Trust the trends for gold

Trust The Trends For Gold

Editor’s Note: For over four decades, the team at Asset Strategies International, now headed by my good friend Rich Checkan, have helped investors successfully insure their wealth against fiat currency depreciation.
 

They’ve succeeded for so long because they understand the true role of gold...and know how to explain that role to investors.
 

I asked Rich to do just that for our Golden Opportunities readers, and the result is his excellent article below, explaining the history of gold from FDR’s confiscation and dollar devaluation all the way up to the current market action.
 

— Brien

By this time last year, just one month into the new year, gold was down one half of one percent. From there, gold would fall to a low for the year over the summer...down 10%.

In that six-month period, the U.S. dollar surged nearly 20%.

By the end of the year, the U.S. dollar would give back 10%, and gold would take back 10%...finishing the year flat. And that performance by gold, against a strong U.S. dollar headwind, was nothing short of phenomenal.

In fact, flat gold was good enough to out-perform the major U.S. stock indices by a country mile…

•     9% better than the Dow Jones Industrial Average

•     19% better than the S&P 500

•     33% better than the Nasdaq

Oh...and gold bested the speculative cryptocurrency, Bitcoin, by 64%.

Keep What’s Yours!

Gold helped us all do just that last year.

For 41 years now, we have been selling gold mainly as wealth insurance. It is the absolute best asset we know to help you preserve your purchasing power against a mismanaged fiat currency that has lost over 95% of its purchasing power since the Federal Reserve was created in 1913.

Does anybody see a connection here?

With gold tethered to the U.S. dollar until 1971, it was hard to completely mismanage the currency. It took emergency powers to devalue the dollar back in 1933.
 

President Franklin Delano Roosevelt did not want anything to do with your gold. Instead, he wanted to devalue the U.S. dollar. So, the U.S. government confiscated gold in order to turn around and raise the “official” gold price.

In so doing, they devalued the dollar...their ultimate goal.

However, by 1971, the mismanagement of the U.S. dollar had gotten out of hand. The government was overspending on a policy of “guns and butter.” They were spending money we didn’t have on a proxy war in Vietnam while they spent money domestically on a whole host of social welfare programs.

Then, the rest of the world started asking for their gold back.

Rather than deplete the vaults, President Nixon removed the convertibility of gold and the U.S. dollar...officially “closing the gold window.” Since that fateful day of August 15th, 1971, the wheels have come off the apple cart.

Take a look at the chart below…

It is so clearly obvious where the Congress was no longer bound to operate within a budget...to balance the government’s checkbook.

Overspending on pet projects to gain or secure influence became the new normal. Debt ceilings were no longer there to limit spending. They were now only meant to let politicians play politics before eventually raising the ceiling and overspending some more.

Every new crisis was an excuse to spend, spend, spend.

•     The War on Drugs

•     The War on Terror

•     The Great Financial Crisis

•     The Covid-19 Pandemic

All led to a massive increase in debt. All were excuses for government overspending. All weakened our currency and our economy.

All saw the U.S. dollar weaken as gold preserved the purchasing power of the money you worked so hard to earn with your time and talent.

One Month Into 2023...

This year is starting off a bit differently than 2022.
 

To start this year, gold, the equities markets, and Bitcoin all moved higher in January. The U.S. dollar continued the weakening trend we saw in the final quarter of last year.
 

Then, a little data came out…
 

The Consumer Price Index (CPI) — although still much higher than a year ago — was receding slightly. The Producer Price Index (PPI) — although much higher than a year ago — was receding slightly. And jobs numbers dramatically surprised to the upside for the month.
 

As Federal Reserve Chairman Jerome Powell announced his scaled back quarter-point interest rate hike decision, investors started to worry that rate hikes would continue.
 

Why?
 

Well, the aggressive rate hikes of last year seemed to be working. AND...they appeared not to have any detrimental effect on the job market. Inflation was coming down, and nothing really appeared to be broken.
 

This worries investors who were hoping for a pause in interest rate hikes to be followed by a pivot.
 

That concern along with a little profit-taking are no doubt responsible for the pullback in equities and gold to start the month of February.
 

Well, that and one more thing…
 

U.S. Dollars

In recent days that has been a complete about-face in the U.S. dollar. It had been falling for four months straight.
 

After touching a high of over 114 at the end of last September, the U.S. dollar fell steadily until it touched 101.75 at the end of January. That’s nearly an 11% fall in just four short months.
 

So, when gold dramatically turned south a couple of weeks ago, I looked immediately to the U.S. dollar. Sure enough, it was up by exactly the same percentage as gold just fell. And that has generally continued.
 

To me, this appears to be some sort of intervention on behalf of the dollar. Some entity must have stepped in to support the free-falling U.S. dollar. My guess is the U.S. Treasury, but time will tell.
 

Now, having said that, I am not a conspiracy theorist.
 

I understand — although I don’t agree with the practice — that central banks will occasionally, at key inflection points, step in on behalf of a currency. The goal is to defend the currency from overheating and from overcooling, and in so doing, maintain confidence in the currency.
 

Personally, I would love to see less meddling in markets and more fiscal responsibility.
 

But as Mick Jagger and the Rolling Stones often remind me...“You can’t always get what you want.”

What’s Next?

No change from what I said a month ago...except…
 

For me, the sell-off in gold this month changes nothing regarding my thoughts on gold in 2023. Nothing moves up or down in a straight line, and there are pullbacks in bull markets and rallies in bear markets.
 

Further, profit-taking and central bank interventions tend to be short-lived phenomena. They tend to be events...not trends.
 

As a result, I believe we have been given a gift.
 

The long-term trend for the U.S. dollar should still be lower. The long-term trend for gold should still be higher. Temporarily, the prices for gold (and silver too) are cheaper than they ought to be.
 

Simply put, gold and silver are on sale.
 

Embrace this opportunity or regret missing out.
 

The time to buy with retirement and non-retirement funds is right now. The ball is in your court. You know how to reach us...Call us at 800-831-0007 or send us an email.