…ushers in the restoration of price discovery in the precious metals market. The price of gold is at or near an all-time in most currencies except the dollar. This summer, however, it would appear that the dollar-based valuation of gold is starting to break the “shackles” of official intervention and is beginning reflect the underlying fundamentals.
Gold priced in dollars is up over 14% since mid-November 2018 and over 44% since it bottomed at $1050 in December 2015. But those RORs for gold are inconvenient truths you won’t hear in the mainstream financial media.
The movement in gold from 2008-2011 reflected the fundamental problems that caused the great financial crisis. The gold price also anticipated the inherent devaluation of the U.S. dollar from the enormous amount of money and credit that was to be created in order to keep the U.S. financial/economic system from collapsing. But those “remedies” only treated the symptoms – not the underlying problems.
Once the economic/financial system was stabilized, the price of gold – which had become
technically extremely over-extended – entered a 5-year period of correction/consolidation.
This of course was helped along with official intervention. Gold bottomed out vs. the dollar in late 2015. As you can see, the gold price is significantly undervalued relative to the rising level of Treasury debt:
This is just one measuring stick by which to assess a “fundamental” dollar price for gold. But clearly just using this variable, gold is significantly under-priced in U.S. dollars.
As mentioned above, the underlying problems that led to the systemic de facto collapse in 2008 were allowed to persist. In fact, these problems have become worse despite the efforts of the policy-makers and insider elitists to cover them up. But gold is starting to sniff the truth. I’ve been expecting an aggressive effort by the banks to push the price of gold below $1400 – at least temporarily. But every attempt at this endeavor has failed quickly. This is the ”invisible hand” of the market that ”sees” the ensuing currency devaluation race, which has shifted from a marathon to a track meet.
Though the politicians and Wall Street snake-oil salesmen will blame the fomenting economic contraction on the “trade war,” the system was heading into a tail-spin anyway – the trade war is simply hastening the process. As such, the only conclusion I can draw is that there’s big big money globally – over and above the well publicized Central Bank buying – that is moving into gold and silver for wealth preservation. In short, bona fide price discovery in U.S. dollar terms is being reintroduced to the precious metals market.
The Mining Stock Journal covers several mining stocks that I believe are extraordinarily undervalued relative to their upside potential. I also present opportunistic recommendations on select mid-tier and large-cap miners that should outperform their peers. You can learn more about this newsletter here: Mining Stock Journal information.