Gold’s Fundamentals Are Intact, With One “Great” Exception
Gary Tanashian

Have you heard the news? America is going to be great again! The people have spoken and the man with the simple but catchy buzz phrase is back in office.

Pay no attention to the fact that he is going to use well worn and unsuccessful tricks of trade wars past, that he is going to increase the already incalculable national debt, and try to stimulate the appearance of “America great again” for the average Joe. It’s not going to work. You know it. I know it, and anyone with a modicum of economic sophistication knows it.

But do you know who doesn’t know it? The men, women, machines and casino patrons that make up the sponsorship of the Good Ship Lollipop’s signature index, the S&P 500. It is no surprise, given great-again America, that the S&P 500 is the only equity/asset market on this chart that gold’s standing is not still constructive against (along with many others not included on this chart). This despite the utter hammering (kidding, it is a normal correction and would be healthy even if gold visits 2400, as is quite possible, if not probable).

You might want to keep an eye on the first panel above, as it will be very important in determining if the markets are going to play the “America great again” theme straight or put a nice contrarian stake right through its heart in the coming weeks/months (inauguration day is a month+ away). Dollars to donuts when the president-elect talks about greatness, he is not talking about the US dollar, because everything he says he stands for economically (protectionism, low interest rates, tax cuts funded by increasing Trillions in debt) is antithetical to a strong dollar.

But so far, Uncle Buck has his own ideas as he waits for his fellow rider of liquidity Apocalypse to to decide on a direction (northerly or southerly?).

If gold does take over leadership from silver and the US dollar holds this breakout and screams higher the indication will be that large swaths of the macro – if not the vast majority of it – will come under great stress. The correction in gold could be leading just that as the precious metals often lead other areas due to greater forward-looking liquidity sensitivity. As for any bullishness in nominal precious metals and miners, if the two horsemen above get impulsive patience will be needed. But the indication will be that oh yeah, the funda are just fine and setting up for the ultimate contrarian play, after the damage is done and the DUST settles (pun intended).

So keep an eye on the relationship above. Break down, and party on. Go the other way and not party on.

I love this market right now because much like the good ole’ US of A, it’s got potential for much mayhem in 2025. I’m not saying I love the mayhem. But I do like a fucked up market that is by outward appearances, unmanageable. It can be fun, if you’re patient and then prepared. Yes, pain, I know. Real people, real lives, I know. But I did not create this giant Ponzi scheme. I simply work with it and interpret it. It’s my job.

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Gary believes that the gold-silver ratio is a more fine-tuned indicator than the gold-copper ratio and that rising gold-silver ratio can indicate that liquidity is under threat in the broader markets. He also discussed the potential for a new inflationary source and de-dollarization, suggesting that investors look for sound gold mining operations in safer jurisdictions, and ETFs such as GDX and GDXJ. He believes that the sector as a whole will benefit regardless of what individual companies are doing and that precious metals should be separated from industrial metals. Overall, Gary believes that the ingredients necessary to create a big bull market in mining stocks are in place and that investors should look for the market signals, tune out the noise, and focus on gold as the anchor of the complex. He believes that the Fed has had enough after decades of inflating the markets and that they may be smart enough to recognize that. Gold is seen as a safe haven asset and Gary believes that central banks will become more involved in gold markets, which could lead to higher gold prices.

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