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June 20, 2019 | Gold Breaks Out—What’s Next?

Lobo Tiggre, aka Louis James, is the founder and CEO of Louis James LLC, and the principal analyst and editor of the Independent Speculator. He researched and recommended speculative opportunities in Casey Research publications from 2004 to 2018, writing under the name “Louis James.” While with Casey Research, he learned the ins and outs of resource speculation from the legendary speculator Doug Casey. Although frequently mistaken for one, Mr. Tiggre is not a professional geologist. However, his long tutelage under world-class geologists, writers, and investors resulted in an exceptional track record. The average of the yearly gains published for the flagship Casey publication, the International Speculator, was 18.5% per year during Tiggre’s time with the publication. A fully transparent, documented, and verifiable track record is a central feature of IndependentSpeculator.com services going forward. Another key feature is that Mr. Tiggre will put his own money into the speculations he writes about, so his readers will always know he has “skin in the game” with them

Every week, I see the talking heads on financial media explain why their predictions last week were wrong, and make new predictions for next week. Since there are no consequences when they get things wrong, the incentive is to sound clever and make bold predictions that make for good headlines and sell copy. This bias is extremely dangerous for their audiences.

It’s all part of the razzle-dazzle show I call The Prediction Racket.

Of course, they’re right very every once in a while, like a stopped clock. Then it’s happy days; time to sell something to the gullible investment herd.

Today is a case in point. There are plenty who are telling all who will listen that they said gold would go up after the Fed’s announcement this week. And in fact, come did say so.

What makes this awkward is that I too wrote that gold was likely to rise after this week’s FOMC announcement.

And, yes, every one of the gold stocks in my portfolio was up substantially today, most by significantly more than gold itself.

But I didn’t predict the specific outcome we’ve seen. What I said was that if the Fed sounded dovish enough to make Wall Street happy, it would be bearish for the dollar and bullish for gold. At the same time, I said that if the Fed failed to do so, it would cause a major retreat on Wall Street—which would also be bullish for gold.

In other words, I didn’t pretend I knew what the Fed had to do, or what the markets would do.

My analysis was simply that either outcome was bullish for gold.

And I was right.

I want to make this clear, because I’m about to offer you more forward-looking analysis. I hope you’ll see the difference between this and the typical talking-head predictions that flood the airwaves.

So, for the record:

  • I don’t know what will happen.
  • Neither does anyone else.
  • In my experience, it pays to be extremely skeptical of anyone who says the Fed has to do X, or the dollar has to do Y, or the markets can only do Z.

That said, here’s what I see coming up next:

  • Stuck between a rock and a hard place, the FOMC is opting to throw the dollar under the bus, rather than let the over-stimulated economy correct.
  • Market odds are now virtually 100% that the Fed will cut rates next month.
  • This is the same setup we had this week—but on steroids.
  • If the Fed gives the market what it wants, it will be bearish for the dollar and bullish for gold.
  • If it doesn’t, Mr. Market will throw a tantrum, and that will be bullish for gold.
  • Either way, gold is looking very good over the next few weeks.
  • I’m not the only one who sees this.
  • Gold’s technical breakout above its five-year trading range may in itself prompt more buying in the near term.
  • Those who didn’t see this coming and were short gold are likely to add more buying in the near term.
  • In addition, Iran shooting down a US drone just injected a big dose of fear into Mr. Market’s aorta, which is very bullish for precious metals—and that’s before we see the response from a US administration that has been rattling its saber extremely aggressively at Iran.

In short, the outcomes I see for gold in the near term range from bullish to extremely bullish—to insanely bullish.

What about the trade war?

Could a deal with China turn the Fed more hawkish, propping up the dollar and taking the wind out of gold’s sails?

I don’t think so.

  • Despite investor optimism resulting from a presidential tweet (a tweet—not a fact, not an accomplishment, nor any real, material progress), it’s clear that neither side is in a hurry to get a deal done.
  • Even if there is a Trump-Xi meeting at the G20 summit at the end of this month, there is absolutely no solid reason to expect them to reach a deal.
  • Even if there is a deal, it may be so lacking in substance that it makes no difference.
  • Even if there is a deal that would substantially resolve the trade issues between the US and China, it would take time to implement.
  • Even with an aggressive implementation schedule, both the Fed and markets would be right to be suspicious about the reality of the deal, until it’s implemented successfully.
  • And even if all of the above goes spectacularly well, other economic factors (including a possible market tantrum) could still prompt the Fed to cut rates as expected in July.

My outlook here is that the trade conflict will continue bubbling along for many more months—but that even if there’s real, credible progress, it won’t be enough to turn the Fed hawkish.

What if I’m wrong?

Well, another big difference between me and most of the financial talking heads is that I invest alongside my readers. There are highly material consequences for me if I get things wrong. I suffer personal loss if I don’t give good guidance.

This makes me extremely careful about all my projections of future trends. It’s why I don’t make bold predictions every week, month, or quarter. Rather than tell you what price gold will be trading on December 31 or any other day, I’m happy just to get the direction right.

But when all the likely scenarios are bullish for a given type of speculation, I’m, not afraid to make a call—and put my own money where my mouth is.

If you’d like to keep up with my take on this and other investable market trends, please sign up for my free, no-spam weekly letter, the Speculator’s Digest.

And if you want to see where I’m putting my own money today and speculate alongside me, please subscribe to my flagship publication, The Independent Speculator.

Either way, I’ll do my best to help you out.

Lobo Tiggre Signature

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June 20th, 2019

Posted In: Louis James

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