Gold and silver are set up potentially for an explosive move, fueled by the inevitable escalation of Central Bank money printing. The Federal Reserve has led the charge on this account over the last three months as the financial system has begun to veer off the rails.
Currently, the Fed is printing money at the fastest rate in its history. The brown stuff is hitting the fan blades in the financial system. By mid-January the Fed’s balance will be close its all-time high. Fiat currency devaluation aka QE aka money printing is like rocket fuel for gold and silver.
A lot of mining stock analysts are drooling over the charts of the large cap stocks. And kudos to Crescat Capital for sharing the chart of above (with my edit in yellow). But the junior exploration “venture capital” stocks are the most undervalued relative to the prices of gold and silver in at least the last 19 years, which is the amount of time I’ve been involved in the precious metals sector.
Last Thursday gold spiked up $14 before the stock market opened. But when Trump tweeted that a trade war “Phase 1” deal was close, gold went $20 off the cliff. However, February gold closed flat vs Wednesday’s close and March silver has reclaimed the $17 level. It’s a big positive that the “Phase 1” trade deal was signed because now Trump won’t have the ability to jerk the markets around with his silly “positive trade talks” tweets.
More important to the gold bull market, the Fed once again expanded the repo money printing QE operations. Early today (Thursday, December 12th) the Fed announced an additional $275 billion in repo operations around year-end. Adding all of it up, the Fed will be pumping half a trillion dollars into the repo system over year-end. This is unequivocally due to bank assets melting down and the need to finance new Treasury debt issuance.
The Fed’s re-liquification program will be given creative names – anything but “QE.” It started off with “balance sheet expansion” but that term was abandoned because of its transparency. The best one I’ve heard so far is “yield curve capping operation.” Watching Jerome Powell try to camouflage the Fed’s money printing is like watching a baby smoke a cigarette.
It’s a good bet that eventually the repo activity will be converted into a permanent “QE” money printing program. The best way to make this wager is via the precious metals sector.