there’s no comparing it to any other.
Anti-Westerners love to showcase the BRICS, but there’s a higher likelihood of putting a colony on Mars than for these countries to actually create a stable currency system.
I hate reckless spending as much as anyone; I don’t like the debt ceiling or the national debt cascading, but even with that, America is preparing itself to the world that is forming now, a world that has a new challenger to America and it’s not Russians.
China is the new rival and it’s extremely different than the Soviet Union ever was.
Before the new world can be launched, we must reset the old one.
That process has resulted in inflationary crises everywhere, so much so that in charts, it looks like this:
Courtesy: Zerohedge.com, Bloomberg
Clear as day are the previous times, we’ve seen business activity in the red and after each of these, gold didn’t do well.
Right here, then, we have a bearish signal, predicting this is already near the end of the road for gold.
Is it, though?
Have you sensed some resemblance of past manias?
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This next chart above is also weird.
It shows the open interest of Put Options to be at an all-time high.
In August 2011, the last time it was this high, gold was just ONE MONTH before hitting its all-time high, which was the end of the 11-year bull market and preceded by a 50% bear market move.
I think the most important of them all is the comparison between 2023 and 1980 and between Volcker and Powell.
So, is this a mega-event? A bearish earthquake?
I think not…
A longer answer is coming in the publication ahead, but the most critical part of this bullish thesis is what is known as the Gold/S&P500 ratio, which shows gold in real terms:
Courtesy: The amazing Incrementum AG chartbook
As you can see, gold is actually extremely cheap!
In fact, since 1990, for the past 33 years, its price, with all of its appreciation, is still trading at a 123-year low!
This, in my view, is the key to understanding the upside.
If history is guide, gold could go up by at least 100% to exit the “cheap” territory. I believe that is set to occur.
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