Editorials

End of Gold Consolidation Approaches

One is wise to sell on the rumor of bad news and buy on the fact. Gold is approaching over a year of consolidation on the rumor of Fed tightening and a rate hike. Next week the Fed is expected to increase its bond purchase taper and hint of more aggressive rate hikes in 2022. However, there is almost a two year lag between money printing and inflation.

After the end of taper in 2022, inflation will continue into 2023. Quarter point increases in the Fed Funds will not slow down inflation, now that it is out of the barn.  Shadowstats shows CPI inflation based on 1980 measures is currently at approximately 14%. and headed for the 1970's rate of 15%.
Jerome Powell is no Paul Volcker.  Inflation will continue to spiral out of control without double digit Fed Funds rate, which would crash markets.

Technical analysts,  such as Gareth Soloway,  see gold price forming an inverted head and shoulders,  with a break out to the upside due around January, 2022,  at a gold price of $1,875.  Targets during the next two years show gold peaking at around $3,000. 

In the next few years a perfect inflation storm is expected to hit like a tsunami. First, the supply chain crisis is expected to damage the U.S. economy until 2023, increasing prices and causing shortages. Second, the money supply surge in 2020 and 2021 exceeded any surge in money increase in the last 150 years in the U.S.  Inflation will continue for the next 18 months. Third, a black swan event, such as a $100 spike in oil would increase inflation, and result in the stagflation of the 1970's.  Because of climate change activism and the pandemic, oil companies have decreased investment in oil exploration, which has lowered supply. Because of momentary stimulus, demand will exceed oil supply in the next few years. Oil traders are making crazy bets on oil with option strike prices at $100 or $200 in the near future.  Gold Resource's acquisition of Aquila Resources will add 1 million ounces of gold and proven reserves of silver and base metals.  I am long GORO. 
 

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