The Reports Of The Gold Bull Markets Death Are Greatly Exaggerated - Long Live The Gold Bull Market
Gold got hammered today and immediately the hand-wringing ramped up as commentators shouted that the gold bull market is over. Which brings to mind Mark Twain's quote,“The reports of my death are greatly exaggerated.”
It is far from surprising because gold bulls lacked confidence all year as gold made a series of record highs. Further evidence of their timid bullishness is in the gold stocks that have been reluctant participants in the gold bull market.
There were a few reasons for the drop in gold today, including that things seem to be calming down between Israel and Hezbollah. Another reason given was that futures and options expire today which often causes violentility (my word for when volatility drives things down), which is the most likely suspect. The reason that some mentioned is because Scott Bessent will replace Janet Yellen as the Treasury Secretary.
Scott Bessent is a hedge fund manager who is considered a fiscal hawk, which the bond market seemed to like as it relieved some of the bond vigilantes' concerns that Trump would cause more inflation. It is also worth pointing out that he is also bullish on Bitcoin and gold.
He is also likely to remind Trump that kicking immigrants out will actually cause economic problems as it will slow down the economy and drive inflation up. It may make people on the right happy on the campaign trail, but it has economic ramifications. Plus, the tariff proposals Trump talked about on the campaign trail are also inflationary.
Scott Bessent seems to be what folks on Wall Street consider an adult in the room. I still find it odd that people want to blame inflation of the past couple years on insane government spending, as they should. But, the Trump fans seem to conveniently forget that until Biden came along, Trump was the worst debt creator ever. Trump took a run at spending more in one term than Obama did in two terms.
Sure Biden is going to be as bad or worse in one term than Trump, but, Obama, Trump and Biden are the top 3 in the hall of shame for debt creators. Collectively, they all helped to create the runaway inflation. With the help of the Fed that was the drug dealer for the spending junkies.
It doesn’t matter how many adults are in the room, the idea that Trump is all of a sudden going to slash spending is ludicrous. He won’t even cut it moderately, mark my words, he is going to continue being a massive spender and likely will set new records. People seem to quickly forget his past actions because he campaigned on cutting spending with the help of Elon and now people believe he means it by putting Scott Bessent in as Treasury Secretary.
Just wait and watch what happens when Trump gets in, once a spending junkie, always a spending junkie. There is a big difference between campaign promises and herding political cats when you are in power and are a proven drunken sailor spender. How do people think that politicians get rich as politicians, it comes from spending. That reality will never change no matter who is in the White House, leading Congress and the Senate.
The past performance doesn’t tell you exactly what will happen in the future, but it is a pretty good indicator. Trump has shown that he will get America out of wars, which is great, he clearly showed that in his first term. He also loves debt and I highly doubt he has recovered from that addiction.
Anybody that thinks the gold bull market is over doesn’t understand what started it. The Death Spiral of Debt is what fueled that fire and the cost of servicing the debt is the straw that will break the debt camel’s back. Which is a key reason the central bankers in the BRICS nations are putting themselves back on the Gold Standard and selling US dollars and US debt to buy gold.
The gold bull market ain’t over, it is just getting warmed up and the only thing that can force discipline on politicians spending and destroying the purchasing power of fiat currency is the Gold Standard.
The debt is so bad now, that the only things that can help it is to slash spending, increase taxes and move interest rates back to the free money era and the Fed to get back in the QE business.
Slashing spending and increasing taxes will send the voters to Washington with pitchforks in hand. The Fed will get back in the QE business and move rates back toward the Free Money Era because if they don’t they will cause stagflation and throw workers and the economy under the bus.
Long live the gold bull market.
All the best,
Allan Barry Laboucan
