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For the last several months, I’ve been putting up with some hate mail, as I forecast a severe decline in the precious metals. Questions came into my mailbag like …
“Don’t you see the negative interest rates in Europe, surely they are bullish for gold?”
Let me address the above, and more, so you have a handle on why I’ve been bearish gold and silver — and correct!
FIRST, negative interest rates are not necessarily bullish for gold. Or silver. Why? Because you cannot spend gold and silver as if it’s real money. Hardly a soul will take it except an informed buyer, and in a barter situation.
The fact of the matter is this: People are hoarding cash in physical and digital form far more than they are hoarding gold and silver. They are doing so because …
A. It’s easier to hoard cash.
B. With deflation still ravaging Europe, that cash’s purchasing power is constantly increasing.
C. It IS easier to spend cash.
And more. So in a very real sense, gold is no longer money. A store of value? Yes, but only when governments’ backs are up against the wall. And that time is coming. But for now, gold and silver are simply commodities.
SECOND, don’t you see that George Soros and other big hedge fund managers are loading up on gold? What’s with you, Larry?! Sure I do, and I also saw them get KILLED when gold topped in September 2011 and they held on to their gold and incurred losses of 50% and more.
Just because they manage big money doesn’t mean they can’t get a trade wrong sometimes. In fact, they get them wrong far more often than you would imagine.
THIRD, China and India are still buying gold so that must be bullish, no? Yes, they are still buying, but so what?! Neither country has any intention of implementing a gold standard. They are simply diversifying their reserves a bit, just like you should be doing with your savings.
FOURTH, one well-known analyst says the dollar is going to crash on September 30 so we must buy gold now, Larry!
This one is total, unadulterated BS. This analyst has been wrong forever on the dollar and doesn’t have a clue how the world’s monetary system works or the global economy.
His theory is that the International Monetary Fund (IMF) is going to officially add the Chinese yuan to the IMF’s composition of its Special Depository Receipts, or SDRs, on September 30 and therefore, the dollar will crash.
Give me a break!
A. The yuan was approved by the IMF for inclusion in the SDRs a year ago. That means the dollar market has already had a year to digest it. And what has the dollar done since then? Appreciated against the Chinese yuan.
B. The yuan only accounts for about 4% of all of foreign exchange (forex) transactions today, which are well over $5 trillion a day. Meanwhile, the U.S. dollar accounts for as much as 85% of daily forex turnover.
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| Converting yuan to dollars or vice versa will cost you a fortune. |
How could the yuan even make a scratch in the dollar?
C. The yuan doesn’t have the liquidity or the market depth to dethrone the dollar. There are still capital controls in China on how much yuan can leave the country and it’s still largely a closed system.
For instance, I have about $500 worth of yuan I forgot to change back to dollars the last time I was in China. I can change them to dollars in Southeast Asia, but due to a lack of liquidity, it will cost me as much as 20%.
And in the U.S? Forget it. Try converting yuan to dollars or vice versa. If you’re lucky, you might be able to do so at JFK, LAX or Chicago — but it will cost you a fortune.
D. Did this analyst even consider the fact that there’s plenty of legal and illegal Chinese money that wants to leave China, for diversification and whatever reason?
From what I can tell, no, he hasn’t. And that’s a big, biased mistake because there’s hundreds of billions of wealthy Chinese money that also wants to go abroad to invest, and mainly in the U.S. — buying businesses and real estate.
Displace the dollar? Heck no. The yuan won’t
even be able to displace the deathly ill euro!
Bottom line: The U.S. dollar is NOT headed for any type of crash. To the contrary, my models show the dollar getting much stronger going forward — regardless of who takes the White House come November.
Why? Largely because Europe and the Middle East are such a mess. Anyone with any decent money would want to put it to work in the U.S., which means demand for dollars will continue to rise, even amongst the Chinese and Southeast Asians.
There really is no alternative at this time.
However, as I have also long maintained, the U.S. dollar cannot be the largely sole global reserve currency and the world’s reserve currency must change to a basket of currencies that is far more fair to the G-20.
That change will come by 2020, and it will involve the IMF or the World Bank. The new world reserve currency will be a composition of currencies of the G-20, it will be solely in electronic form, and it will be tied to a floating basket of commodity values.
That way, it will be not only transparent and fair but also subject to free market forces.
And by the time that transition comes, there may be some turmoil in the forex markets, but even then, the dollar will not crash.
