The US Government budget is such an obvious and total disaster.
There’s no one in Washington DC who is remotely serious about solving any of the problems necessary to avoid dollar inflation.
The Trump administration seems happy with some emblematic cuts and some culture war victories, but is ultimately unserious about dealing with deficit spending.
That’s not news of course. Every President for the past 5+ decades at least seems to mostly be interested in symbolic rather than real victories. Real change is difficult.
It’s cold comfort for most Americans that there’s such bipartisan support on this one issue… but it’s the reality of a political system disconnected from any tether to budget reality.
As gold investors, it’s more bullish fodder. Higher deficits, more inflation, more dollars chasing fewer goods and the necessity of printing money to make up the difference…
There’s only one direction these trends will push gold.
But there’s an important caveat you have to keep in mind:
No bull market goes up in a straight line.
I see investors frequently struggle to understand how markets really work. Most people are uncomfortable when they see markets that move inverse to how they might logically expect.
But markets are not machines of logic. They don’t obey gravity or any other physical laws either.
Markets simply represent the democratic urges of the most frenetic/greedy/fearful participants at any given moment.
Sometimes that means your investment thesis is aligned with market movements. Frequently, it means the market is not in step with what you know or believe to be true.
And that’s okay. We can not control the market. We can only control how we respond to it.
When gold is soaring and gold stocks roaring, it’s easy to stay the course and to enjoy the ride.
But that’s not always going to happen – even in the middle of an amazing bull trend in gold like we’re in right now.
Even the strongest bull markets see corrections and retracements.
Just look at this chart of arguably the greatest bull market in gold history, between 1971-1980:
Gold had multiple 10%+ downturns during this period, including a 40% drawdown between 1975-1976…
I’m bringing this fact up now – not because I am changing my mind about gold or because I think we’re going to see a 40% pullback tomorrow.
For the record, I think we’re still in the early innings of this bull trend. And I have no magic 8 ball to help me predict short term price movement.
It’s just likely that sooner or later, we will see a correction in the gold price.
And you need to be prepared as a gold investor to either buy more of your favorite holdings at better prices – or at the very least, to be able to stay pat while the market is moving against you in the short term.
As an investor, doing nothing can sometimes be the most difficult task. It’s a skill that most people simply do not possess. But if you can prepare yourself in advance, then it gets easier to do nothing when you probably shouldn’t do anything.
It also helps to keep a couple of things in mind about gold investing that I’m focused on.
For one, just consider where gold is likely to be in a year or five years or ten years under the current path for the dollar and other world currencies. It’s probably going to be higher. It might dip over the short term, but the long term trend is as certain as the likelihood that the US will continue to deficit spend and rack up massive debts.
Another thing to keep in mind is that my research only covers high quality gold companies that have massive leverage to the price of gold, world class gold properties and top notch leadership.
I look for companies that can add value regardless of the Gold price. I see higher a Gold price as just the cherry on top of a strong management team that drives value through exploration and resource growth, recovery enhancement, capex reduction, or working to bring higher grades up front, which increases total project value as it drives early cash flow higher.
The high grade Gold Miners, Developers, and Explorers I’m interested in have low costs and prosper even at $1,500 gold. Many of them are still valued as if we’re living in a world of $1,500 gold. The market has not yet caught up.
So when you wake up a day or a week or a year from now and gold is down 5% or 10% or even 20% or more… just keep in mind: the trend is intact, and a reprieve in gold’s price gives you a chance to buy high quality gold companies at a discount.
Best,
Garrett Goggin, CFA
Chief Analyst & Founder, Golden Portfolio