Is This ‘Peak Gold’?

Here’s a Bloomberg headline from yesterday:

As Gold Smashes Records, Forecasters Ask Whether Peak Is Near

You have to wonder: Who are these forecasters? Where have they been? Do they have any idea what is going on?

Gold has its nose in the air. Like a deer in a dry forest, it smells the smoke. It knows it’s time to get out of town.

On Monday, the Republicans threw another $1 trillion worth of tinder on the fire. The so-called HEALS Act would bring the deficit for the calendar year (the feds operate on a different ‘fiscal’ year) to $5 trillion — or about 25% of GDP.

To spell it out: More spending = more deficits = more fake money printing.

And more fake money pushes up the price of real money — gold. As long as the money printing continues, in other words, gold will continue to rise.

Contraction ahead

But wait…maybe the trend is over. Maybe the Federal Reserve has turned off the printing presses. And now, with the last of the dry wood ablaze, gold can peak out as the fire settles into warm coals.

Or not…

Here’s another from Bloomberg to give you a clue:

U.S. Is About to Unveil the Ugliest GDP Report Ever Recorded

Thursday’s report forecast to show annualized 35% contraction.

Let’s see…

Less GDP growth = lower tax receipts = more stimulus measures = bigger deficits = more money printing…

You can see where this leads as well as we can.

False hope

As for us, we recommended a shift to gold 20 years ago. At the time, the price was about $280 an ounce.

Our view of the money world back then was amateurish; we hadn’t yet figured out how the fake money system works. All we knew was that gold was way down. And stocks were way up. We guessed that both would regress to the mean in time.

The stock market represents hope for the future. Stock investors are said to ‘look ahead’ to the flush stream of earnings that companies are likely to produce. That was especially true of the Nasdaq — the benchmark tech industry stock market index — at the turn of the century.

Gold, on the other hand, is more of a reminder of the past…a souvenir of all the plans and projects that never paid out as expected.

Stocks are an indicator of giddy greed. Gold is a measure of sober fear. One is hope. The other is reality.

And with the Dow selling for more than 40 ounces of gold in 1999, the two were farther apart than ever before.

Looking back, it is now obvious that hope had had too many martinis. The US was at the peak of its power and prestige — practically unchallenged. No war against terror. No mortgage finance crisis. No war against a virus. No shutdowns. No bailouts. The federal government was running surpluses. And the national debt was going down.

All we saw was upside.

And to make the future seem even more fetching, a new technology — the internet — was offering dizzy dreams of avarice. ‘Dotcoms’ were revolutionising our economy and the way we lived…or so it appeared. And the Nasdaq was exploding to new highs almost every day.

Dumb luck

Still, without knowing anything about the future, it seemed likely that hope and reality would come closer together.

And by dumb luck, our timing was good. After hitting a high just shy of 42 ounces of gold for the Dow in mid-1999, stocks began to slide…and gold started going up.

All you had to do was buy gold and sit tight. Today, you’d have multiplied your money seven times (a 600% increase) in dollar terms.

By comparison, the Dow averaged around 10,800 in the year 2000. Now, it’s at 26,500…an increase of just under 150%.

Over the last two decades, in other words, gold outperformed stocks by about 450%.

Foolish moves

And now?

The US has been slipping for the last 20 years.

A foolish ‘war’ against terror cost $7 trillion.

And after the dotcom bubble blew up in 2000, ultra-low interest rates caused another bubble in 2007, this time in real estate.

Then, the Wall Street bailout fouled the economy even more…with $25 trillion in new debt piled onto households, businesses, and the government.

But the foulest and most foolish moves came just a few months ago. In a coronavirus-induced panic, the feds shut down the whole US economy…and then began printing money on a scale never before seen in US history.

Now, they are committed not only to bailing out their campaign donors and cronies on Wall Street…but Main Street, too. They broke it; now they own it!

First act

So, what do you think?

Is this the end of the trend that began 20 years ago? Is this the ‘bottom’ for the US economy…and the peak in the yellow metal?

Will the US reclaim its numero uno status…while gold crawls back into its mines and storage vaults, like it did after 1980, and rest for another 20 or 40 years?

Or is this just the beginning…the first act in a show that will last for years more? Are there whole forests yet to light up…followed by houses, factories, furniture, books…and ballot boxes?

Yes, dear reader, we don’t know any more about the future than you do. But we’ve learned something over the last 20 years: The fake money system is corrupt, counterproductive, and self-destructive.

And while we are ‘always in doubt’…there seems to be more than an even-odds chance that the trends now in motion will stay in motion…

…until the whole shebang — the economy, politics, and the social system, too — goes up in flames.

As for the peak in gold…it is probably still far ahead.

Stay tuned…

Dan Denning Signature

Bill Bonner,
For The Rum Rebellion


Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries.

A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities.

Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally.

With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance.

Bill has been a weekly contributor to The Rum Rebellion.


Leave a Reply

Your email address will not be published. Required fields are marked *

The Rum Rebellion