Bottom line: Don’t fall for all the fear-mongering on the dollar. It’s coming from either inept analysts or fear-mongers trying to pick your pockets.
Lastly, keep your eyes on gold and silver now. Cycles still point lower into early October, they point higher for the dollar, and lower for stocks.
October is merely two weeks away, so stay very tuned in. My Real Wealth Report subscribers and trading service members are now starting to get very active with specific buy and sell signals for terrific profit opportunities.
Stay tuned and stay safe!
Best wishes,
Larry
P.S. Economic tidal waves act just like tsunamis. According to the National Geographic, the enormous energy of a tsunami can lift giant boulders, flip vehicles and demolish houses. But from a financial standpoint, the K Wave will be even worse: Millions could lose their homes. Millions more could see their lifesavings wiped out in an instant. Businesses, large and small, could close their doors. Even the bare necessities of life — food, water, clothing — might become scarce. That’s why it’s so important that you get your free copy of my new report “STOCK MARKET TSUNAMI” right away, click here to download now!
John N. September 27, 2016
I noticed you had a mention in stock gumshoe, but they spelt your name wrongly so I told them how to spell it properly and gave a plug for you, ie good publicity, even though you don’t need it! It was all about you rubbishing Jim someone who is promoting himself LOL!
Anyway I do have a previous question about the range and time for oil and also whether Deutsche Bank will at least not go bankrupt, because I worry that this WILL be treated as a Lehman moment, maybe next year? and USA stocks will tank; rather than simply follow your prediction of a repeat of 1932 to 1937 and at last start going up to 31000 on the Dow and break this now over one year bear cycle since May/August last year! I do notice you only see 17000 at the worst on the near term downside, not 13000 odd!
Yes I AM paying attention to you and not being hypercritical, as you can see!
Please amplify your predictions which have been very accurate lately!!
Phil September 26, 2016
Tat ta tap. Get ready for another “cycle inversion”…
Chris September 25, 2016
Wade is correct. None of the other reader’s have been able to make fortunes and even figure out the gold market correctly or they would already be gold gurus, well-known and well paid.. This is about patience and is bigger than today’s action (mid & long-term). It is a little tricky with all these sovereign egos out there as well. I for one thank you Larry for your enlightening comments.
I do find valuation to be a slippery slope for all the markets at this moment in time due to idiot central bankers, QE and negative interest rates. We are in interesting times.
were September 25, 2016
I haven’t been here for a while and long timers will recognize my predictions are almost always on point. The $US will not crash. But this is a top until early summer next year.
Wade September 24, 2016
Patience, investors you bought into the Super cycle concept, show a little respect, Larry has been spot on. Show some patience and it will work out. Consider the turmoil world wide including U.S.A.
Linda Auerbach September 23, 2016
Larry
Should I buy gold in mid October even if it stays within this trading range?
Aj September 23, 2016
I have never heard so much of conflicts between nations in the last decade…n u r not God who knows the exact bottom…
TBo September 22, 2016
Larry, you have repeatedly stated why the Euro experiment has so far and will continue to fail. What makes you think that the global economy will buy into a global currency that is identical, in theory to the Euro? After all the Brexits from the Euro, I can’t imagine it would get any support from any country involved with or witness to the Euro and its demise.
Ashu juneja September 22, 2016
U could be right,but I believe u r not 100% correct,people would buy gold for future protection not to spend right away,
Why China has accumulated so much gold in the recent past? There is a reason……
Why Jpmorgan is hoarding so much of silver…
Melody September 22, 2016
If gold is heading lower why did you recommend Btg?
It has moved up but I just find it odd.
John Draughon September 22, 2016
Larry, I don’t get it. How can a new world reserve currency be composed of G20 currencies AND tied to commodities.
When this happens, will not buying commodities, which you advocate, equate to buying the new world reserve currency if it is tied to commodities? (Presumably, individuals will not be allowed to buy the new world reserve currency.)
Gordon Harvey September 21, 2016
Larry,
Keep the updates coming, most of us are still holding off purchasing yet.
regards.
Herma B. Fischer September 21, 2016
Looking forward to receiving more information regarding the developing money situation. Thank you.
Alwie September 21, 2016
Forget all the hypes bro.
There will be no more market crashes. Central banks QE moneys will stabilize and keep buying every dips. Expect no more extreme volatility in the future.
