Precious Metals were down today; the Conventional Markets closed up; and, both West Texas Crude and Brent measurement of a barrel of oil were up.
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Djia closed up 145.47; S and P was up 1448; Nasdaq up 33.83; energy up; and gold down a bit at $1224.40
The markets have been climbing with low volume in past years.
LOL, it might go up, might go down, might chop…now that is some insight!!
The real reason we are entering a long term period of deflation and very low growth is almost all a demand side story that is centered around falling global population numbers. It is a story about our demographics profile and those of all the other so-called rich countries.
And it is a bigger story than any other fundamental we usually consider.
We don’t discuss this aspect of investing much because we all tend to get lost in the analogs of what happened the last three or four times during our lives that the developed economies were attempting to exit a bear market.
But what if it really was different this time?
Well in fact, it is different because so many of us are aging and nothing can be done to change the trajectory of the oncoming sharp population drop scheduled for ALL of the worlds major developed economies (plus China) over the next few decades.
The facts are, there are going to be fewer and fewer of us each year for many years to come and that really does not bode well for the prospects of mining companies trying to bring new supply online in a world of falling demand. Nor does it offer a positive outlook for existing mines producing excess supply into a market that is all about shrinkage and less demand.
Most notably, it is the demand deficits that are underway in the richest countries that will have the largest impact on future mine development. And so it is a fair question to ask whether there is going to be a true shortage of gold and silver as so many analysts keep trumpeting in just the same way we should wonder if there will be genuine shortfalls in iron, copper, aluminum and lead.
What we do know is that it has been population growth that has spurred global growth and demand during the 70 plus years of our post World War II period. So should that not also tell us factually that as population numbers drift lower that a contraction is the only available outcome during the next few decades as that large population bulge slowly fade away?
I am not referring only to the North American cohort of Baby Boomers. What is underway is a worldwide phenomenon of aging that is most notable in the Developed Western economies of Japan, the US and Canada, most of Europe and even China.
Those are the same populations whose offspring have to be able to absorb all the surplus of supply that has been created in the last few years while simultaneously burning off all the excess debt that was created in its formation.
Lets not kid ourselves. It can’t be done. Someone is going to bankrupt and close instead.
I honestly think this is part of the reason why gold could not exceed the 1981 highs in inflation adjusted terms during its last bubble peak in 2011 and why gold will actually become CHEAPER in inflation terms for many decades to come.
We are already seeing that current prices per ounce are near 50 year lows in inflation terms and it is entirely possible they can go lower still as world population declines because that decline is now beginning to accelerate.
We are going to need a serious reconciliation between the existing volumes of excess production of mined resources of all kinds to create a value match with the population trajectory. Basically, we are swimming in supply whether it be crude oil, natural gas, gold or iron ores in a day when we should be easily able to predict that far less fresh supply will be required in the future.
The mismatch that we do have points to a continuation of the deflation bust that has already been ongoing since the collapse in prices since 2011 and not a whole lot can be done about it until the natural clearing forces of the market take a whole lot of that supply offline.
That points to slow growth in the future, thinner profits and fewer opportunities to invest as we were more familiar with during the boom years we have enjoyed since the 1960’s.
Be careful what mining shares you buy therefore. This is not over by a long shot as the reconciliation phase could take many more years to evolve before balance is again achieved and during all that time our population numbers will be falling and demand could still hit lows that today seem unimaginable.
Have a look at this short article on demographics and debt for a perspective on where we are heading. And ask yourself seriously…….is gold really going to see its highs of 1981 again or is that just a pipe dream for a future generation to enjoy?
Add It Up… And It Doesn’t Add Up ~~ Chris Hamilton via ZeroHedge
http://www.zerohedge.com/news/2016-05-25/add-it-and-it-doesnt-add
NB….that 800 dollar ounce of gold you bought in 1981 should be worth more than 2300 dollars per ounce in todays terms (inflation adjusted). That is just another way of saying that in the past 35 years gold has actually fallen in terms of its buying power by 1500 dollars of today’s money.
Fifteen Hundred Dollars!!! Poof……up in smoke.
Gives perspective to buy and hold does it not?
And that is without even considering that those ounces of metal did not throw off a single cent of interest or dividends in all those years to soften the blow. In the meantime, gold is still low and remains in a bear market until further notice.
The 1981 buyer will not be able to claim victory as to having invested in an asset that held its value until gold exceeds 2300 per ounce but he will still need to see a great deal more to show that the investment generated any kind of fair return.
Just do a compound 3 to 5% annually since back then to see what I mean.
Some one please tell me again what makes gold so great? Shit, it does not even keep up with inflation as can easily be proven! By the time you deduct for storage, taxes, premiums paid and all your personal time it was actually quite a big fat depressing drag on your portfolio.
Four decades running!!! And that’s why gold bugs are so foolish.
And that’s why I don’t buy physical.
Still, despite all that, there will eventually be another bull market in precious metals. That could be many years in the future though and will only happen once this current bear market has ended, consolidated and embarked on a new phase higher.
