Every day the market is open at the New York Stock Exchange, someone rings a bell to announce the start of the trading day.
Here you can see the staff of the Financial Times ringing the bell:
There’s also a closing bell that rings to announce the end of open market trading for the day.
The tradition goes back to the beginning of the NYSE, and before there was a bell, they used a gong. Before a gong, they used a gavel to signal the opening and closing of trading.
Right now there’s a different signal going off… and it’s signaling something dire for the world’s fiat currencies – starting with the dollar.
There’s no doubt in my mind that we are now seeing the slow motion and purposeful demolition of the US dollar. All of the policy tools at the fingertips of the Fed and the Treasury are going to be put to work to devalue the dollar in an effort to prop up employment numbers and the stock market.
We’ve already seen out of the ordinary tools like yield curve control being employed by the US Treasury – putting its thumb on the scale of bond auctions to affect long term interest rates.
The Fed will be next, first with interest rate cuts, then likely with some new version of QE – and finally with the total monetization of US Treasury debt. It’s all very banana republic stuff – except the US doesn’t have many bananas.
Gold is signaling a five alarm fire – having breached $3,500 without taking a breath, and is now north of $3,600.
Gold does not run through all time high prices like this unless the global market is worried. During periods of fiscal/monetary stability, gold’s price tends to drop like a rock (as we saw through the 1980s and into the 1990s).
So, you have to consider: either the market is totally wrong about the dollar, or we’re heading into a very bad time for the dollar – and other fiat currencies.
At the same time, the market for gold stocks has seemingly lost the ability to connect the dots to what’s happening with gold. As I’ve said many times, the bulk of the companies I’m covering are selling at a discount to $2,500 gold… let alone $3,600 gold. Gold keeps marching higher, while world class gold stocks in my portfolios are limping, unable to keep up.
The value is unbelievable at this point. I have to continually update my target prices higher because all of the economics of these businesses only get better as gold keeps soaring.
That’s especially true for the royalty businesses I cover – because their fixed costs are super low, they see almost a dollar for dollar increase in their assets when gold rises.
And of course, with gold rising, the miners they own royalties on are trying to increase their production as much as possible. That’s welcome news for my gold royalty firms, because they typically have what’s called a Net Smelter Royalty, which means they get a fixed percentage of a mine’s production.
But I believe we’re going to see much larger returns, especially if gold keeps moving higher.
Don’t wait for a clearer signal – this is it.
Best,
Garrett Goggin, CFA, CMT
Lead Analyst and Founder, Golden Portfolio