Weston September 21, 2016
The fact of the matter is this: People are hoarding cash in physical and digital form far more than they are hoarding gold and silver. They are doing so because …
A. It’s easier to hoard cash. Not as easy as you think. The Average Bank has $100,000 in their vaults. It seems like a lot until 10,000 depositors request a $1000 withdraw at the bank at once.
B. With deflation still ravaging Europe, that cash’s purchasing power is constantly increasing. It depends which asset class your purchasing. Real Estate is not cheap.
C. It IS easier to spend cash. True, until people realize it is worthless.
And more. So in a very real sense, gold is no longer money. A store of value? Yes, but only when governments’ backs are up against the wall. And that time is coming. But for now, gold and silver are simply commodities. False. In 1913 the price of Gold was $19.00. 2016 the price of Gold is $1300 an increase of 68X. Since 1913 the Dollar is now worth 98% less. “Gold is Money everything else is Credit” JP Morgan
steve brassey September 22, 2016
Weston, do you realize what many real estate mkts have done since 1913, or stks, for that matter? Gold and silver have brief bullish periods, but on balance are dogs. AS far as Rickards goes, all you have to do is watch the sorry forums that he shows up on, before you load up on his ideas. Take care.
frank September 21, 2016
it,s all good to me ..i think larry is a very wise person and knowledgable and im not but i think knows more with all the reasearch he has behind him …kewep up the good work larry your doing a hell of a job…frank
Andrew September 21, 2016
Larry , with all due respect , your 7 sept article titled” Sneek preview at an important forecast tool ” appear shaky now just look at Dji and gold , it’s moving the opposite direction of your forecast tool … And you have a few more days to Oct16 !
If you are right by first week of Oct , I think your reputation will spread far and wide ….
I think everyone is tracking your forecast tools vs the actual so good luck !!
Old Bullfrog September 21, 2016
As you point out, the stock market should be getting close to tanking but I don’t see gold crashing at the same time. If anything, the market turmoil should cause investros to run for gold because it likely that the bond market will be collapsing as well
Laura September 21, 2016
Thank you Larry! I was very worried recently about the dollar crashing too because of probably the guy you are talking about…..I feel much better! I just recently subscribed to your newsletter and I am really enjoying reading them. They are very easy to understand and informative.
Sonny September 21, 2016
Hey Larry
You nailed it when you made the comment about the fellow who has called the dollar dead on Sept 30
Gold will be below 1300 in 3 weeks or less – Oil retreats to the low 40’s – mid 30’s & silver dips
Stay Well
Sonny
Bob Schubring September 21, 2016
The group closest to a gold standard, are the Wahhabi fundamentalist hardliners whose inflluence limits the powers of the King of Saudi Arabia. The reason for this, is that they believe the Qur’an commands all Muslims to use only gold and silver as money.
On February 11 of this year, gold and oil prices reached a record level, at which Saudi Arabia had to pump and sell 38 barrels of oil, to earn enough dollars, with which to buy a single ounce of gold, At that point, the Wahhabi-endorsed strategy to bankrupt the US oil industry, failed. Saudi Arabia, dumping oil on the markets at a loss, could not swap oil for gold at any better price.
Larry is absolutely correct on this issue: Nobody can controi the market price of any commodity. Trades happen because people agree to trade. Agreeing isn’t controlling.
Gerald H. September 21, 2016
I am guessing today was a very bad day for your subs?
bharat September 21, 2016
Larry..u have been veey bullish on gold till recently..2dau u r talking different language..u have turbed bearish according to this article..u used to say it will touch 5000 mark in 2 yrs..
Arminius Aurelius September 21, 2016
The market will once again CRASH considering cash in bank accounts is actually losing money what with .01 % to .o5 % interest rates. . Therefore money was thrown into the Dow hoping to get a better rate of return. That drove the Dow up to an irrational point. The value is NOT there . Once the market crashes as in 2000 and again in 2008 , I jump in and BUY , BUY , BUY Precious Metals . In the meantime I do NOT sell what I bought at lower prices. The buying power of $ 1000.00 paper money in 2000 now would cost $ 1376.00 , a 37 % loss. Gold in 2000 was about $ 300.00 and now is about $ 1300.00 . Gold is insurance . I look forward to a market CRASH . Buy low , sell high.
charles e.berner September 21, 2016
Larry, I am a subscriber to your gold mining millionaire.I am not getting any more info from you. what going on? I also get money and markets. Please reply.
