Why I’m Now Short: The US Equity Markets

March 2, 2016 in News by RBN

The reason this topic is so important for our readers is because a crash in the stock market would be the most bullish event for gold.
The gold and silver markets are tiny. It doesn’t take very much capital to move the markets. When the hedge funds decide that the bull market in stocks is over, precious metals will look more attractive. When wealthy investors can no longer count on the Fed’s “Put” to move the stock market then gold becomes a go-to investment. Especially with interest rates offering next to nothing – and negative interest rates right around the corner. This is a very bullish event if and when it occurs. It will happen and the Peak Prosperity article builds a strong case why the day of reckoning is inevitable.
We have noticed a change in our client’s attitude toward gold and silver. Four years ago, when gold and silver started to fall, our clients watched in disbelief. How could this be happening? Gold had finished higher than the precious year for 11 years in a row, and it seemed the bull market would never end. After a year or two disbelief turned into uncertainty and then into fear – fear that perhaps people like Harry Dent or Larry Edelson would be right and gold was headed sub-$1000. Lately, however, many of our readers and clients are beginning to believe that the bottom is in, that we will not see sub-$1000 gold and that the future for gold and silver is exciting. Our phones are ringing again and big orders are common place. We are off to a very strong start this year, the best in three years. Why is this happening?
The coverage that the Presidential Election is receiving is one of the causes. If nothing else, the current coverage has made people aware that things are a mess and that there are many big problems that have to be dealt with. People are hip to the fact that big government is the cause of our problems, not the solution. The thing is, what the problems are and how to deal with them is very different depending on whether you are a Republican or a Democrat. One could easily conclude that no matter who wins, many of the important issues will not be addressed. That is exactly what will happen – it doesn’t matter who wins, if cleaning up the current mess is what the election is all about. It won’t happen. And people are starting to figure it out. No matter who wins (and I assume that means Trump or Clinton) half the country will be beside themselves. There will be no winners this time and that is the foundation for gold and silver to reassert themselves as a hedge against uncertainties. That is what gold and silver are for and that is where we are headed.
A stock market crash will accelerate the move into gold. Remember, it is a very small market (the physical market, not the paper fraud) and it doesn’t take much new capital to launch the bull market. 2016 will be a very good year to be long gold and short the stock market.
Check out Daniela Cambone’s terrific interview with the legendary John Hathaway.
I Feel Like The Federal Reserve’s Lab Rat – John Hathaway
By Kitco News
Monday February 29, 2016 11:47
(Kitco News) – The Great Monetary Experiment, as a result of the 2008 financial crisis appears to be coming to a head and that will be good for gold as investors lose faith in paper currencies according to the manager of abillion dollar gold fund.
In an interview with Kitco News, at Gold Stock Analyst Investor Day, John Hathaway Senior Managing Director, Tocqueville Asset Management, said that gold, which is preparing to end its best month in recent history, is turning a corner as people become disillusioned with monetary policy. He added that the demise of paper money is now becoming the top reason to hold gold among investors.
“It’s been like four and a half years …and I feel like we are beginning to see some daylight here,” he said. “It seems to me, that we are maybe, at the beginning of a loss of faith in public policy, monetary policy, fiscal policy, politicians.”
Hathaway, added that the results of the Federal Reserve’s actions have left him feeling like a “lab rat” as returns on saving have deteriorated in a low-interest rate environment.
Although gold prices have made considerable gains since the start of the year, up more than 16% on the year, Hathaway said that he could see even more money pour into gold in the current market environment.
“Anybody who invests in gold, and is not a trader… feels that the long-term decline of the purchasing power of the [U.S.] dollar and other paper currencies is the principal reason for owning gold,” he said. 
Along with the growing economic uncertainty, Hathaway said that he is also optimistic on gold prices as the lack of physical supply is “greater than what most people think.”
He explained that the last few years, while paper markets have been driving the price down, physical gold has been flowing into India, Turkey, the Middle East and China.
“That gold gets refined into different bar shapes, different purities. You just can’t bring it back to the London or New York market and expect to trade it without a delay, in some cases very substantial,” he said.
While the $1 billion gold fund was purchasing the yellow as prices declined, Hathaway said that the firm is now looking to the mining sector as the price goes up.
“If the gold price continues to rally, I would expect better performance from the mining stocks,” he said.
As of 11:24 a.m. EST April Comex gold futures were trading at $1,233 an ounce, up $12.4 or 1% on the day.