The Case For Gold

Published on
July 18th, 2019
Duration
18 minutes

The Case For Gold

Technical Trader ·
Featuring Greg Weldon

Published on: July 18th, 2019 • Duration: 18 minutes

If the next global recession is approaching, is it time to turn to gold? That’s the case that noted trader Greg Weldon makes. Weldon believes that central banks’ response to the potential downturn will create very bullish conditions for gold prices. Weldon also provides his commentary on emerging markets and on commodities more broadly. Filmed on July 12, 2019 in Jupiter, Florida. For more of Greg Weldon’s views about gold, see gold-guru.com.

Comments

Transcript

  • RH
    Rob H.
    2 August 2019 @ 21:40
    Add the charts to the transcripts or add a tab for them.
  • KL
    Kim L.
    1 August 2019 @ 18:34
    Really liked this interview and his call on FR is doing well it seems. If Greg lost interest in stock markets, he could be a good sportscaster :)
  • BA
    Benjamin A.
    30 July 2019 @ 15:30
    I thoroughly enjoyed this interview! Excellent content!
  • WE
    William E.
    29 July 2019 @ 16:06
    As always, thanks Greg!
  • F
    Floyd .
    23 July 2019 @ 22:34
    Well done Greg,you were a bit early on the gold trade but it is working out very well.
  • RS
    Robert S.
    23 July 2019 @ 07:05
    That’s infotainment :-))
  • JS
    Jason S.
    22 July 2019 @ 17:56
    Nice one! You can possibly tie my view in with Steven V's comment below. If you think about it, this period for gold is very similar to early 2016 when the Fed also did a U-turn. It was expected to raise rates four times that year. This time around the Fed has back flipped and you are hearing rumours of massive rate cuts (i.e. 50-100 bps, more aggressively than expected). So with all the turmoil and lack of confidence, gold has really rocketed. The question is, does gold peak temporarily when the market digests interest rate expectations? It hasn't happened yet; hence why gold is frothy up above $1400 per ounce. Still, one thing is sure though: this is the preview before the prime time show. Imagine what happens to gold when the US Fed goes negative and employs MMT in the future...the next dip lower (magnitude dependent on US dollar strength/weakness) should offer one of the greatest buying opportunities of all time.
  • JS
    John S.
    22 July 2019 @ 08:14
    excellent in depth and great historical context
  • MS
    Michael S.
    22 July 2019 @ 02:47
    Outstanding!
  • R
    Ron .
    20 July 2019 @ 06:43
    Anyone know the promo code for Greg's guru-on-gold newsletter? At $600 a year I'd like a promo code if anyone knows it! R
  • HK
    Himanshu K.
    20 July 2019 @ 05:22
    This is good stuff
  • TR
    Travis R.
    19 July 2019 @ 22:16
    Excellent synopsis. Another great gold indicator (gold vs monetary base) is breaking out as well. https://www.macrotrends.net/2485/gold-to-monetary-base-ratio
  • BJ
    Brian J.
    19 July 2019 @ 07:14
    Raden is back!
  • BG
    Bharath G.
    19 July 2019 @ 05:07
    Brilliant very interesting.
  • so
    steve o.
    19 July 2019 @ 04:31
    Greg is the John Madden of trading. Smart, experienced, hardworking, enthusiastic and can't stop moving his hands when he talks. One of the best!
  • SC
    Sejong C.
    19 July 2019 @ 01:48
    5th wave in the Elliot wave? What about after that?
  • SV
    Steven V.
    18 July 2019 @ 22:31
    I'm glad to see Greg back on RV, since his work is first class. As a former subscriber to his service, I can attest to the quality and depth of his near-daily reports. I strongly recommend his service for anyone who is looking for an in-depth breakdown of the markets. As he says, nobody breaks down the market like he does. His call on gold is premature. Gold does follow real, or inflation-adjusted yields. You can chart this on the FRED database by inverting gold against 10-year Treasury yields less the year-over-year rate of change of the CPI. What you will see is that gold is front running real yields. The question should be, why? While you're on the FRED database, run a second year of the M2 Money Stock YoY against gold, and over the past 10 years you will see a very strong correlation. You will also see the recent rise in gold is correlated to the M2 risings. Again, why? The M2 has been rising as the government is running low on funds. When the government doesn't have a budget, the U.S. Treasury will drain its deposits from the Federal Reserve member banks (also available on FRED) so the government can pay its bills -- Social Security, Medicare, etc. The money held in the member banks is not part of the M2 until the money comes out, and it's been flowing recently, but it will run out in two months. Back to gold following real yields. Treasury yields have been flat this past couple weeks, but should continue falling as financial conditions tighten. In the formula, yields are being held constant. A rising M2 is often associated with inflation, since lower interest rates lead to increased borrowing which increases the money supply. In this case, borrowing isn't increasing, it's decelerating, especially by the large banks. (See the YoY change in Commercial & Industrial lending while on FRED). Normally a rise in the M2 is inflationary except this time, which it isn't. Gold is acting like inflation is going to take off. When yields are constant and inflation is rising, then gold should rise. Except this is a false move based on the Treasury draining its deposits. Once a budget is passed and the Treasury borrows to refill its accounts, the M2 will collapse along with gold. What we are seeing in gold right now is a preview of what will happen during the next recession when the Federal Funds rate is back at zero and they are doing massive amounts of QE. Yields will collapse ahead of the CPI, which is bullish for gold. Gold will peak as the CPI catches up to yields being at zero, and then fall until the Money Multiplier hits one, then gold goes straight up.
