Long Gold, and Long Cryptos
Gold sets a new all-time-high … why its gains will keep coming … bitcoin and altcoins are also poised to jump … get some of your wealth outside the dollar
Last night, gold exploded through its prior all-time high of $1,920.
The precious metal reached as high as $1,944 before slightly pulling back.
As I write, it’s trading at $1,938.
About three weeks ago, we wrote the following in the Digest:
… within the next three months, (gold) will set a new all-time high.
… the media will be filled with headlines about the new record … the start of a new, gold bull market … various gold mining stocks enjoying double- and triple-digit gains …
As the broader population slowly becomes aware of all this, we’ll see a new host of investors piling into gold …
… this flood of new dollars will drive prices higher. Higher prices will attract more investors. More investors will drive the price higher … the trend will surge …
With that in mind, note the current headlines:
***We believe that, while remarkable, $1,920 is just a milestone within a far bigger move for gold
That’s because the fundamental reasons why the precious metal is climbing aren’t due to short-term, quick-fix issues. Gold’s gains are rooted in the precarious reality of today’s global macroeconomic situation.
A quick glance around our world reveals a pandemic that’s not going away … persistent unemployment … massive sovereign debt (which is growing) … social unrest … and an avalanche of newly printed fiat currency.
Consider what’s happened since our most recent Digest that focused on gold from a few weeks ago.
One, European leaders just agreed to create a 750 billion EUR ($858 billion) recovery fund to support the EU economies that have been hobbled by the coronavirus crisis. The European Commission is going to borrow this money — so, more debt.
Two, here in the U.S., the CARES 2 Act appears right around the corner with another check coming to qualifying Americans.
CARES 2 will likely be another $1 trillion+ package, so fire up the Fed’s printing press again. And prepare for our national debt-to-GDP ratio to climb to even more stratospheric, record levels.
Three, the U.S. dollar continues weakening.
After spiking in the panic of the March market-lows, the Dollar has been falling hard. In recent days, it’s flat-out fallen off a cliff, as you can see below …
Top to bottom from the spike in March, that’s about a 9% drop in just four months.
Four, the CARES Act temporary moratorium on evictions, which protected some 12.3 million rental units nationwide, officially ended this past Friday.
Data from the U.S. Census Bureau found that nearly one in five renters — roughly 14 million renters — either didn’t pay the rent last month or delayed their payment. Landlords can now begin to take action.
Yes, some renters are covered by a patchwork of state and local eviction bans that don’t end until this fall. But in general, unless our officials extend the national moratorium in the next relief package, this could end in a wave of evictions with ripple effects extending throughout the broader economy.
Of course, if the moratorium is extended, the problem doesn’t disappear, it simply shifts the economic pain to a different group.
Instead of renters, landlords without deep pockets will face a cash-flow problem, which puts them at risk of defaulting to their banks and lenders. If banks are left footing the bill, we can expect losses and stricter tightening of lending requirements that will hamper economic growth even more.
Bottom line, someone has to pay the bill. And if the government eventually has to swoop in to absorb all these rental payment losses, that means the taxpayer is booting that bill.
Five, and also from the economic arena, Markit’s U.S. preliminary composite purchasing managers’ index data for July was weaker than expected. The numbers are adding to the growing concern that our economic growth is stalling as our nation struggles to reopen.
Six, the U.S. ordered China to close its Houston consulate, citing Chinese efforts to steal U.S. trade secrets. In response, China has ordered the U.S. to close its Chengdu consulate. This is a new escalation in the rapidly deteriorating relationship between the superpowers.
Put it all together … more sovereign debt, more fiat currency creation, more Dollar weakness, more economic pain, more geopolitical tension …
While all terrible, it’s also highly bullish for gold.
***It’s not just gold that will benefit — bitcoin and altcoins are poised to climb as well
Shortly after its late-March low, bitcoin rallied alongside stocks until May.
Since then, it had been trading sideways, establishing a base. It also began trading in a tighter pattern.
But in that last few days, bitcoin has exploded out of its recent compressed trendlines. It’s now back above $10,000.
We’ll show you this in the chart below.
But I would also draw your attention to the bottom pane beneath bitcoin’s market price. The pane features the readings of an indicator called Average True Range (ATR).
ATR is a volatility indicator. It shows how much an asset or security is moving up and down in a given time frame.
Higher ATR readings are higher volatility readings, and vice versa.
We’ll add commentary on the ATR below. For now, just note bitcoin’s price action breaking through its recent trend lines, as well as the level and curve of the ATR.
As you can see, bitcoin’s ATR has been trending lower and lower and lower. But in recent days, it’s stopped its decline and taken a sharp upward turn as bitcoin’s price pierced its upper trend line.
A study of market history shows that assets often make strong moves after going through periods of compressed price action and compressed volatility.
The reversal in the ATR coming from such low levels, alongside bitcoin’s explosion above $10,000, is another reason why we believe a larger price-breakout may have just started.
***While we expect gains for bitcoin, we anticipate even bigger moves from elite altcoins such as those held in Matt McCall’s Ultimate Crypto portfolio
For context, Matt introduced his crypto service with his first altcoin recommendations back on January 7th. Since then, bitcoin has tacked on 33% as you can see below.
Meanwhile, what’s the average gain of Matt’s 11 altcoin recommendations over the same period?
Again, that’s the average gain.
As I write Monday morning, I’m seeing individual altcoin gains of 180%, 225%, and 272%.
***At the end of the day, the long-term case for gold and cryptocurrencies reduces to one thing — getting some of your wealth outside the U.S. Dollar
While there’s still a tug-of-war today between deflationary and inflationary forces, in the longer-term it’s hard to see how the trillions of dollars of new fiat currency creation won’t result in significant inflation.
For savers with a large portion of their wealth in the dollar, this could be disastrous.
While we believe gold and elite cryptos are two of your best preventatives against such an inflation-disaster, they aren’t your only options.
You could invest in real estate … or collectibles … or a storage-units … or fine art … and yes, even stocks.
The reality is that companies with the ability to increase the price of their goods and services to match inflation rates will be better able to protect your wealth that plain ‘ole dollars.
Bottom line — move some of your wealth outside the Dollar to an asset that will retain value regardless of what happens with the Dollar itself.
As we wrap up, today’s macroeconomic environment points toward a simple takeaway — long gold, and long cryptos.
Have a good evening,