Will we see a gold standard ever again? | Update 22 May

Prediction for Gold and Silver at close 22 May, 2020


Gold Price Forecast relative to
Long Term Monthly
(LT-M) – Medium Term Weekly (MT-W) – Short Term Daily (ST-D) – and Hourly (not shown) data

(Previous week in brackets)


Gold/USD LT-M MT-W ST-D
1733 (1740)
Trend ↑ (↑) ↑ (↑) ↓ (↑)
% Risk
Weight
82 (82) 89 (86) 70 (74)
Allocation 100% (100%)

Gold/USD live price


WILL WE SEE A GOLD STANDARD EVER AGAIN?

Nature’s currency, gold, is the only one currency that has survived throughout history. Gold is the ultimate monetary asset and currency of exchange, which is, since everything else is evidently failing, why gold will return to that role at some future date.
For that to work a pre-reset negotiation requires unilateral coordination which is easy on paper but harder politically. In reality it only needs G7+ to come to an understanding and everyone else must follow. If there is a will there is a way.
It also requires solidarity between nations and willingness to share some wealth to make this work including fiscal harmonisation. This would be the ultimate system reset involving some form of managed confiscation of hard assets and the introduction of a digital currency only in exchange for gold.
In theory this creates the financial space for major infrastructure and climate improvements worldwide and long term employment in construction and engineering.
A massive devaluation of fiat against gold of say an average 1000% is the kind of equity injection that allows fresh funding into badly needed global maintenance.
If agreed by G7+ countries and based on existing gold reserves reported, it would deliver an immediate new normal at the stroke of a pen. Impossible? All things being equal, yes. But things aren’t equal anymore, hence nothing is impossible even if it takes another major conflict to realize that. Because the need for big funding is now so very imminent, that reset could come as an early surprise. The elite is smart enough to design a reset that works for most. And with Elite we don’t mean career politicians.

What is our gold chart telling us today? Daily risk weight showing some sign of temporary weakness. This could develop a bit of price pressure building a bullish divergence within two weeks or so. As longer term time frames are expected to first create bearish divergence in a primary advance, as is the case now, Gold vs USD (and other currencies) is along way away from traditional peaking.
Private investors that own gold should not sell any gold under 15k/oz. And this still makes gold at current levels a buy. No Change.

15 May: At this week’s close the last but one standing currency gave up on Gold. The Swiss Franc weekly closed at a new all time high, since 2012, for the second time in one month. That leaves the dollar which only has a mere 10% to beat the September 2011 closing high.

If a larger number of influencer economists start to embrace the untested Modern Monetary Theory one needs to become highly alert. The exact same thing happened in 1985 as the US dollar rose against all odds and doubling its value from the 1978 low against the Deutsche Mark. That experience helps to drive risk awareness or even become a contrarian.
Theorising Debt Deflation where excessive debt leads to deflation first as the debt is so huge it cannot be repaid leading to bankruptcies and so forth. The big difference between today and previous major depressions, on which the theory was developed, is that back then, there was a gold standard, public debt was much much lower as a percentage of GDP and interest rates weren’t sub zero. So, this MMT is just old theory with hindsight, whilst the economic variables are hugely different. Dangerous indeed.

To keep it simple we stick to the single available solution of a fiat reset against hard assets like gold and silver or a mix with other essential commodities.

Looking at the charts the risk weight in all time frames is indeed high, but the evidence of major top, from experience, will lie in the appearance of bearish divergence in the Long term time frames. We should expect to see moves north that require logarithmic charts to be introduced again and if that happens it means inflation is present big time. Of course, it is already in the equity and real estate bubble markets.
Stay fully invested in physical Gold only, and always enough to not lose entire savings if denominated in speculative assets, like cash in the bank, equities or any other paper iou’s for that matter and that also applies to Gold ETF’s. The GLD custodian HSBC 200M loss for not meeting physical ~Gold backing ‘on paper’ is a big warning signal that something is seriously wrong in the physical gold market. No Change


SILVER FORECAST

(Previous week in brackets)

Silver/USD LT-M MT-W ST-D
17.15 (16.60)
Trend ↑ (↑) ↑ (↑) ↓ (↑)
% Risk
Weight
45 (44) 58 (50) 87 (90)
Allocation 100% (100%)

Silver/USD live price


The 40% rally from the 12 handle low in March tells is that long term support is holding. On a linear chart this gives an ultimate objective of the parallel line through the peak of 2011, now at 55.70. Short term this is meaningless and a more likely scenario is a future need to changeover to the inflation signalling log chart. The potential for silver to advance rapidly remains very high and strong. Patience to witness an equilibrium ratio to gold is key. No change.

15 May: Silver, for the first time in many months, has shown some real price strenght and confirmed by an intra-month long term change of trend upward in a very bullish divergence position.The March low now looks like a controlled move and far from free market price discovery. We already noticed this just after that March low as the Weekly turned up from a very low risk bullish divergence picture. Silver has a long way to go and we just need patience. It will be a very bumpy road for some. No Change.


GOLD/SILVER Ratio Price Risk Analysis

(Previous week in brackets)

GOLD/SILVER Ratio LT-M MT-W ST-D
100.32 (104.20)
Trend ↓ (↓) ↓ (↑) ↑ (↓)
% Risk
Weight
64 (67) 50 (55) 6 (9)
Allocation 50/50 AU/AG (50/50 AU/AG)

Gold/Silver Ratio live price


We blew straight through 100 mid March and returned the past week for a brief moment and closed around this level on Friday. Looking at the Netdania chart on mobile on Wednesday I happened to clip this rare moment of an exact 100 ratio.

With Daily risk at an oversold level it may take a few more days before the downtrend resumes driven by the stronger downtrends shown in all technical tools for the Longer time frames. Holding on to a full ratio of precious metals investment between Gold and Silver is the correct risk assumption.
One note about Platinum. Owning PT can’t be bad at this stage. It can best be bought, in smaler quantities, via an exchange like Bitpanda that offers physical backed digital contracts. Platinum has been exceptionally weak for a number of years now. One day we will wake up with a massive rally that sets the direction for a minimum of 100% advance. The recent 560 low showed strong bullish divergence in Monthly, Weekly and daily time frames. Pt should be a safe spec for a longer hold and as part of a smaller diversification of the precious metals portfolio.

15 May: Silver weakness in recent months has been a major disturbance in our portfolio but it hasn’t changed the technical outlook. This wasn’t defying gravity. The Gold/Silver ratio has now recovered 20% from the panic high in March and is setting up for a long recovery to equilibrium. Surely more government debt will be used as a phony war chest against an undesired attack on the US Dollar. The ratio will need to break 80 first which now looks like strong support. If and when a world monetary reset becomes mainstreet going scenario, Silver will move a lot closer to Gold with asking and dealing prices at 20% above paper spot. No Change in keeping an evenly spread investment portfolio in Gold and Silver with maybe more bias on Silver still. A precious metals portfolio should be at least 25-30% of total free assets. Just as an insurance to keep the entire portfolio above water. Anyone, even with a very small savings account, should not hesitate to pay a larger premium for acquiring a few coins of gold and silver. No Change


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