There’s always a risk when I make forecasts with specific numbers. When I’m right, I’m a hero. But when I’m wrong, I’m mud.
So be it. As far as I’m concerned, forecasting is the business I am in. After all, every time you buy an investment, you’re making a forecast, that the price of that asset will rise.
And conversely, every time you sell, you’re mostly making a forecast as well, that either the price will fall, or that you’re grabbing enough profits that you don’t give a hoot.
So right now, I’m going to give you some specific forecasts for the main markets we’re all so concerned with.
Let’s start with gold and silver: As I indicated in my special column last week, gold’s current rally is to be expected, but it is NOT the start of a new bull market.
Yes, gold has tested major support levels that have held. Yes, gold is starting to rally again. And yes, gold can reach as high as $1,365 before turning south again.
But gold’s bull market is not yet here. It will not come until gold plunges to test — and hold — major support levels under $1,000 an ounce. Those support levels are at $915 and $847.
Ditto for silver, whose major support levels lay at $14.15, $13.85, and $12.50.
|Investors around the world are hoarding cash.|
The reason precious metals remain in a bear market? Simple …
First, deflation has the upper hand in commodities right now. The reason: Most investors around the world, and businesses, are very uncertain about the future.
So they are taking money off the table, hoarding cash, preparing for a rainy day. The velocity of money turnover and credit is slowing; it’s a “risk off” mentality in nearly every corner of the globe.
Money printing by central banks isn’t doing the trick either. Most of that money is sitting in banks, or back at the central banks themselves. Hence, negative interest rates in Switzerland, Japan, Germany and more. Don’t be surprised if negative rates come to the U.S. in the not-too-distant future either.
Second, authoritarian governments are squashing growth. Europe is raising taxes like there’s no tomorrow, and regulating anything and everything that moves.
It’s not all that different here in the U.S. either:
During President Obama’s administration, a record 21,000 new regulations on businesses were enacted, most of them without Congressional approval.
Last year alone Obama issued regulations costing American taxpayers and businesses an estimated $762 million in regulatory costs per day, according to the American Action Forum.
All told, President Obama’s administration has filled 468,500 pages in new regulations in the Federal Register.
Moreover, according to the Competitive Enterprise Institute, the president is poised to unleash another 2,375 new rules on American businesses this year, and again without first giving Congress an up or down vote.
Strangling the economy? Which in turn strangles the global economy? You bet! No amount of money printing can offset excessive regulation and uncertainty.
After the current bounce is over, gold and silver will plunge anew to new lows for their interim bear market cycle.
Crude oil and energy prices: They’re bouncing now too, but don’t be fooled. Energy prices are headed much lower before the year is out, just like gold and silver.
It’s the deflation environment, just like it is for gold and silver. Plus, the geo-politics of oil is adding to the bear market. OPEC is flooding the market with supplies, hoping to shut down other producers, namely the U.S.
In addition, demand is falling, due to anemic growth in most corners of the globe. It’s a deadly recipe for lower energy prices ahead, with crude oil’s bear market not set to end until oil falls to near $30 a barrel.
Food prices: Same thing here. Sugar has plunged from over 0.33 per pound in August 2011 to 0.1479 today (Feb. 3rd), a whopping 55 percent loss.
Corn has plunged from $7.65 a bushel in August 2012 to $3.67 today, a 52 percent loss.
Wheat, from $12.29 in August 2010, to $5.00 a bushel today, a devastating 59 percent nosedive.
More declines are coming in the grain and other food markets, such as coffee and cocoa. Untold scores of small and medium farmers will be wiped out before their bear markets end.
Sugar will plunge in half again, to below 8 cents a pound. Corn to under $2.50, another 32 percent plunge. Wheat will slide to below $4, another 20 percent loss.
The deflation will not stop until these markets swing to the other side of the spectrum, to new lows, to prices that will wipe out any semblance of possible overproduction …
Setting the cycle up for much lower supplies, so low that prices will eventually have no other choice but to bottom, and then begin a fresh new bull market.
Base metal prices: Copper, iron ore, nickel — all hit hard. Copper sliced in half in the last couple years. Iron ore prices, down as much as 40 percent last year alone.
And the list goes on and on. Deflation, pure and simple.
But what about equity markets, especially in the U.S.? Why are they not deflating?
Mark my words: In the short-term, they are indeed starting to deflate. The long-awaited correction is finally here. Stocks will not be able to withstand these deflationary forces.
But long-term, the U.S. equity market is in fine shape. The forces that will drive it higher long-term have not changed, and indeed, are intensifying: Europe’s demise, the rising war cycles and geo-political conflict in nearly every corner of the globe.
Fears of confiscation, weak banks, rising taxes, eventual sovereign debt defaults in Europe, Japan and yes, the good old United Sates of America — will all drive capital back into the U.S. equity markets …
Once their correction ends. That correction, underway now, though, will first see the Dow fall as low as 14,300, before it too comes to an end.
The good news: Once this deflationary storm passes, late this year, most asset classes will take off again to the upside, in a moon shot that will make their most recent bull markets look like a walk in the park.
Stay safe, stay tuned and stay open minded!
Best wishes, as always …
P.S. With my gold and energy picks, I’ve guided investors to 271.7% gains in one year flat. Now in my FREE report I reveal how you can profit enormously as the investment world is shaken by dwindling supplies of oil and natural gas.