When looking at the gold market, it’s easy to get caught up in the daily price fluctuations or the most recent headlines on the financial channels and forget about long-term market dynamics. Gold, after all, is generally more of a long-term investment that has historically served as a hedge against economic turmoil and protected investors against fiat currency devaluation – otherwise known as inflation.
The World Gold Council recently released its Gold 2048 report providing in-depth analysis of how the gold market will potentially evolve over the next 30 years. In general, things look pretty bullish for the yellow metal if you consider a longer view.
Peter Schiff talked politics in his latest podcast and raised a sobering question: Could the US be on the path toward a socialist administration?
Peter noted that we are long overdue for a recession. There are plenty of signs a major economic downturn could be lurking right around the corner, including stock market weakness. And as we reported today, US Treasury yield curves are flattening. The average global yield curve has inverted. Inverting yield curves are a strong predictor of recession.
This is bad news for President Trump, who has taken credit for the “great” economy and strong stock market. Peter said the president has set himself up as the fall-guy when the crash happens. Meanwhile, the Democratic Party is drifting further left.
The economy is strong!
Or so the mainstream financial talking heads tell use every day.
Meanwhile, one of the best predictors of a looming inflation is flashing red.
The yield curve between the two and 10-year Treasuries narrowed to around 34 basis points this week. That’s the lowest level since 2007 – right before the financial crisis. Even more troubling, the global yield curve has inverted for the first time since 2007.
At the current trajectory, the cost of paying the annual interest on the US debt will equal the annual cost of Social Security within 30 years, according to a recent report released by the Congressional Budget Office.
By 2048, as interest rates rise from their currently low levels and as debt accumulates, the federal government’s net interest costs are projected to more than double as a percentage of GDP and to reach record levels. Those costs would equal spending for Social Security, currently the largest federal program, by 2048.”
The price of gold hit six-month lows in recent days, primarily driven down by a surging dollar. Peter Schiff has been saying investors shouldn’t get too caught up in greenback hoopla. This is likely an upside correction in a dollar bear market. As it turns out, Peter is not alone in this assessment. At least a few mainstream analysts agree, and they see gold rallying by the end of the year, according to Bloomberg.
Remember when Bitcoin was knocking on $20,000? Today it’s it’s in a freefall, trading in the $6,000 range.
Crypto markets tumbled again last week after Japan’s financial regulator ordered several cryptocurrency exchanges to beef up anti-money laundering practices. The move prompted the country’s largest crypto exchange to suspend creation of new accounts. Bitcoin fell nearly 9%.
Last week, we reported on the mess in the European banking system, asking the question: could big European banks drag down the world economy? Big banks in Europe have piled up debt just like the rest of the world. But an article in Bloomberg reveals big banks in countries like Germany, Switzerland and France may be in even worse shape than we think. There are indications that European banks are using a Lehman Brothers-style trick to disguise their actual levels of debt.
The Dow Jones was up Friday, avoiding it ninth consecutive down day. As Peter Schiff noted on his most recent podcast, such a long stretch of declines is pretty rare. Eight straight down days has only happened 43 times since the Dow launched in 1896. The last time we had nine straight days of Dow Jones decline, Jimmy Carter was president.
Peter said this is a little ironic because he sees another Carter-era phenomenon on the horizon – stagflation.
We’ve written a lot about government debt and warning signs in the Treasuries market. The US government needs to sell over a trillion dollars in bonds a year over the next few years to finance its skyrocketing deficit. Who exactly will buy all of these government bonds remains unclear and the impact on interest rates could send shockwaves through the entire US economy.
Equally troubling, but less often discussed, are the risks piling up in the corporate bond market.
The SchiffGold Friday Gold Wrap podcast combines a succinct summary of the week’s precious metals news coupled with thoughtful analysis. You can subscribe to the podcast on iTunes.
