I write this just after the markets had their worst day of 2019. They may have recovered some of those losses by the time you read this, but that doesn’t change what I’m about to tell you.
The world is waking up to the warning sign that is the bond yield inversion — when long-term bonds pay less than short-term bonds.
Such things certainly increase the urgency… and the intensity as well. But that’s not the driving factor I’m thinking about today.
I’d say the same thing with or without the recession signals blinking bright.
The bottom line is it’s time to buy gold — because paper currency is about to go on a crazy ride.
Trade War Tit for Tat Gooses Gold
If you’ve been following the news, you know that it wasn’t long ago the Trump administration announced an upcoming 10% tariff on all Chinese goods not yet affected.
The move was delayed to Dec. 15 — to give stores a chance to stock up on Christmas season items before prices shoot up — but make no mistake… This is a huge deal.
Indeed, it’s a big enough deal that it looks like China is throwing in the towel on reaching any sort of trade deal.
Rather than try to work something out, China simply devalued their currency.
The White House immediately labeled China a currency manipulator, potentially as a precursor to a more aggressive move.
Why does this matter? Simple — these factors are coming together to pound the ever-living daylights out of the dollar… and probably the pound, euro, yen and renminbi when all’s said and done.
What had been done cautiously, slowly and in the dark — lowering currency values, the better to sell exports — is now being done aggressively and in the open.
Don’t expect it to stop with China, either… These things never do. Everyone’s going to race to the bottom so their goods are competitive on the world stage.
In practice, that means currency values are getting squeezed in two ways:
- One — tariffs themselves are inflationary. When goods get hit by tariffs, producers don’t just absorb the cost — they pass it along to the customer. So prices increase, often at an accelerating pace, which is a textbook example of inflation.
- Two — and even more important today — when countries manipulate foreign reserves, interest rates and other financial factors to debase their currency, you get hit with another inflationary pressure.
All of which is to say — unless there’s some miraculous trade deal no one sees on the horizon — the dollar and other world currencies are about to fall in value.
Probably by a lot.
Now, some of you might think — who cares? If everyone is doing it, won’t currencies stay relatively stable compared with each other?
The answer is no. There won’t be any stability. In practice, these currency moves are herky-jerky, unpredictable and can wreak havoc.
But beyond that — even if currencies don’t move much compared with each other, they’ll move a lot compared with other things.
Like tangible assets — such as gold, silver and other precious metals (not to mention collectibles).
History Repeats Itself
Gold has had a few good runs in the past few decades.
Most folks remember the run in the 2000s — fed by the worst economy since the Great Depression. When everything was falling, gold was the only safe haven for many investors.
But the big bull runs of the 1970s were fed not so much by a weak economy but by double-digit inflation.
Well, not quite “here” — it’s August 2019, and gold is currently over $1,500 an ounce — but you can see there’s still a lot of room to for it to run if conditions are right…
Today, we could see both factors come together. Neither is likely to be as bad as in days past — hopefully, we won’t see double-digit inflation anytime soon.
And — while we’re overdue for a recession and the signs all point to one again — let’s hope it doesn’t compare with what happened in 2008.
But put a milder version of both together… and you’ve got the perfect recipe for a big bull run in gold.
I was talking with Rich Checkan of Asset Strategies International recently. He’s been through plenty of gold bulls before — and he sees all the ingredients today.
In fact, he told me that — looking at the charts from a technical viewpoint — gold recently established a new floor when it broke through $1,400 an ounce and stayed there.
Currently, gold is comfortably trading over $1,500 an ounce.
And Rich told me that the next price level with any resistance — where gold paused on the way down after the last bull run — doesn’t come until $1,900 an ounce.
We’re going to hit that level a lot sooner than you’d think.
Which means it’s time.
Buy gold. Before it’s too late.
Editor-in-chief, Unconventional Wealth
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Ryan Cole is the editor-in-chief of Unconventional Wealth. He’s been covering the alternative investment space for nearly a decade and writing about finance and investment for almost 20 years.
Ryan has walked the walk for years, living a very unconventional life. He’s led snowmobile tours through the mountains of Colorado, settled in Japan for five...