Transcription
All right, gold has been whipsawing around $4,000 all week long, ripping higher one session, selling off hard the next, and it's not happening in a vacuum.
Now, oil pushed back above $100. Bond yields ran to the highest of the year, and the Fed meets next week with a rate hike suddenly back on the table. So, what is gold actually telling us? Well, this week I put that to four very different people. A chartist, a veteran trader, a former Black Rock money manager, and a constitutional scholar. And here's what makes this interesting. They do not agree. One is waiting to buy lower. One is bracing for a crisis. One says the dollar itself is the problem. But all four land on the same warning. This is about something much bigger than gold. So who's right? Stay with me. This is this week in focus.
Welcome back. I'm Jeremy Saffron. And a quick thank you to the comments, the emails, everyone who stopped me on location of Florida. I've heard you and this weekly wrap-up show is here to stay.
Now, here's the thread that ran through all four conversations that we had this week. Gold's wild swings around $4,000 aren't really a gold story. They're a dollar story, a debt story, and a credit story, depending on who you ask. And to make sense of this week, you have to start with the chart. So, let's go back to last week. That's when Kiko's very own technical analyst Gary Wagner of the goldfor.com watched gold break below $4,000 for the first time in months and told me his $6,000 year-end target had to change. Now, everything gold has done since the bounces up to the sharp drops have played out between the two lines he drew that day. Here's his read on where it goes from here.
Well, if we count the beginning of the last strong leg of the rally, which was 39 to a top above 56. But even if you look at the body, it opened at 5400. This is the all-time record high. It comes down and makes a lower high. It then makes a lower low, lower high, lower high, lower low, all the way down. This is a textbook example of a market under pressure. Now I have a technical level that is now that it's broken what what I assume could be I always say potential support. Um but the case is this market is highly or the market participants are highly focused on interest rates and inflation. And the thing about inflation in this case is it has elicited a verbal response by the Fed. When you see inflation tick up and the and the Fed's still in a wait and see pattern or attitude, it will not affect prices as strongly as what we're seeing. But when you have the chairman coming out and talking about and strongly talking about recommending a rate hike, this is the first time that's been put back on the table in a long time. And that's what market participants correctly are reacting to. Changes in fundamental events or changes in the perception of forward monetary policy will always lead the market. The market reacts to what is said and that's what we're seeing now. So when I said that there was potential support at this level, there was right in here. And when you look at this, this is the lowest low, you know, since quite some time. You've got to go back into 2025 if it continues to break, which obviously it has increased the probability of it with this strong down day and more importantly the fact that it's closing near the low. Potential support comes in around 3920. And that's just just the way we have to view the charts. If we have a model that's looking at a floor, but the fundamental um events or the focus by market participants are aligned to recalibrate because of new statements or new beliefs such as a rate hike. You're going to see gold, silver react in those ways. All the precious metals are down today. you'll typically get silver having a larger uh percentage decline, but certainly gold will, I believe, lead the way in terms of that reaction, but silver will move harder in whatever direction.
So Gary's line in the sand on the downside is about 3920. On the way up, his pivot sits near 4,200, right about where gold has been fighting all week long. But the call that got most attention here was the one that he had to take back because remember this is a man who had gold on a path to $6,000. That call has to change.
Remember um I create models and look for certain activities based on past performance. But my mentor that really taught me more than anything else about technical analysis, following markets, and trying to forecast it is that think of a market technician as a worker on a ship and he's sitting at the the the um ender the where the propellers come out the back end of the boat. And he's looking at the waves to determine uh which way the boat will go. that is going because the waves will determine the direction. But then he would put one huge caveat. But remember, Gary, only the captain knows when he's going to turn the wheel. If you're just staring out of the ocean and and not looking at a map or anything and you're just watching it, it occurs when action is taken. And that's the same in gold or any asset class to a degree in that it reacts to changes in fundamental policies and monetary policies. >> And that's what we're seeing. >> So only the captain knows when he turns the wheel.
His point is that the chart follows policy, the Fed, not the headlines. And and that takes us straight to the trader who saw this drop coming. Now, we started the week with Clem Chambers, the veteran markets commentator, and he warned this audience that the sell-off had another leg down back when most people thought the worst was over. He was right. And and now he's telling us the level where he finally becomes a buyer again.
