2019 is off to an exciting dynamic year already. I’m very bullish to say the least on what we have ahead of us in precious metals that we’ve all been waiting on. On a personal note, in a matter of months, I’ll be welcoming to the world my third child which we found out will be a girl, and we couldn’t be happier.
In the spirit of renewal, I’ll say this, if your 2018 was anything like mine, it was full of some of the greatest memories I’ve ever had, along with pivotal challenges that has felt like my back was against the wall.
Unfortunately, it’s easy to allow the challenges we face to monopolize our thoughts and take us down to a toxic destructive state if we aren’t careful.
Keep in mind, diamonds are a piece of coal that didn’t quit under pressure. I really believe that the difference between those who are successful and those that aren’t are that successful people just don’t quit and continue to stay nimble under any circumstance.
Being able to roll with the bad and thrive in the good is key. And to that effect, I’m anticipating bad news to continue to shake markets up, inflation to continue to set in, and for gold and silver to dramatically rise.
There are an estimated six billion ounces of gold in the world, worth more than $7 trillion – a whole lot of value contained in a precious resource with a limited supply. And yet, we didn’t hear much about gold in the mainstream media when the price got trapped in a tight range for most of 2018.
Perhaps that shouldn’t be unexpected, as the corporate media consistently lags the markets in its coverage to breakout assets. The tail end of 2018 revealed that precious metals are indeed breaking out of a long base and, on a technical level, are ready to move much higher:
What kept the price of gold near the $1,200 level for much of 2018? The primary factor was the U.S. dollar: in a very rare event, the dollar outperformed all other major U.S. asset classes, including the stock market. This is actually pretty amazing, as the last time the U.S. dollar outperformed everything else was way back in 1969.
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The value of the dollar consistently deteriorates over time, with occasional dead-cat bounces along the way. 2018 was one of those bounces, and we can’t reasonably expect the U.S. dollar to have another year like that. There’s little doubt that the dollar will return to its usual decline as the national debt (now approaching $22 trillion) mounts and inflation takes its toll.
It’s a perfect formula for rising gold prices, as gold and the U.S. dollar historically have a negative correlation of 80% to 85%. As gold expert Pierre Lassonde put it: “Gold is the anti-dollar… When the dollar is weak, people go back to gold.”
And what buoyed the dollar for much of 2018 was the expectation that the Federal Reserve would continue raising Treasury yields at a rapid pace. However, Fed Chairman Jerome Powell has halved his forecast of interest rate hikes for 2019 from four to two. Given President Trump’s constant pressure on Powell to ease up even more, analysts are starting to predict that 2019 will have no rate hikes at all, or eveninterest rate cuts.
The way I see it, Trump and Powell have no desire whatsoever to push the stock market further into full-on crash mode, so the pressure will most likely be to the dovish side throughout the next year at least.
This will have direct consequences on real interest rates and I expect very fortunateimpacts on gold prices.
When you take the “nominal” or officially reported interest rate and subtract the anticipated rate of inflation, you get the real interest rate. After all, the stated yield of a T-note as an investment should reflect the actual purchasing power given the destructive effects of inflation. It’s apparent that after inflation has been factored into the equation, U.S. Treasurys have offered very little in terms of real yield since 2008:
The already dismal returns from Treasurys could easily go negative after inflation in 2019 – a perfect setup for gold to skyrocket. A collapsing dollar, coupled with bonds that literally offer less than nothing in real terms, will provide a tremendous catalyst for gold’s bull run in the coming year.
I implore my readers to fully take in the facts. It’s a recipe for a wildly successful 2019 for gold investors – look at the chart, check the data, and strap yourself in for a terrific ride.
Chief Editor, CrushTheStreet.com
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