Investor Place: Gold's Next Big Move

October 15, 2020

Article by Jeff Remsburg in Investor Place

Most people don’t truly grasp the enormity of the number “one trillion.” Our macro specialist, Eric Fry, finally put context around this for me in his most recent issue of Investment Report.

Here’s what blew me away: “One million seconds would equal 11 days. A billion seconds would equal 31 years. And a trillion seconds would equal 317 centuries. If you turned the clock back 1 billion seconds, you’d be in 1989. But if you turned it back 1 trillion seconds, you’d be somewhere around 30,000 B.C.”

I hope you’re getting an idea of must how mind-boggling one trillion is. Now, with its enormity in mind, let it sink in that over the last four years, the federal government has increased the national debt by $7 trillion, much of that from freshly-printed dollars. Here’s Eric with the significance:

“… money-printing schemes are not good for the dollar’s value, all else being equal. And as the history of finance has taught, a trend that is bad for the dollar is good for gold … all else being equal.”

Today, let’s get Eric’s latest thoughts on why wise investors are making sure gold is in their portfolio today. But then, we’ll do you one better. We’ll turn to Stefanie Kammerman, the analyst behind Dark Pool Trader. It turns out she believes gold and silver are on the verge of their next leg higher right now. Let’s jump into the details.

For newer Digest readers less familiar with Eric, he’s our big-picture, macro specialist. He’s also probably the most successful investor you’ve never heard of. In 2016, some of the world’s best money managers and stock pickers participated in an annual investing contest. Participants included Leon Cooperman, David Einhorn, Bill Ackman … and Eric.

Eric beat them all. He posted a one-year gain of 150%. Beyond that, over his career, Eric has dug up 40 different 1,000%+ returning investments. Most investors never get one. So, when Eric is incredibly bullish on an investment or asset class, we pay attention. And that bodes well for gold today. From Eric’s recent update:

“Since the COVID-19 crisis struck down the U.S. economy in March, the U.S. Treasury has raised $3.4 trillion in new debt by selling Treasury securities. But over that same time frame, the Federal Reserve has purchased a net $2 trillion of Treasurys. In other words, the Fed has simply printed nearly 60% of the net new cash the Treasury has “raised” this year. And as the history of finance has taught, a trend that is bad for the dollar is good for gold.”

To illustrate this relationship between the Fed’s activities and gold, Eric presents a chart beginning in 2007. It shows the Quantitative Easing operation in 2009 and extends all the way through today’s coronavirus stimulus dollars. Gold’s price is in blue. The Fed’s net stimulus purchases are in orange.As you can see below, the relationship here is pretty straightforward.

The difference today is that our current monetary debasement is taking place at such a massive scale and speed that Eric believes it could easily produce a $4,000 or $5,000 gold price.

He isn’t the only one. In his issue, Eric quotes Paul Singer, founder of the hedge fund Elliot Associates: “This is a perfect environment for gold to take center stage. Fanatical debasement of money by ...

To read this article in Investor Place in full and view the relating charts, click here.

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