When I think about the price of gold, I think we got three primary
bias.
It's the, it's the, it's the diversify, its the folks are worried
about the purchasing power and it's the Speculator.
And today is the Speculator piling.
It on the short Side, gold hasn't changed, its the price of gold that
has changed.
Well, one of the odd things in the currency world is that when
inflation takes up a currency, not just the US dollar often, takes
higher, and the reason why it takes fires because when inflation moves
higher than the perception is all the central banks are going to do
the right thing, they going to hike rates, and therefore the the
currency will will need to appreciate and then only over time that the
real story comes out of what the central banks are actually going to
do.
And that's when assuming that they don't take care of inflation.
And don't tighten so patient of the currency will weaken again.
And of course it's done in a global context in the Eurozone which is
of course the huge and the heaviest weight and the dollar Index.
Then just backpedaling says well maybe we didn't mean it then we're
going to hike rates as much as as previously thought and so they
obviously these sort of factors and then on top of that, the dollar is
in some ways, a carry currency, meaning when there's a risk of
environment in the market, people are have to get buy back their
dollars.
Is that they previously borrowed the correlation of gold versus the
S&P 500 over.
The long run is 0 and that doesn't mean it always does the opposite
sometimes with with the as a something against it, sometimes does
whatever it wants.
And and so any investment is pretty much bound to frustrate the most
out of investors.
And we can't expect it to do, always the quote unquote, right thing.
It's one of these kind of Hallmarks of the environment that if you
aren't confused.
You're paying at not paying attention and
Just go by the news of the day, you almost certainly lose money and
you got to make up your mind while your whole, any asset including
goals, and then just cross that that theory over time rather than
being bound by the moves of the day.
It's quite possible.
That said we believe to - quarters in GDP of the recession.
But actually in the US, the official word is done by a comedy and they
just take that as a contributing factor and they may not declare
recession because we have low unemployment and other items.
So they may tell us a, everything is good, everything is great.
We don't have
Research.
Ultimately, of course, a recession is of your neighbor loses a job at
depression is of you lose your job.
The fact of the matter is it's a mess out there and the markets are
telling us.
It's a mess up there.
I think mess is the technical term rather than recession.
The risk is high there, obviously various cross currents and but
they're doing like just say the risk is high.
What we are faced with is this is not your typical cycle that we're
used to.
We were faced with a major Supply shock and when you're faced with a
major,
A shock.
One of the Hallmarks is that policy makers make the wrong decisions
because the right reaction to get supply and
Act in check is not to write a stimulus check, but to quite the
opposite to Throttle Down demand then instead of cause the Federal
Reserve kind of kept the pedal to the metal, we get stimulus.
Checks, we do all kinds of things and that creates less ability.
It creates this is incredible unstable Dynamic that's coming.
And and so in that sort of environment, that's why everybody is
confused because on the one hand, some numbers going up through the
roof, some are going down the the politically attractive thing to do.
Who is most counterproductive usually in this sort of environment and
and that's why everybody is scrambling and that's all the reasons.
Why the markets are having it.
I think we're looking at 20 22 and what is it what it means is that we
have high inflation and that means the Federal Reserve has enter
Federal behind the curve is behind the curve and so the FED will have
to get the labor market.
The open jobs together with those those who are the jobs are being
offered,
And it wants to have this Cliff Walk and so day gonna they tightening
right now.
And so the markets all screaming and presumably the year-over-year
inflation numbers are going to look a little bit better.
And then presumably the FED is going to back pedal a little bit.
And so we get some relief and then a few months down the road, some
numbers will be bad again, and then they have to tighten again.
And so this is going to be a very tedious path.
Where we'll have this back and forth, where some numbers look, better.
The FED is going to say, okay, we've done enough.
Enough Victory, right?
We won and and then they're going to tightening it and say, this is
not going to be a typical cycle.
This is going to be a very grinding process.
Yeah.
Well, the FED is using a sledgehammer to, to kind of take care of this
huge problem that we had to job openings for every job Seeker, which
is hugely inflationary.
So the views, the sledgehammer it starts in high tech and anywhere
there was profit in the economy.
And so we'll have the kind of these Ripple effects but the the high
tech worker while some of them.
I work in a restaurant but for the most part it was a different types
of jobs where where we have the, we have kind of this mismatch between
supply and demand and that's not going to be fixed overnight.
Now that said, of course, when the tech workers lose their jobs,
they're going to go list to the restrooms, it's going to Ripple
through them.
And and again, it's if we have this, this, we're coming out of covid
and trying to put kind of Humpty Dumpty back together.
And in the meantime, we're going to get these cross currents that that
policy makers.
Try to fix it.
Now we're told hey, the gas prices, have to come down maybe we'll get
regulation on this and that and then all of that creates more
disruption and is going to create a huge, huge mess out there.
And at the end of the day.
Yes, the economy has to slow down.
That is how you try to get rid of this.
This is overheated economy.
Okay, so you think the FED is purposely trying to slow it down,
they're creating their engineer.
Specialized, they don't have a choice, they don't have a choice,
right?
The, the question is, whether they'll stick with it.
Larry Summers said the other day, one of the worst things you can do
when you take antibiotics is to stop taking them too early.
Dave did the problem with high inflation is not inflation is not
linear, right?
If you had, if you can't just High grades and relations going down,
everything is going back to normal.
Even in the 1980s inflation was gyrating.
Whereas now we have so much more leverage in the economy.
We have high inflation.
Yeah, and it's going to come down but then it might pop right back up,
right?
And that's the problem that and and we if we, if we have to kill off
growth, inflation numbers are going to come down.
The FED May well declare Victory, but inflation won't have been being
kind of Concord, so to speak.
And it's going to pop right back up and that's the the problem we have
with undulation, it unleashes, unstable Dynamics, and that's why we
are living and breathing it in the markets right now.
I'm not going to give you a very specific price and but it is
Again, we think that the FED actually might be already near the peak
with a, there's upcoming interest rate hike.
And so, the FED very quickly, the market is going to price in that
will see some easing down the road and we are late cycle, late cycle,
price of gold tends to do well.
And so, unless the Federal Reserve is going to be suddenly, extremely
hawkish, which I don't think they are.
I think that after this technical move, we see here.
The price of gold will be doing, just fine.
Well,
Gold had been holding up very well and today sell-off May well be
technical in nature.
The 50-day moving average.
Went to the 200-day moving average.
I like to focus on the macro picture and one thing to keep in mind
like to take people gold hasn't changed its the price of gold that has
changed.
And so it's the macro environment that changes the perception of the
macro environment that changes and in part that I would be a policy
makers, don't have many good options and so we might be in for some
pain and in the
In the short term, people are selling everything.
You'll break your barbaric Relic.
You are your coin is unchanged.
It's the perception of the value of the asset that changes.
And I like to think about when I think about the price of gold.
I think we got three primary bios.
It's the, it's the it's the diversify is the folks are worried about
the purchasing power and it's the Speculator.
And today, it's the Speculator piling.
It on the short side,