Lets get a little technical…bills, bullion and bitcoin. Part 1

Buy Gold Buy SilverI have been getting a ton of questions about bit coin and I have been learning a lot personally about this backless, digital “currency”.  Don’t worry, I am not going to bash bitcoin, in order to pump up gold and silver, I don’t need to. One has been proven to be valuable since the beginning of recorded history and one is still in the infancy stages (relatively anyway) proven to be one of the most volatile forms of an “investment” you can make.

I am quite intrigued but crypto-currencies to say the least. When we see something take off like cryptocurrencies are and gain so much attention, you have to be on your guard.

I know bitcoin has been around since 2009 and has stuck and probably will stick around, as will a few others. It’s the other 800+ that have more recently been created that I am concerned about. We’ll get to that.

You can guess what has been the most asked question this week, what’s happening with gold and silver?

We have talked about what’s propelling gold and now what’s causing a pull back. We have analytical data that we can study over the course of decades and can see similar patterns depending on what is going on nationally and internationally.

That last statement is a blanket statement if ever there was one, there are a ton of variables in any analytical/technical review.  Past performance is in no way a guarantee of future action with anything that is traded, much less anything that is seen as a hedge.

Do the same variables that help drive gold and silver drive crypto-currencies? It’s too early for that to be determined.

Gold finally broke over $1300 and shot up to $1380+ within a few weeks and has since retracted back to $1300. Why?

There are a few reasons.

One reason, all the hurricanes that have caused billions of dollars of destruction is instigating a lot of unforeseen spending (unforeseen weeks ago). This is helping drive the stock markets, we’ll talk about that in moment.

Two, and one of the biggest reasons we are seeing gold take a nice dip is that Janet Yellen is yelling that the Feds are going to tighten the strings on their over $4.5 trillion balance sheet (this is how the QE was born) to the tune of $50 billion a month, starting as early as next week. This basically the opposite of QE, however, that QE is already out there, it’s not like they are taking out of the system, they are merely spreading it out.  What’s scary about this is that this has never been done before. No one knows what’s going to happen as a result.

What does this mean? For one, this means that the yields on the different levels bonds (specifically the longer term ones) will look better for foreign investors. This is facade of sorts, it doesn’t change anything, it’s simply another tool, the last tool that the Feds can use to keep the dollar alive a bit longer. This too will come to an end.

The Feds have two options: let it ride out, which will cause a quicker and painful economic downturn, allowing us to start something new quicker or they dump their government securities on the open market as interest rates increase and prolong the bubble a bit longer. This will be setting us up for an even worse, but further down the road economic downturn/disaster.

You may think that with the stock market breaking records as it is, that dollar would be heading upwards, but that’s not the case. There are quite a few counter intuitive actions happening right now in conjunction with all the “good news” the Fed has to share. That shows the damage has been done, but the players will still play, ignoring the massive, massive pink elephant in the room.

Of course we have all types of war talk, debt beyond belief, more and more and more and more spending for the sake of spending, it’s all bumping the paper markets.

This (“this” being everything I’ve covered so far) will not last for long, you can mark those words.

The Federal Reserve can not keep this boat afloat with their current strategy. It’s like the Fed has been poking a hole in the bottom of the boat every month while only patching one hole every three months.  Eventually the boat will flood and sink. The Fed has been poking holes now for over a decade, they are running out of room to poke any more holes and running out of ways to patch all the holes they have poked, the boat is taking on a lot of water.

How will crypto-currencies do in while the water gets deeper?  My opinion, formed on nothing more than years of watching the markets, currencies and trading patterns is that we could very easily see a couple of mini crashes in crypto-currencies based on what’s happening in those markets.

I’ll be the first to admit my opinion on where the crypto-currencies are going is formed on a limited base of comparison simply because the world has never seen crypto-currencies until recently, the world has never seen these levels of debt, we have never seen “reverse QE”, etc…we have very little to base any type of projections on, outside of speculation.

What we do know is that crypto-currencies are being scrutinized by central banks around the world. Why? That’s easy, they are worried about losing control.

There’s a lot going on right now, who knows what will happen before part two of this post is published. No matter what happens you need to have financial insurance. Gold and silver have dipped, we have seen this too many times to count. What we know is that in the long term gold and silver will increase in value. That is important, but more importantly, no matter what the spot price of gold and silver may be, the fact that owning physical gold and silver is the purest and safest form of financial insurance, that gold and silver is the best protection against the failing dollar and a hedge against any economic concern will never change.

Making a nice big profit on gold and silver is every buyers eventual goal, and over time it has proven that this goal is very much attainable. Seeing dips like this can be discouraging, trust me, in my 12 years in this industry I’ve been there and done that. When we see dips like this people do two things, they sell in fear or they buy the dips knowing where gold and silver will eventually go.

Be sure to be on the look out for part two of this series!

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