Well, because it wasn't an ordinary rally. It was a bubble rally and they always pull back a long way. Everybody believes the bubble until it burst and they keep believing it all the way back down. And that's the tragedy of bubbles. You know, the same the.com people made a fortune on the way up and put it all all back and maybe some more. So, this is one of those bubbles. And I'm afraid that will be a very um uncomfortable idea to a lot of your viewers. But the good news is we're getting near to the bottom now. And I see 40 to 50 as being the bottom. So, the the roof of the basement is 50 bucks. The the the the floor of the basement is 40 bucks, okay? or thereabouts. So, I'm expecting it to go to 50, probably go down a bit more, and then wobble about and and establish a bottom. And >> for gold, that's probably $35,000. It could be a little bit lower. >> So, gold 35,000 as a place where it starts to get interesting because, you know, the speculators want to plunge at the bottom and then, you know, do whatever they want to do when they sell. Whereas investors, they want to know really when to start dollar cost averaging again, >> right? >> And that's that's under $50 in silver. And you can, you know, buy some at 50, buy some at 45, buy some at at 40, buy some at 39, buy some at 45, buy some at 50. You know, you're you're moving into a position and that moment where that starts is not that far away. It's sometime this year. And I think that that I will start itching under $50 and I will start thinking about picking up some bars at that point. But I'm not thinking about plunging and then expecting it to explode. I'm expecting to go sideways for quite a long time. And I I really don't know when it's going to rally again. Although it could be a couple of years. Yeah. Because if you look at these bubbles, there's normally a spike like an echo of of a boom a couple of years down the line. So, I believe that will probably come and and what happens really long term, obviously, it's going to go up a long way because we're about to go into a seriously inflationary period and that gold, you know, I I I think you're brave if you're buying it now, but you're not brave if you're buying it at um 35,000 and you'll be, you know, you'll be good if you're buying it at 3,000. And I think you'll be lucky to get it that low. I I should think 3 and a half thousand 33 and you gain you'll see a long-term sideways move. It might have some dips in it. It might have some rallies and you know if you're DCAing you you buy two um chunks when it dips. So you know I think we're back into stacking mode >> um very soon. And of course most people want to know where the bottom is and and that's where I believe it is. And it's not far away, you know, at at um $110 on silver a few weeks ago and it started to fall. I mean, the bottom was a long way away or where we are now was a long long way, let alone where we're going to end up. So, you know, that that kind of period is over, >> right? >> We're now close to a bottom and we're now close to an area where I personally would be looking to start picking up silver and gold and platinum and palladium.
So Chambers wants lower before he buys. And and when he says stacking, he just means buying gradually rather than all at once. And and here's the bigger, more contrarian idea why gold fell in the first place. He says it isn't the Fed at all. It's it's war.
So you have a situation where um President Xi in China has gone on the record to say he's going to get Taiwan back. Okay? You you can go back and you can hear lots of people talk about that over the last few years and all the people I know in Europe that are connected to military things were saying that that was next year around April and May. Yeah. And everybody was panicking about that and military people were saying if you've got any technology for us you better have it ready for you know the middle of 2007 otherwise we're not interested because of that. Yeah. and the the the the impact of China trying to take Taiwan would be completely catastrophic. Yeah. And that was on the cards and people thought that was coming now at the beginning of this year and you could this is all documented so you can dig it out. She and the PLA fell out with each other. So you're not going to have, you know, World War III if you haven't got your army on side. So it was postponed or maybe cancelled and or maybe somebody convinced the leadership that they could do nothing and win. And doing nothing and win is a brilliant strategy because boy is America going to have to do a lot to not lose. And if they if they're not going into Taiwan, the need of vast gold reserves suddenly, you know, evaporates or certainly gets less pressing because you gold goes up before a war. Gold is for war because it's a currency during war. So during a war, you have to sell your gold like Russia is doing and I'm sure Iran is doing and that puts a downward pressure on gold. Now once the war is over, up gold goes because the wars have created inflationary pressures. you know that that have been suppressed by things like like um price control and gold goes through the roof because people aren't selling it anymore and people want to get their hands on it to stop their fear getting devalued because in a war the fear is just tokens that are going to completely you know collapse in value after the war is over and and markets free up for prices and you know that's that's what happened in World War II blah blah blah So