Michael September 21, 2016
Since the the FED and central banks continue economic engineering, how can you be so sure we go down in the markets you mention? It looks to me that the manipulation continues with today’s FED non-move. Business as usual. Markets will not crack…….
Don Foster September 21, 2016
Larry,
Thank you for your input of information, it is valuable to us and appreciated!
Please keep it up!
Jim Liese September 21, 2016
I to have been confused by the reported trends of big money as far as gold, but very concerned by what Jim Rickards has been espousing. Your explanation of cash and SDR’s have given me better clarity. Your hate mail appears to be a result of the confusion between reality and perception.
Bonnie E September 21, 2016
Concerning gold vs. the US dollar: I understand that you’re predicting gold to go down into the early part of October, and then rebound and start heading higher, much higher, from there.
Your statement, above, says “…my models show the dollar getting much stronger going forward — regardless of who takes the White House come November.”
My question: If the dollar grows significantly stronger, would this not suppress any real meaningful rise in gold prices? ….Am I missing something here?
Millfield September 21, 2016
As a UK resident and RW subscriber, I am surprised at your stated belief (in September RW) that the UK has exited the EU. No it has not!
Although the majority voted in favour, no move has yet been made to implement the formal exit procedure, and it is not beyond the realms of possibility that our thieving, lying, scumbag politicians will find some excuse to avoid the divorce entirely.
Greg September 24, 2016
Yeah, these Politicians are crooks and hopefully someone will push them to trigger Article 50 otherwise democracy in the UK is dead.
brad September 21, 2016
Thank you for your straight forward Common Sense approach
Alhough you mention in 2020 and not within 6- 12 months is the consideration that there will be a Big Transfer of wealth soon and the volatility of the world economy with 258 Trillion of Bank Derivatives being held by the top 4 worldwide banks along with the Credit Bubble is about to burst
Will September 21, 2016
Hi Larry,
I very much appreciate your at long last communicating to us the reasoning behind the comments you have made about gold that were painted to look like some form of proprietary voodoo based on cycles, secret formulas and what not. I am not surprised that your readers are at best confused or at worst angry, because their intelligence does not understand voodo but is looking for concrete information. Thanks for the information; and I should like to comment on it as follows.
Many do not like gold because they do not see gold generating income, but this has been negated to some extent by ZIRP and NIRP, and by banks charging customers money held in accounts. The banks do everything they can to prevent you from using cash and from obtaining cash; but how will that end should any of the cyber or power fears actually come about. Also, we can not all hoard cash should the stock and bond markets fall out of favor.
Cash is indeed the way to go and is my day to day mode of operation, but I see my ability to rely on cash deteriorating. I hate using plastic and limit my account transactions to interbank transfers as much as possible. But how many years worth of cash can I accumulate; and how much more cash will I need to buy the same amount of gold at a later date, and will I later even be able to use cash to buy gold and silver?
I do not expect China to back the yuan with gold today, but what about in the future; and if China and India diversify into gold, just maybe we need to consider doing so at the same time as well. Man~ana is not good enough for me.
You do not mention who the well known analyst is that says that the USD is going to crash on 30 September; but you must not be referring to Jim Rickards. Rickards tells us that the G20 and IMF meetings this September will historically be seen as the date for the demise of the USD as the world’s premier reserve currency to be replaced by the SDR. I have seen this misinterpreted by other “experts”.
Your comments still do not confirm any significant price reduction for gold and silver to be forthcoming that I can see. I still do not understand your models on which that forecast is predicated. Data input to the models would need to be based on a benchmark that is consistent over time; much of today’s data comes from a playing field with moving goal posts and side lines. We could be looking at garbage in gives garbage out no mater how good the models are; but your comments completely side step your models and data input. Frankly, I do not fear the SDR; I fear the value of my USD, and that is why I like precious metals. They remain precious to me.
Will
TomT September 21, 2016
RE: >>His theory is that the International Monetary Fund (IMF) is going to officially add the Chinese yuan to the IMF’s composition of its Special Depository Receipts, or SDRs, on September 30 and therefore, the dollar will crash.<<
That analyst is Jim Rickards and while I agree that his claim that the dollar is setup for a crash on September 30th is absurd, he actually is NOT claiming that this is due to the Chinese yuan. He also states that the new world currency as of September 30th will be "a basket of currencies that is far more fair to the G-20".
