Richard Nixon was born in 1913, just like the Federal Reserve was. When Nixon was 16 years old, it was 1929, and the country went into its darkest economic period to date, The Great Depression.
Forty years later, in 1969, he became the President of the United States. Entering office under the extreme pressures of an gold audit by French President, Charles De Gaulle, the U.S. president caved. In 1971, he became the world’s original gold bug, making sure the price jumped from $35 to fair value, by closing the gold standard era.
9 years later, gold prices reached $850/ounce and inflation was getting out of hand.
Actually, at its peak in 1980, gold covered 100% of the currency supply!
For a brief moment, the U.S. government could have pegged the USD to gold again, at $850/ounce. Today, with the price at $1,320, it merely covers 7% of it.
Said differently, for gold to act as a blanket that covers the USD currency supply, its price would have to be $1,320 * 14 = $18,480.
The more leveraged our financial system is, the more susceptible it is to booms and busts.
This is the chart that has Jeff Gundlach, the bond god, and Ray Dalio, the top hedge-fund manager in the world, all worked-up to the point that Dalio recently said: “It keeps me up at night.”
As you can see, the difference between reality and perception is the largest it has been since the Dot.Com era.
Notice also those periods of extreme differences between reality and perception occurred in 1974, 1987, and 2008 as well. All are times of huge sell-offs for the markets.
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President Trump is under pressure, then. He was preparing a scapegoat with Jerome Powell’s interest-rate hikes to blame the slowdown on, but that’s out the window, now that Powell showed his true colors, admitting he is a wuss and at the mercy of market forces.
Trump’s Get Out of Jail Card, is no longer valid. The spotlight is on him, and him alone, to deliver results; otherwise, his tactics will be blamed for the slowdown.
The mainstream media would love nothing more than to fire all the arrows at him, if no progress is made on the Chinese front. Of course, the Chinese are well aware of Trump’s growing need to show the public real progress, in order to get re-elected, so they’ll stall, as much as they can, to prove that they are in control of the game.
Here’s where this gets interesting because China’s central bank is buying gold by the truckload right now – gold $1,450 by the end of the year, according to Goldman’s commodities desk, the one with the best track record in the world, is what we get when the PBOC is buying this much.
What about silver?
Well, up until now, it has traded as a precious metal, going up with gold and going down with it, but China is proving that even in downturns, it grows at a 6% clip, which is remarkable.
The industrial demand for silver is enormous, then. If supply pressures persist, companies that rely on silver will bid-up the price by at least 15%-20%.
Remember, no other metal is down 65% from its 1980 high, except for silver.
It is the most undervalued commodity on the planet.
Gold is cooking. Silver is slowly brewing. Once we hit the boiling point, it will make all the years of suffering look pale in comparison to the upside gains.
Research Partner, PortfolioWealthGlobal.com
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