on the leadup to a war, everybody's buying gold because they're going to need to have golden bullets because that's what they're going to have to buy stuff with. So anybody with it in any reach or anybody at all, any government at all needs to lay in gold. Now the moment that eventuality starts to disappear, the optionality starts to becoming more vague is not so not such not so expensive, >> then gold falls. And that's what I believe we saw back in the beginning of the year. China went right, we're not we're not going to invade Taiwan next year in in May and that was it. That was the that was the end of that vertical because the if they had done that or even if people thought they were going to do it, even if there's a percentage possibility of them um doing it, massive impact. I mean, what happens to the NASDAQ if there's no Taiwan? All the chips come out of there and all the chips come out of China. What happens when America is at loggerheads with China over Taiwan and you know all those chip plants in Taiwan are blown up? Why do you think Intel's 100 well was $120 a share from $20 a share when I was saying oh you know Intel is going to go through the roof because of new American foreign policy. It was $20. It hit $120 and yes I did do quite well out of that. So if you put all those pieces together, the onshoring of American industry, why do you think they're doing that when they can buy it all cheap from China? Well, China's an adversary now. So you've got to onshore all your production. You got to onore all your rare earth. Look what's happened to rare earth. Look what's happened to all those stocks, Mountain Pass, um you know, people like that. So, um, NEO performance, um, minerals, they've all gone through the roof because China has a strangle hold over strategic and critical minerals, and you've, if they're not your friend, if they're adversary, you got to onshore it. You got to onshore all your factories, you got to unsure your ship building, you got to onore everything. Well, boy, that's a big ask. And you know, when China isn't going to kick off an invasion of Taiwan, which would be almost unescribably terrible, and says, "Oh, we're not doing that." Or people work out they're not going to do it. Maybe it's the year after, or maybe probably not even the year after that, or maybe they're not doing it at all. Then, well, gold is has just lost a very, very powerful use case.
So, gold as a war currency, that's a lens you don't hear very often. And one more from Clem here. And this one is a warning for anyone who actually holds the physical medal because the price on your screen is not always the price you can get.
Well, I mean, it was down um 80% of the screen price, 70% of the screen price. Nobody wanted to buy it at the top of the market because there's a chain of you bringing in a coin to a coin dealer and it going down the chain to some guy that's going to melt it down and turn it into a bath. And when that chain's blocked, no one can buy it because they can't get it into the chain. And they're not buying your silver at $120 an ounce if it might fall to 80 overnight. In fact, like it did. Yeah. Because they they give you $120 and then 3 weeks later they're sitting on a fat loss. So they just say, "No, the the pipeline is choked." So, what I told my people when it was getting up to the highs on on my YouTube channel, Creme James Alpha, was get your exit sorted. You don't have to sell, but make sure you can, you know, identify the exit. Like in the airplane, they say the exit may be behind you. Yeah. You have to know where you're going to sell. Yeah. Because I mean even in the markets in a crash you go to sell and all the blooming brokers have crashed because everyone's trying to sell. So you have to if you are going to invest always know how you're going to sell. So sort out your exit before you ever buy. Simple and a lot of people learn it the hard way.
Uh Chambers is planning patience. My next guest is planning for a crisis. Now, Tuesday brought us Ed Doubt, a former Black Rock portfolio manager who now runs Global Macro at Finance Technologies, and he would be cautious on gold right here, but he still sees it reaching about $10,000 on the other side of the crisis. He believes that has already started. I asked him to walk us through exactly how gold actually gets there.
Well, so go gold had a, you know, a tremendous run. >> Yeah. >> Going up going up into January of this year. And in many ways it maybe kind of um discounted the war was coming some some geopolitical events and had a parabolic move. Uh which I don't believe is the end. Uh then it started to consolidate and then the war started and gold uh started to go down and that's because a lot of the countries in that were affected needed liquidity right away and they sold what they could which was some gold. Turkey uh uh sold many tons of gold. So that that was a short-term pressure on gold. If there's a riskoff trade, uh generally speaking, uh gold may get hit some more, but that's you want to buy that uh that sell off because we know what's going to happen. We know that the Fed and and and the governments of the world are going to print and spend and that will reinflate and then gold should do fine after that.
So for Dow, the dip is the opportunity because he is convinced the policy response is coming. But here's the part that reaches ordinary savers. How a credit problem most people will never see could end up sitting inside of their retirement account.