Chuck Burton September 21, 2016
If the Fed does raise interest rates a tad, that would be negative for gold, but only slightly, which could cause a small decline into October. Barring some other negative news, gold seems very close to a bottom, and if it begins another leg upward in the early part of the month, it could be about to break out, maybe to new all-time highs in 2017, as people everywhere begin to lose faith in fiat currencies. The Fed might get it’s desired 2% inflation and a lot more besides. Of course, gold’s value is also fiat based when it comes right down to it. That is why it has climbed so much in the last few decades.
gordon September 21, 2016
Precious metals are jumping today of all days. Seems the financial junkies were waiting for their shot from the BOJ and it did not materialize. Should be a great day night here for gold and the stock market hmm not so much so. Did you watch Elizabeth Warren (who should be running for president) rip Stumpf from WF a new one. He tried to run a firewall defense but she soon punched holes in it. The stock dropped 8%. I wish she could have had him on the hot seat for another 48 hours she would have driven WF stock down to zero. How sweet it is. The Global Greed award goes to Exxon. Seems like the attorney general from New York does not agree with their methods. Exxon went to their buddies on the hill and cried and congress subpoenaed the attorney general to ask him why he was bothering this sleeping giant. It seems that they did not take write downs on some losses like other major players did. Exxon was trying to protect their stock price. I hope none of you have these stocks in your retirement portfolio’s. It seems that Mr. Putin sold a bunch of “paper” bonds to hedge and pension funds and turned around and used the money received to buy 700,000 ounces of gold. Da yes I sell you bonds and take your money and buy your gold. What a smart fellow.
bruce September 21, 2016
i look forward to lower silver prices. gold works as currency for me. i dont know where you deal. i dont buy groceries with it, as even a 1/10th ounce coin is too big for them to break….there in lies the rub. now, if the german or italian banks crash…..as they just might do…..we are into dominos and 2008 the sequel. lots more going on that you have covered but, i like a contraian opinion. everybody has been yelling ”FIRE” in this theatre for the past year or so.
Toby Howes September 21, 2016
‘My Real Wealth Report subscribers and trading service members are now starting to get very active with specific buy and sell signals’
Larry, please could you clarify … I am a RW subscriber if the above statement means that the RW is currently sending or has recently sent some specific instructions (it’s not actually clear from the wording), I have not received anything other than the monthly RW report.
Thanks
Damien September 21, 2016
You took the words right out of my mouth. Plus all my hedges are now in the red. Ouch. I new I should have sold yesterday and played the waiting game
Andrew September 21, 2016
Larry,
on a related topic……global economy vs U.S. economy in the upcoming presidential candidates debate, what questions would you, as moderator, pose to our candidates that would corner them into their true authoritative positions on where YOU feel the U.S. should strive to be related to the global economy? It seems to me that the U.S. and Europe have the most to lose in standard of living, employment, technology to support globalization. Thanks
wade September 21, 2016
Thank you Larry for a balanced, non hyped, common sense approach.
PJM September 21, 2016
Who Larry do you see gold having a 2nd bottom in January of next year or do you think this will be the final bottom..keep up the great work, best regards.
Hail Mary Pass September 21, 2016
Larry high risk calls. If you are correct you business should boom. If you basic premise is wrong your done. Not that it matters, but I have bet real money your wrong.
John
roger hazeldine September 21, 2016
YOU are quite correct with regards to your analytical projections in all respects, BUT your premise is based on past actions and past annalist methods which in all due respect to your good self have served you well and other like you.
. That said we are in uncharted waters as spoken by some very famous names in the banking community. Hence this time around we shall see unprecedented reactions to the bond implosion that’s just down the road and with that implosion the exact oppisite will happen with silver and gold.
People will buy gold out of fear not a sense of correctness. Fear will grip the majority of dumb sheep that pass for the vast America populace .. My conclusion is therefore you are incorrect as to the value of gold going forward.
Ralph September 24, 2016
LMAO
davis john ochola September 21, 2016
thanks a lot i hope that my request will considered
James Knoesen September 21, 2016
Morning Larry,
Most interesting articles ! I have one concern . That is the health of the Chinese banking system . The iMF was not pleased . Then Wells Fargo . Is the problem as bad as the reports ?
Thanks for letting us have level headed information.
Regards
James Knoesen South Africa
Dan Wanner September 21, 2016
Larry, thank you for your continuous flow of updates; seems like a breath of fresh air. Will you please give me your thinking re: GDX and GDXJ? Thanks again. Dan Wanner