But what you had all best be cognizant of is that precious metals in inflation adjusted terms made a lower-low at the 2011 bubble peak. The peak year 1981 was as high as we ever saw in our lifetimes and the future projection, all other things being equal, is that the next peak will come in even lower than 2011.
Maybe Harry Dent low….nobody knows for certain.
The Gold bugs want us all to think it will be different this time but they never consider the implications of a deflation driven by an absence of demand and falling populations. The future is not shaping up to be pretty though and the prospects for metals is not quite so bright as those guys would have you believe.
Fair value for gold on that same inflation chart is still well below prices that we are seeing today. So how in Sam’s Hell is gold going to get from here to 2300 dollars anytime soon unless we get an outburst of inflation that rocks the world and breaks the banks and pretty much every indebted government on Earth? (high inflation begs much higher interest rates in case you are wondering what I am referring too)
In any event, that 2300 dollar number is based on the peak price of the 1981 top in todays terms, not the average nominal price over all those years. Even if we get there it will only be fleeting because it would just represent another high which is where you should sell, not buy more of the stuff.
So play the rise and the fall. Buy the dips and sell the peaks. For Gods sakes don’t take the gold buggy stuff literally though. If inflation does rocket ahead we will instead expect to see interest rates destroy the debt markets of the world and a very ugly depression ensue.
Last time that happened precious metals hit their bottoms.
Gold will not save you in that next Great Depression. Neither will silver. What you need, like always, is solid growth companies that thrive and grow and throw off a dividend or continuous stream of income while enjoying some capital appreciation.
As I have already demonstrated……gold SUCKS!
You seem to miss the entire thesis for owning gold.
If as you seem to purport, all the government needs to do is credit our bank accounts
with digital credits. Why work? Why study? Why become doctors, lawyers, engineers.
Just let the government credit our bank accounts, as the world will gladly exchange their goods and services for newly created fiat currency brought into existence by making a loan. Debt doesn’t matter, nothing matters except the fiat created by an institution.
You can not be taken seriously.
Dave, I might just be the only person you have ever read who puts together a cogent argument (or any argument for that matter) about why gold investing is not what its cracked up to be. Lately I have not really bothered with much push-back because I can appreciate all the excitement of a little bullish mood change.
But I have not changed spots and my stance on gold has never changed. Those arguments you just offered are no different than what was considered the words of the wise back in the 1970’s as well. It was nonsense then and it is nonsense now.
But there is nothing new under the Sun. Maybe you were not as active with gold as I was back in those days. The propaganda of the gold cult has never stopped in all that time though.
If anything it has gotten to be more sophisticated and more akin to brainwashing than the old days when people bought and invested seriously in the stuff for much more legitimate reasons than we have today.
Back then inflation really could eat your savings away.
People were desperate to find solutions to protect themselves. Some of them made the mistake of thinking gold was the answer but as demonstrated above it was no panacea over the long run. In fact gold turned out to be a net loser and has cost a great many uninformed people like yourself a lot of money for little real benefit.
But surely you have been around the gold sites for the last few years and cannot tell me with a straight face you were unaware that for all the thousands of reasons offered by the cultists of why gold was supposed to rise this time, that instead……it went into a depressed funk and just kept falling.
This little blip we have seen since January is hardly the strongest price rebound we have seen out of a bear market. some might even call it feeble. That in itself should make you suspicious that it will have staying power or that it is perhaps not the real deal.
But getting back to you primary objections which are that you have doubts about the currency I am sorry to advise you but the gold cult has led you astray. So be careful who you listen too. The real risks facing our economy and the US dollar are that the worlds primary reserve currency will strengthen, not weaken.
We have an excellent historical precedence for this as well so we cannot even argue about it. That period in history was called the Great Depression and it was known as a period of Sovereign debt defaults and the failure of many dozens of countries to make good on their obligations abroad.
That was the Jubilee of the day when massive unrepayable debts of that time were wiped away by the magic called “stiffing your creditors”. Banks in the US and around the world failed in the thousands. Millions of people lost their homes, farms, savings, jobs and pretty much all else they had cherished.
The dollar soared in value and by no small coincidence silver hit its lowest point of the last 100 years. Gold only behaved differently because it was held at a fixed rate to the dollar determined by the Treasury and because there was a confiscation. If not for that, golds fate would not have differed much from silver at all.
Even back then it was dollars that people wanted and needed.
The second thing is that you are also under the impression that the money being created by the Federal Reserve and other Central Banks is inflationary but I will tell you point blank it is peanuts in comparison to the massive debt overhang and thus of little consequence to how the dollar is valued.
It is even tinier in terms of the unfunded liabilities. Like trying to kill an Elephant with a fly swatter. I am pretty sure you have no idea why that is but I suggest you look into the topic a little deeper before shopping around the gold propaganda.
Especially shopping it in my direction!
Anyway, if history repeats or is even rhymes slightly then gold will decline as the debt burden and its accompanying deflation comes home to roost and you will find you are the proud owner of beautiful gold coins that might have been purchased for a much better price if you had just waited longer.
