Oil is one of the major inputs to the U. S. GDP. WTI crude has fallen from $107 to $66.80 as of this writing. This is highly deflationary. In the short to medium-term, it undermines the inflation prongs of the thesis. Of course this does not change the very long-term outcome. For the foregoing reasons, in the last Complete Portfolio Update, allocation to TBF was reduced from 7% to 5%.
A Case For Buying Gold
Here are the reasons to buy gold for the very long-term.
High sovereign debt.
The only way out of the debt is monetization of the debt with cheaper fiat currencies.
A segment of the population is addicted to government handouts. This cannot be sustained at the present rate without fiat currencies losing a significant portion of their value.
A Case For Not Buying Gold
Here is a case for not buying gold at this time.
Higher interest rates drive the price of gold down. The reason is that gold does not pay any interest or dividends. When interest rates go higher, it becomes difficult for gold to compete with other investments.
The momo crowd is a relatively new phenomenon in gold. The momo crowd is sitting on very large unrealized losses in gold and silver. As gold and silver have fallen, the momo crowd has not cut its losses as prudence would have required. Instead, momo crowd has continued to add to their positions without any diversification discipline.
The foregoing is a very dangerous situation for gold. 100’s of years of history tells us that sooner or later the momo crowd will panic and sell its gold and silver. Such a selling can easily cause gold to go under $1,000. and silver to go under $12.
When To Buy Gold And Silver For The Very Long-Term
The time to buy gold, silver and precious metal miners will be when the momo crowd panics. Please stay tuned to the Real Time Feed as our sophisticated proven algorithms are always on the look out for the opportune moment to start accumulating gold, silver, and precious metal miners for the very long-term