    • BG
      Bharath G.
      19 July 2019 @ 05:06
      This is throughly right sir. Anyway to contact you? Thanks for the insights.
    • SV
      Steven V.
      19 July 2019 @ 15:15
      I don't know if it's appropriate to give out my contact information here, but you're very welcome!
    • NI
      Nate I.
      21 July 2019 @ 05:56
      I agree, but gold is about two things. Real yields and confidence. You nailed it on real yields, but I think you might be seeing the beginning of a loss of confidence in central banks.
    • WG
      Wade G.
      22 July 2019 @ 16:29
      Steven, thanks for a detailed and thought provoking post. I confess this dynamic wasn't even on my radar, despite my interest in precious metals and active effort to adjust exposure to the sector. I wanted to share a few thoughts and ask you or anyone else to chime in with any insights. First, FYI, coincidentally a short, clear article appeared on zerohedge today addressing the core topic u raised: treasury acct down about $200B and about that amount in extra debt issuance expected shortly after debt limit is extended. Article likens the draw down to a mini QE and the coming acct build up to a mini QT; concludes "liquidity sensitive assets" may be more at risk. https://www.zerohedge.com/news/2019-07-22/debt-ceiling-impasse-has-meant-mini-qe-may-will-mean-qt-when-resolved I looked at 2 data series on FRED on different time frames to get feel for their history, and focused on 1 year charts, examining closely the last few months: M2 & Treasury Account Balances. https://fred.stlouisfed.org/series/M2#0 https://fred.stlouisfed.org/series/WTREGEN Also examined daily spot gold prices for same time frame. I drew some low key conclusions: (a) treasury acct balance indeed down $200B from May 1 peak; (b) M2 does indeed appear to increase faster on this time frame; (c) but treasury balance declined $180B from a Feb 1 peak; (d) thou less clear, it appears M2 responded to that too; (e) yet, the changes/relationships seem modest and M2 increasing persistently always. Perhaps more interesting to me, Gold didn't seem to care at all about $180Bish draw down beginning in Feb, and arguably gold's recent rise doesn't align well with the $200B move (former moves early June; later begins May 1). I wonder if I'm missing something or if it might be possible that while the issues you raised may be technically accurate, that the movement we've seen in Gold (and precious metals and miners generally), relates to broader/bigger fundamental issues. Perhaps the sector isn't discounting an M2 that will persist at increasing rate, or inflation that will bust out anytime soon for that matter, but rather an increasing likelihood of rates which are heading lower for longer, with sufficient inflation to ensure real rates are indeed heading even lower than they've already moved (and probably staying there for longer)? Any thoughts?
  • RL
    Robert L.
    18 July 2019 @ 20:14
    Great presentation.
  • SS
    Steve S.
    18 July 2019 @ 19:48
    First Majestic is up 20%+ since Greg's call on Real Vision. Ideally would have been great if this was published sooner. People would have made a killing if people followed Greg's top Gold recommendation last year of Barrick Gold Corp. It's almost doubled since his recommendation. Greg is the man!
    • WS
      Will S.
      20 July 2019 @ 21:50
      FVI (Fortuna Silver) is another excellent pick. Per oz cost of just over 10$US, so they are profitable with depressed prices. FVI has done fantastic since silver started moving up.
  • DR
    David R.
    18 July 2019 @ 19:22
    Great presentation!! Gold, silver and related miners indeed are on fire as the Weak Dollar pukes. There's a huge oversupply of dollars globally that nobody wants to hold anymore as the USD crash gathers pace, notably against some of the volatile EM FX as it has for a few months lately. Nowhere better to run than gold or silver when the US is burning like now.
  • OC
    Otto C.
    18 July 2019 @ 17:28
    Great analysis Greg!!! Have you consider that this current rally is just a correction to a still developing bear market in Gold/Silver? When I look at the long-term chart in Gold, it seems to me it's been forming a bear flag since the 2016 bottom. I would love to hear your thoughts on this. Thank you again!!!
  • TR
    Thomas R.
    18 July 2019 @ 17:01
    Where's the web page gone? gold-guru.com
  • V!
    Volatimothy !.
    18 July 2019 @ 14:43
    Perfect time to have Greg back. This video is loaded with nuggets of good info.
  • PG
    Philippe G.
    18 July 2019 @ 13:25
    Damn, what happened to the hair tho?! Great stuff Greg!
  • WG
    Wade G.
    18 July 2019 @ 12:30
    That was great, thanks Greg and RV. I had to stop the tape numerous times to study the charts. If the decline in real rates persists longer and stays pinned at even lower levels than at present, which appears to be quite possible, we could have quite a run. A couple years ago, gold seemed to trade precisely inversely to the dollar, and so my fear of a strengthening dollar (based on capital flows when Europe implodes, if nothing else; or dollar scarcity generally) made me cautious on taking an aggressive position. A sinking US PMI along with lower real rates gave me courage to add some over the last 2 months, but Greg's dollar/gold charts have really peaked my interest. Definitely worth studying them to form a firm view of their meaning. I have to say, Greg's energy is contagious. Thanks for the helpful video Greg.
  • MK
    Michael K.
    18 July 2019 @ 11:02
    Greg is unique manic brilliant funny kind creative, I can go on.
    • JM
      John M.
      18 July 2019 @ 21:47
      and he knows his stuff!
  • AP
    A P.
    18 July 2019 @ 09:52
    Amazing Greg, love the energy
  • HB
    Heini B.
    18 July 2019 @ 08:35
    Greg Weldon is one of those "drop whatever you're doing and watch now" commentators. Fully engaging, love it