These are not my opinions either Dave. I am speaking from history and facts. The chances of us entering into a new paradigm or a gold paradise are slim to none because it is going to be the dollar that dictates our future. So I suggest you sock some away (and do it soon) because time is getting short.
Or just ignore me and do your own thing. But keep this post in the back of your mind. I am probably the only person you are reading today who is giving you the straight dope on gold.
Buyer beware!
thing is, it is not nonsense.
Regarding your comment
the wise back in the 1970’s as well. It was nonsense then and it is nonsense now
Gold is up from $30 to $1250 since 1970.
That is not nonsense. UP 41x
Nothing compares to that.
Gold and silver shares on the other hand, many have come and gone.
I don’t play in the casino of gold, silver mining shares, EXCEPT for quick in/out trades.
Buying and holding over time is suicide.
1970’s has nothing to do with anything.
Gold went from a fixed price to a floating price Dave. That is why it went up like a rocket. That all happened BEFORE 1980. It’s old news now. So don’t use that little gimmick on me as if it applies today. You need to calculate gold’s performance during the years 1981 through to today as a separate period (and gold has been pathetic in that time frame in case you didn’t notice).
And PS….those multiples will never happen again so don’t sell that stale macaroni here.
You nailed it Dave, Birdman cannot be taken seriously. I pity the fools who disagree.
All depends on your lucky purchases with gold. Luck is a prerequisite and but not with real estate and the DJIA.
They are both above there respective highs from previous years. R.E. in the premier investment capitols. Luck was not a prerequisite as with precious metals.
There is rarely anyone on the planet who got their wealth from investing in PM’s.
Ask a thousand people how they made it big. Lucky to find one who answers – PM’s.
Re: “Luck is a prerequisite and but not with real estate and the DJIA.”
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Sorry TJ but that is complete BS. Dumb money needs luck to do anything right in any market.
Re: “There is rarely anyone on the planet who got their wealth from investing in PM’s.
Ask a thousand people how they made it big. Lucky to find one who answers – PM’s.”
—————
What does that have to do with anything? We already know that sheeple only feel confident when they’re all huddled together and in agreement with one another.
Matthew, its quite obvious major wealth creation has been in usury financial instruments and assets. Thats no secret and there is less than one percent of society who made it big investing in PM’s.
There are many individuals I know who are extremely wealthy. All their friends and their friends and their friends, not one made their wealth in PM’s.
That should answer your question. Unless of coarse you own a gold mine and all your friends/associates own mines as well.
How many people own actual gold mines. I see millions of people around me and not one is running a gold mine.
Matthew, the topic should never arise again in many months ahead as no one knows the exact time it all caves in, but it’s certain and assured. All asset classes will be falling like meteors coming down from the heavens. Any comparison will be immaterial and rendered useless.
Precious metals will not prove to help those that believe the opposite is true either.
There will be no safe haven when the system implodes. Even food and water people have stored up will run dry if they can hold onto it.
YOU HAVE BEEN WARNED !!
Correct Trader Jake. Most millionaires made their fortunes on real estate. That is a fact. Very few made their millions on precious metals. That is also a fact. Every single person who bought gold since it was selling for 400 dollars USD or more back in the 1970’s and is still holding the coins is underwater on that “investment” today (in inflation adjusted terms). That is also a fact and it is a dismal statistic because gold was not even able to maintain itself against inflation for the past four decades. Plus it proves every ounce sold above 400 USD in the 70’s was pure speculation….not investment grade.
Dave is repeating 30 year old gold-bug propaganda Matthew and you know it unless you really are that stupid. Are you that stupid Matthew? ……………..Serious question.
Couldn’t agree more with some of your above comments.
I agree with you when it comes to gold stock shares. It doesn’t take much money for the banks to short them and drive them into the dirt. That is why I only day trade them, and will never buy and hold them, period.
Gold and silver are completely different animals. They are to be treated as cash.
Every time you make some cash from trading put 50% in cash and the other 50% in gold/silver itself.
Gold and silver shares, you have to be vigilant as hel1. Buying and holding is suicide. Case in point.
In 2001 gold at 250,
NEM traded around $16
ABX traded around $13
Last year in December with gold at $1100 or so
NEM was trading at $16
ABX was trading at under $7
So during the price rise of 5x of gold and 5x of silver, from trough to trough
you still had 5x your 2001 investment.
Gold shares on the other hand, took every penny back from you, even though gold and silver held their 5x.
Gold and silver shares are for speculation. You are competing against the largest banks and investors around the world, and they have a wall of money that can literally destroy you.
NEVER buy and hold gold/silver shares. Agreed.
It is obvious you are going to have to learn when to buy Dave. But that’s your education man so good luck with it.
I am open to previous highs and even newer highers in the conventionals – but what about the lack of volume this week and especially today?
Regarding gold – I suspect that Goldman, or others, have massive bets on $50 oil. Once they get it there then perhaps look out below.