16 Nov Gold & Silver Run Post US Election
3 Trends Will Push Gold Higher
No 1 – US Election
The US election will have a profound effect on the world’s financial markets. Although the election is done and dusted, or so it seems barring any Trump litigation surprises, we still do not know what the US government is going to do about injecting more printed money ( stimulus ) into the economy. The expectation is that the Federal Reserve will add another massive $6.5 trillion into the US economy to keep it afloat. The us markets have been riding this money printing wave since the early 2000’s. This will most certainly bring inflation back up and that will be followed by higher interest rates which will be detrimental to the markets. Like the Titanic many years ago, it is only a matter of time before the US stock markets implode. If we look at the very accurate Schiller PE ratio chart below, we can clearly see that the markets are massively over valued.
The long term Schiller PE average is 15 as opposed to the current reading of 32.6. This tells us that the S&P 500 index is purely driven by speculation right now, courtesy the Fed’s money printing machines, and not value per share as it should be. There is huge potential for the S&P500 index to drop below 1000 which will be a 70% loss. The possibility of a huge drop in the stock markets are very real for the first quarter of 2021. This will be the time that investors will flock to safe haven assets like physical gold and silver. The only real safe haven asset is if you physically own it, and own it in a safe way. By that I mean you must hold it in your hand. Putting it in the bank vault or owning paper Exchange Traded Funds exposes you to third party risk like the bank closing down or the EFT going bankrupt.
No 2 – Brexit
Brexit is happening on 31 December 2020, and there will not be an extension. If you think Brexit does not concern you, think again. After Germany, the UK is the largest trading block in a very fragile Euro Zone. If the UK should emerge as a new blooming export economy outside of the Euro Zone, many other borderline countries in the Euro Zone might decide to go the same route. That will be the end of the Euro Zone and have serious implications for the rest of the world because all the big European banks will go bust. The fears of such an event are already driving wealthy EU investors to gold and silver putting a strain on physical supply. This can only encourage a higher gold price.
No 3 – Covid-19
To date approximately 54 million people across the world have contracted the Covid-19 virus. 1.3 million people have died so far and bear in mind that the figures are misleading because governments across the world are suppressing the real figures for political reasons. Nearly 30-40% of the world’s 3.3 billion work force might loose their jobs by the end of 2021. There just is no way that the world can avoid a depression as a result of the Covid-19 virus. One of the surest ways you can protect your wealth in the coming years, will be to own physical gold and silver. All paper money and paper based financial assets will be devastated. A brief look at what happened with gold and silver after the 2008 sub-prime bubble burst shows why you should own gold and silver.
After the 2008 market crash, gold went up by 157% and silver went up 380%. The graph clearly demonstrates what panicking investors do when their wealth are threatened. They move into physical gold and silver. You should do the same!
Gold Technical Analysis
Gold is currently in a consolidation phase with an upper resistance level of $1965 and a lower support level of $1848. If the gold price should go below $1848 we will see some further downside to around $1818. 90% of the reason why gold is lower is purely based on the high US stock markets. I do believe the gold price can go to $2,100 by year end and $2,300 by end 2021. Currently investors are seeing profits in the high stock markets and they have no fear of the coming stock market devastation. The slow steady decline of the US dollar will work favorably towards a higher gold price. By the way, president elect Joe Biden is in favor of a weaker dollar to benefit the US export markets. Clever investors will however take advantage of the current low gold price to accumulate gold and silver because once the precious metals start running ….. they run fast! We saw that when we had the gold run from June 2020 to August 2020. I fully expect the next gold run in the first quarter of 2021. We also saw many refineries running out of stock where you could not buy gold or silver even if you wanted to.
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