History of Hard Money: Japan’s Lost Decade

Throughout the 1980s, Japan’s economy soared past the rest of the world. The growth that once earned the envy of investors and economists now stands as a dire warning against debt, speculation, and easy money.

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Gold’s flash crash

The recent plunge and subsequent rebound have extended gold’s bearish correction phase in the middle of a long-term bull market.

Key Takeaways:

  • A positive jobs report triggered a $130 drop-in gold last weekend. The price quickly turned back around, supported by Congress’ latest trillion-dollar spending proposals.
  • Gold failed to break through its $1,680 floor, once again showing the strength of this support level.
  • We are experiencing a short-term correction in the middle of a bull market. Looking back at other mid-bull corrections, we see that this phase has actually been quite shallow. Now is the time for investors to add to their gold position at a discount.
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Gold looks strong, but struggles to hold gains

Gold has been stuck in a $40 trading range for over a month, building a base around the $1,800 level and looking toward higher highs.

Key Takeaways:

  • Gold has been trading sideways for a month, but external pressures are mounting to push gold back into its long-term bull market.
  • In August 2020, gold began a retracement phase. It looks like that ended in March, but we need a few higher highs to confirm the end of this bearish phase.
  • The government is fighting to either re-suspend or raise the debt ceiling, which is bearish for the U.S. Dollar and bullish for gold.
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Gold Bounces on U.S. Dollar Weakness

Gold took a $35 jump after struggling to escape the $1,800 range, alongside strength in equities and cryptocurrency markets.

Key Takeaways:

  • If gold puts in a higher high on this rally, the price would be on its way regain June losses.
  • The U.S. Dollar Index dropped below its rising channel after the RSI divergence last week, giving gold a boost.
  • Companies are protecting their margins by passing higher costs to consumers. Despite record inflation, consumer demand for goods has also been rising.
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Gold’s Tug-of-War

Bullish stock market sentiment and unexpected U.S. Dollar strength are putting pressure on gold, while increased volatility in the equities and bond markets support safe haven demand for the yellow metal.

Key Takeaways:

  • The economy seems to encounter new risks every day, from the rise of COVID-19’s delta variant to extended supply shortages and record inflation numbers.
  • U.S. Dollar strength and bullish stock sentiment are creating headwinds for gold, delaying the escape from its year-long correction phase.
  • Gold proved its value as a stable safe haven on Monday, emerging as one of the only winners during the sudden market volatility.
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Gold Sets the Stage for its Next Rally

As inflation metrics continue to break records, the U.S. dollar could be reaching a breaking point.

Key Takeaways:

  • Gold has been rising steadily for the past week, recovering from its $100 drop-in June.
  • Existing home prices have increased 24% over the last year and rent is up 9.2% in 2021, yet CPI only reflects a 2.2% increase in housing costs. When will CPI catch up?
  • Premiums on some precious metals products at record highs, reflecting a heavy increase in consumer demand for gold and silver.
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Bullish Indicators Balance the Bad

In both the stock market and the precious metals markets, investors face a paralyzing collection of bearish and bullish evidence. Everyone is looking for the asset that will emerge as the winner in this new era of finance.

Key Takeaways:

  • Gold continues to show some weakness following its recent drop. It looks like it might be headed to retest the March lows, but several indicators are signaling a bullish reversal when or before it gets there.
  • The stock market is as white-hot as the housing market, but some money managers worry equity valuations are in a dangerous position. Stocks look priced to perfection, meaning any shock to the system could trigger a major correction.
  • The next couple of weeks will provide some excellent entry points for gold investors. Precious metals are providing a rare pocket of value in today’s extremely expensive financial ecosystem.
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A $100 Drop Halts Gold’s Bullish Trend

Gold bounced off the 50% correction line after last week’s plunge. The metal’s next move will either strengthen the bullish reversal or signify a continuation of the 10-month bear market.

Key Takeaways:

  • Expectations for rising interest rates buoyed the U.S. dollar and halted the recent rally in precious metals prices.
  • Gold has formed a reverse head and shoulders pattern, which typically indicates a bullish reversal. If the pattern holds, gold could continue the upward stair-step that began in March.
  • The U.S. dollar rose 2% against other currencies last week, but the currency remains in a long-term bearish trend with little chance of a reversal.
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Fed Discusses Interest Rate Hikes

Gold took a hit this week, alongside the stock market, after Jerome Powell announced the Fed’s plan to mitigate hotter-than-expected inflation.

Key Takeaways:

  • After Wednesday’s highly anticipated Federal Open Market Committee meeting, Jerome Powell announced a plan to raise interest rates in 2023 to curb rising inflation expectations.
  • The U.S. Dollar rallied on the news, while gold and the stock market indexes reacted with steep drops.
  • Expectations of rising interest rates can hurt gold in the short term, but history tells us gold ultimately thrives in the inflationary environment that requires rate hikes.
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The Gold Rotation: Institutional Investors Seek Stability

After surging past several resistance points on its climb to $1,900, gold continues to shine in a financial ecosystem wrought with volatility.

Key Takeaways:

  • Hedge funds, money managers, and retail investors are starting to rotate back into gold as cryptocurrencies falter and the stock market gives warnings of an inflection point.
  • This safe-haven demand is reminiscent of the forces that pushed gold to its all-time high in August 2020.
  • The other flagship precious metals – silver, platinum, and palladium – are also showing strength as rising commodities prices underpin gold’s bullish performance.

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Gold Marches Higher Amid the CPI’s Shocking Jump

Gold is continuing its short-term bullish pattern as year-over-year consumer inflation reached a shocking 4.2%.

Key Takeaways:

  • Gold is up $30 since last week, showing steady gains off its double bottom in March.
  • Yesterday, the U.S. Bureau of Labor Statistics reported a 4.2% increase in prices year-over-year, surpassing expectations and prompting a 3-day stock market selloff.
  • The U.S. Dollar Index bounced off 90 and remains half a point below last week’s level.

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