Weekly Update: Gold, Silver, Bitcoin – 01.12.2017

honest-money

One of the prevailing themes in the independent financial media recently is that 2017 will be a year of rotation out of assets that were once deemed safe and into alternatives. The various sizes of invested capital across primary categories leads to aggressive forecasts for gold, silver, and bitcoin (‘GSB’). This recent post from Charles Hugh-Smith The Path to $10,000 Bitcoin is a prime example of such commentary. While there are certainly back of the envelope calculations that revalue precious metals and cryptocurrencies at orders of magnitude higher than their current prices (in order for all the debt to be backed by gold the price would have to be over $100,000 an ounce, etc.), my advice is to approach these forecasts from a balanced perspective.

The crucial point these calculations illustrate is the relative size of markets. Traditional asset classes like stocks, real estate, and most of all bonds are so much larger than alternatives like GSB that if even a tiny fraction of capital in the major classes were to lose confidence (bonds default, interest rates rise, more bonds default, safe haven shaken) and rotate into the minor classes then the price action in GSB would turn exponential and astronomical in a short period of time. Such a rotation can feed on itself in such a way that a reset could take place in a matter of weeks and days as opposed to months and years if a precipitating event of great significance lands black swan style.

It is critical as savers, investors, and alternative asset enthusiasts to avoid emotionally pegging the value of GSB to paper prices in any way shape or form. If you are not trading in and out of these vehicles, then your focus must be on accumulation at intelligent price points. Don’t mark the emotional value at the current paper price or the future hypothetical prices from forecasts and calculations deriving from rotation or the end of price manipulation. Doing so will whipsaw you, and in a weaker moment you will get squeezed out of some or all of your holdings and end up with a devastating dose of regret. Don’t be a weak hand: deal with this the way the pros do.

If you have a thesis, then stick with it unless something about the thesis changes. The thesis here derives from the debt. It is simply unpayable and must be dealt with either by default, renegotiation, or inflation. In any of these scenarios paper wealth will be incinerated and real assets will be the beneficiary. Various alternative assets will perform better in different scenarios, so gradually accumulating a balanced portfolio of GSB in a mix that is right for you based on your risk profile and preferences is the way to go. Only use price as a way to enter at good spots, but keep building your savings in real assets without sacrificing your operating capital.

I see a lot of chatter back and forth between people who would slice the G&S or the B out of GSB. I ignore most of it. My advice is simple: don’t own what you don’t like or don’t understand. If you think bitcoin is going to zero because of an EMP or another scenario, then don’t own any. If you think gold and silver don’t have functional utility, then don’t own any. However, you owe it to yourself and your family to do the research and learn from the best about the vehicles that are available and what scenarios they will perform best under. While I believe the problem with the debt is intractable and the resulting reset is inevitable, I must admit that I don’t know exactly what will transpire because I’d be a fool otherwise. As a result, I diversify. Physical silver, Goldmoney, bitcoin, and mining stocks are all part of my portfolio. The accumulation from my operating income and from stock profits is reserved for GSB.

While your thesis is intact, you can’t afford to be wed to a paradigm that restricts you from owning other assets that will benefit if you are right. Believe it or not, you can be right and still lose. Developing the appropriate mindset of patience and learning is crucial. Educating yourself is just as important. In fact, I could argue that knowledge itself is the most valuable asset. Keep on accumulating that as well!

Gold

gold-01-12-2017

We’re back above $1,200 on the fake paper price with a steady move up following the puke down to $1,100 after the Fed hike in December pushed the dollar up. If we hit a wall here and they slam it back down then good prices to buy would be at the $1,120, $1,050, and $1,000 levels. This move could stretch a bit, but unless a severe catalyst comes in or the deep state decides to let the price go and stop selling billions in naked shorts I don’t expect it to run away. A consolidation of sideways price action above $1,200 would be constructive.

Silver

Silver 01.12.2017.png

While silver didn’t get beat down quite as aggressively after the election, it hasn’t been leading to the upside in this latest move either. Any price is a good buy for silver, and particularly under $20. Keep accumulating and watch for a consolidation above $18 or a run back above $20 to signal another move up. If it gets stuffed down below $15 then it’s a great time to pick up some more on sale. Be patient and embrace the smackdowns. They bring you more incredible buying opportunities that we should all be thankful for. Last year I thought that we might not see $16 again, but it came again as another awesome opportunity to exchange fiat currency for real assets.

Bitcoin

BTC 01.12.2017.png

In the last report I said that a drop back to the trendline at $800 or below would be a nice buying opportunity. It’s critically important to avoid chasing a rally, particularly in something as volatile as bitcoin and especially when the rally is predicated on feverish Chinese buying. All it took was China to make an announcement and the smackdown ensued. I grabbed some on this latest drop and am looking for the price to stabilize. If it drops further you’d want to be careful about jumping in on every dip, but spacing in small orders every $100 seems like a good strategy. There’s a lot going on behind the scenes here that I’ve heard people discuss but that am not directly privy to. Like in gold and silver, the smackdowns should be your buy points rather than on the way up like the parabolic move in December. If you space yourself in with the understanding that the drops can be significant then you’ll be in a position to avoid chasing if the price runs away.

Conclusion

The debt is still unpayable. Stick to your guns. Be tactical and buy on the manipulation dips. Accumulate real assets. Diversify yourself. Continue researching and learning. Avoid getting sucked into paper price emotionalism. Steer clear of petty arguments.

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