vrijdag 20 maart 2015

U.S. Debt and Gold

Think of this for a minute.

In 2008, gold was at a bottom of $600/ounce and U.S. debt was $9 trillion. Now debt has doubled to $18 trillion, so you would expect a bottom now at double the gold price, which is $1200/ounce.

Gold will be bottoming out soon on the condition that U.S. debt will not fall. But I'm certain U.S. debt won't go down as deficits are now starting to crawl upwards.

Look at the latest deficit numbers. Since 2014, deficits went uphill, so you can bet that U.S. debt will continue to increase.

After the Fed meeting this week, interest rate expectations were lowered in the Fed "dot plot", which led to a surge in precious metals.

Gold demand from China is very robust, this week we saw gold buying again at the high end in Shanghai (50 tonnes). Premiums are robust too, with silver at the high end historically.

APMEX gold premiums are higher.

Oil is starting to bottom out at immense contango. No shale oil company is profitable at this stage, which is also why tax earnings for the government are decreasing, fueling a higher deficit. When oil goes up, so does silver.

Managed money has now gone very short, which will lead to a bounce in gold prices soon.

The GLD ETF has seen increases in stock.

On the currency front, we have seen that the U.S. dollar had a huge surge. I believe this cannot keep going, at some point it will reverse (due to QE4) and that will support precious metals.
Overall, I'm pretty bullish precious metals now.

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