The little trick that happened and it it didn't it wasn't intentional. It just hap it, you know, look, the private credit industry started uh in earnest after the great financial crisis. And like all niche uh financial instruments, it it met a need and it and it worked. The problem is the fees were fat and big because it became eventually the new junk bond market. People don't understand this, but junk bonds are publicly traded. There's a lot more transparency uh going on and you can you get a public quote so you know what's going on in the market. uh the junk bond market lost share to the private credit market because the issuers uh were traditionally uh even uh riskier and they they get confidentiality no mark to market and that's all good and fine when the flows are going it kind of supports the whole thing but the flows have paused and now you're seeing uh the Wall Street alchemists and I hate the word alchemy because that triggers me when I was at Black Rockck uh Black Rockck had a small CO operation not not nothing as big as the other big guys, but uh the head of that uh that that that division notoriously said, I turned into gold, which is alchemy. That that didn't end up well. So now the the the latest thing we're seeing is they're trying to wrap up uh these current private credit funds into loans to sell to insurance companies with an insurance rapper. And that that smells a awful lot like the great financial crisis. And eventually it doesn't end well. So the the people the the private credit market is basically resides in insurance balance sheets, asset manager balance sheets, high net worth balance sheets and pension and endowment balance sheets and when that goes south uh that's that's where the losses are going to be and those people are going to get all uh you know we don't know yet. We have this whole space is going to be stress tested so we don't know what the losses are going to be but I suspect they'll be higher than what they're projecting.
So, packaged up, wrapped, and sold on to insurers and pension funds. And in his words, it smells an awful lot like 2008.
Now, three guests, three very different timelines. And my last one this week isn't a market voice at all. On Wednesday, I did something a little bit different here. I brought in a constitutional scholar, William Watkins or Bill Watkins of the Independent Institute. With the federal debt near $40 trillion according to the Treasury, he argues that the whole trajectory of it reflects a country that drifted from the limits it once set for itself. He does not soften his conclusions started with with his read on the day Washington called in America's gold.
No, it's absolutely not constitutional. uh a true reading of that document, you can find no power where government can take uh the people's money in that regard. Sure, government can pose uh in u impost excise taxes with the uh income tax amendment. You can tax incomes uh but it you have to stretch that document so far uh to be able to take the people's gold uh from them. Uh there is no constitutional standing for that. Especially again it's clear that the framers uh the power to coin money gold and silver uh this was getting rid of fiat money which had so plagued uh the states and the Continental Congress uh and the war for independence. They saw the damage that it could do, how it robs um essentially creditors um of their investments, the value of items they've sold, and they were ready to put a stop to it.
So, in his reading, that was never constitutional, but his sharper point is about what the dollar actually rests on today.
Well, I think if you're holding dollars, you have to recognize that there's a great uncertainty that uh that paper money is really only tied uh to the coercive power of the federal government uh to the extent it can cause other uh industries, other people uh to hand over things of value. There is nothing tangible backing it like gold or silver. Uh it's a bit of a shell game that we just smile and keep playing, but u it is but a game. There's nothing of real value behind it.
So nothing of real value behind it. His words. And here's the idea from Watkins that stuck with me the most. That that hard money was meant to make war itself harder to wage.
Especially if you look in uh Jefferson's uh writings and his economic thought uh the idea is that hard money uh would force government for example if government wanted to get involved in a foreign adventure or a foreign war. You would have to pay for that uh rather than just printing uh dollars inflating the currency. To pay for it you would have to tax the people. they would feel that bite immediately uh as the tax gatherer uh showed up at their door wanting more of their resources. Therefore, the people would use the franchise to limit government to pull government back from say the foreign adventure there. Uh we've lost that uh now with uh paper money and inflation and the way we're uh Federal Reserve conducts matters. A government that has to tax to fund a war has to convince you first. Print the money instead and and that check quietly disappears.
So put the four of them in a room. They do not offer one forecast. Wagner sees a chart under pressure caught between clearly defined support and resistance. And you got Chambers who wants kind of a lower entry and thinks that the metals could drift sideways here for quite a while. Dow expects a credit event first and the big gold move only after the government responds. and Watkins isn't forecasting prices at all. He is questioning the monetary structure underneath of them. What connects them isn't really a single gold target. It's it's one question. What happens to gold when confidence in the markets and credit and government and debt or the currency itself begins to weaken? That's the thread this week. Gold's violent move around $4,000 is the visible part. And the disagreement is over on what's happening underneath it. It's what comes next.
Now, that's this week in focus. The full conversations again are all linked below. Obviously, they go a lot deeper than these clips can do for you. Here's my question for you in the comments. Of the four, whose macro version convinces you? Is it the chartist, the trader, the macro manager, or the scholar? Tell me below. And and remember, subscribe. We do this every week. I'm Jeremy Sapp for all of us here at Kitco News. Thanks for watching.