I hope you’ve been watching gold and silver. They’ve been moving nicely lower, right on target with my cycle forecast for a potential major low later this month.
Just in case you missed it last week, I have the forecast chart today. As you will clearly see, gold is following its cyclic destiny, to the tee. Silver’s outlook is pretty much the same.
That said, I thought I’d take this opportunity to answer your most pressing questions on the precious metals.
After all, they are the markets where there is the most amount of mis-information out there.
And the markets that most pundits seem to completely misunderstand. So let’s get right to those questions.
Q: Larry, you’ve been right as rain about deflation. So how could gold and silver bottom when deflation seems to be picking up steam?
A: There are numerous reasons. But the most important is the following:
Precious metals can do well in either extreme. Extreme inflation, or extreme deflation.
In fact, historically, gold gains the most purchasing power during periods of deflation, not inflation. The reason for that is also simple: During extreme deflation, the debt and credit structure of the world’s monetary system — especially sovereign debt — come under increasing stress.
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As such, savvy, big money starts to seek out hedges against collapsing sovereign debt. Hence, new bull markets in precious metals can be born, even during deflation.
That is exactly what is happening now. As long as gold makes a major low by the end of the month (other precious metals too), then it is quite possible we will see brand new bull markets.
Q: Oil is tanking again. Do you expect it to fall much below $30 a barrel?
A: Yes, I do. My models, technical and cyclical, point to oil moving below $30 by the first quarter of next year. Probably to around $26.
Hard to believe, given all in the geo-political instability in the world. But all that is overshadowed by Europe’s dying economy, Japan’s slumping economy, China’s modest slowing, and the U.S.’s muddle through economy.
Moreover, oil inventories in developed nations now stand at a record 3 billion barrels, with no end in sight as OPEC nations keep the pedal to the metal on supplies, trying to choke off competition from U.S. producers.
There will, of course, be bounces in the price of oil, but overall, oil is headed much lower.
Q: The stock market can’t seem to breakout to the upside. But it can’t seem to pullback much either. What gives?
A: Three things:
First, I believe the market’s resilience is a testament to its long-term strength. As I have said all along, the Dow is headed to 31,000+.
Second, looking simply at the Dow Industrials, or even the S&P 500, is deceiving. The majority of publicly traded U.S. stocks are down for the year, with as many as 39% down more than 15%. The Dow Jones Transports, the Dow Utilities, the Russell 2000 — are all down and weaker than the main indices.
So in a very real sense, U.S. equities are already in a stealth pullback. Odds are that the Dow Industrials and S&P 500 will soon succumb too.
Nevertheless, keep in mind that any pullback you see will merely serve to get the majority of investors bloodied and bearish. The long-term trend is higher.
Q: I can’t believe how accurate you have been when in late 2012 you forecast a rise in global stress and geopolitics. Since then we have seen the rise of ISIS, Boko Haram, a worsening of the war in Syria. Putin takeover Crimea. Now the terrible Paris attack. How much worse can it get?
A: Unfortunately, a lot worse. We are still early in the cycle, which calls for rising social and international stress and discontent to rise all the way in to late 2020.
Europe is the hotbed, and will be the entire time. The refugee crisis has allowed terrorists to infiltrate Europe, and Europe is also buckling under the financial stress of providing for as many as two million refugees.
But don’t kid yourself. You will soon see all of this migrate to Japan, then to the U.S. as well.
Not just terrorism, but civil discontent too. Protests against government. Secession movements. And more. It will get very ugly.
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Q: Do you believe gold and silver will eventually be confiscated?
A: No, I do not. Why would governments move to confiscate them when what they want to do is make them obsolete? Confiscating gold or silver would send the opposite message; that they are too important to be in the hands of investors.
This is also why I believe investors, when buying gold or silver, should opt for ingots and bars. Why pay premiums of 4 to 7% on bullion coins when you don’t have to?
Governments of the world are not interested in gold or silver. They are more interested and will expend more effort, moving toward electronic money and eliminating cash, so they can track and tax you more.
Q: Will inflation ever come back?
A: Yes. But not until the current monetary system crashes and burns, via deflation and sovereign debt defaults.
Q: Bitcoin crashed, just as you predicted. But now it’s rallying again. What are your thoughts on Bitcoin?
A: I still wouldn’t touch it. It’s too thin a market, and too subject to government interference.
That said, there may come a time when it does indeed go mainstream. The monetary system is breaking down even more quickly than I had expected. And there may be a future role for Bitcoin in investors’ portfolios. But right now, no.
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