I’m getting so many questions from readers, so this week I’m going to devote my column to answering the most important ones. Let’s get started!
Q: Larry, you had a tough time earlier this year with gold and silver, but now, you’re nailing it again. The precious metals are collapsing, just as you said they would. When will the bottom come?
A: Not for a while! Gold has now broken the June 2013 low and shattered monthly support at the $1,170 level. There may be another bounce, but gold will not bottom until the die-hard bulls are trashed.
That will be at much lower prices, at least in the medium term. The same for silver. I sure hope you took me up on my suggestions of the past several weeks to purchase inverse ETFs on gold, silver and mining shares. If you did, you’re sitting pretty with some very robust gains. Hold those positions. I expect more gains to come as the metals and mining shares slide further into next year.
|Gold will not bottom until the die-hard bulls are trashed.|
Q: Why isn’t inflation a big problem now? Everyone is expecting it and the world’s central banks have certainly printed trillions of dollars of paper money.
A: As I’ve said all along, printing money by itself is not inflationary if the majority of investors and consumers don’t want to spend or borrow money. That’s been the case for years now as consumers, investors and businesses — the private sector — all retrench.
Moreover, the money printed thus far, around six trillion dollars between the U.S. Fed, the Eurpoean Central Bank (ECB) and the Bank of Japan (BOJ) — is a tiny fraction of the amount of debt swirling the globe, a conservatively estimated $158 trillion.
So there is no way we are going to see hyperinflation, and in fact, the opposite is occurring, deflation!
Q: Where do your war cycles stand?
A: Precisely as forecast, they continue to ramp up. You can see it all over the world, in the Middle East, in Asia between China and Japan, in social unrest in Europe, and more.
Just look at Putin, who was obviously behind 19 Russian planes that crossed into NATO airspace last Wednesday.
On my short-term war cycle models, I have a turning point coming in mid-November. So stay alert, we should soon see a new geopolitical crisis emerge.
In short, the war cycles point up all the way into 2020, so keep your seatbelts fastened, it’s going to get a whole lot worse in the months ahead.
Q: You’ve been forecasting that the U.S. stock market will take a moonshot to Dow 21,000 — even as high as 31,000 — over the next few years. Is that forecast still on target?
A: Absolutely. There is no doubt in my mind we will see the Dow move to at least 21,000 by 2016, and probably much higher. And not despite turmoil in the world, but because of it. The Dow and other blue-chip type stocks can and often do act just like gold, as a safe haven for capital.
But the Dow has not yet completely broken out to the upside. A sharp, swift correction is still overdue. We got the first phase of it in early October. October’s swings were the greatest in 119 years in the Dow. More wild swings are coming.
Q: Are central banks manipulating the markets? Are such manipulations routine, and are they present in gold and silver?
A: Yes, on occasion the big investment bankers and central banks attempt to manipulate markets, for short-term opportunities.
But here’s the important point: Manipulations never, ever change the destiny of the markets. They don’t change the trend, and they certainly cannot reverse major trends. All they do is increase volatility.
So don’t buy into the excuses, for instance, that if it weren’t for some manipulation, gold or silver would never have crashed.
That’s pure baloney put out by inexperienced traders and analysts, and by dealers who want to blame some outside force to get you to believe that gold and silver’s decline isn’t real, and that if you simply dive into the markets you’ll make money.
Look, if central banks were trying to push gold prices down, then why did gold soar from $255 in 1999 to $1,921 in 2011?
If they were trying to manipulate down the gold market, then why would many central banks be buying gold?
It just makes no sense. Period. These theories about massive manipulation changing the trend of markets have more holes in them than Swiss cheese. So I urge you to cast them from your mind. If you don’t, and worse, if you use them to make investment or trading decisions, you are virtually guaranteed to lose your shirt.
Q: If the Swiss vote to increase the franc’s gold backing, won’t that be bullish for gold?
A: Hardly! Even if the Swiss were crazy enough to go to a 100 percent gold backing, it wouldn’t have an impact. In terms of global gold demand, it’s a drop in the bucket. Moreover, gold is in a bear market, and demand is being met by aggressive selling.
Q: Some time ago when Germany decided to remove its gold from the New York Federal Reserve’s vaults and start shipping it back home, you said it was bearish for gold. Everyone thought you were nuts. But then, Germany ended up selling 25,000 ounces of its gold. Is that a sign of things to come, central bank gold sales?
A: Yes, I believe it is. But not by all central banks. Only by those desperate for cash.
Look, no matter what you hear, Western central banks have no use for gold and instead, they want to move the world to an electronic currency that can be fully tracked, and taxed.
So to them, gold is a dinosaur.
Meanwhile, the central banks of the world, our Fed, the ECB and now the BOJ, are aggressively purchasing stocks. Again, conspiracy theorists tell you they are trying to inflate the stock market. And to some extent, that is true.
But it’s only part of the story. The fact of the matter is this: Central banks also want to get a return on investment. And the deepest, most liquid markets on the planet for them to invest in and get a return is, you guessed it, the stock market.
Here in the U.S., central bank purchases of equities will make our equity markets even more bullish, which is one of the reasons I see the Dow going much higher over the long term.
However, in Europe, it’s not likely to support those equity markets much, since most savvy Europeans are moving their money out of Europe and Europe’s economies and stock markets are in bear markets.
In Japan, you are not seeing any real net gains in equities, despite BOJ purchases. Why? Because at the same time the BOJ is purchasing Japanese equities, the bank is also devaluing the currency.
That’s it for now. Stay tuned — my models are showing that November and December are going to be some of the wildest final two months of the year, ever!