Wednesday, December 28, 2016

Where Is Gold Headed? 
Rick Rule: Focus On These 2 Factors 
The price of gold in 2017 will be ruled by two things: 10-year U.S. yields & the U.S. dollar. At least that’s what famed investor Rick Rule thinks. Giving his 2017 outlook, Rule tells Kitco News he expects these factors to weigh on the yellow metal at least for the first quarter of next year. ‘I think the chief competitor that gold has is the 10-year treasury, I think that’s the world’s benchmark instrument where people go to in times of stress,’ the Sprott U.S. Holdings CEO said. ‘A small deviation of wealth from the U.S. 10-year treasury to gold and gold stocks will have a dramatic impact on gold prices.’ In his candid and straightforward fashion, Rule also shared his outlook on newly elected Donald Trump, who he thinks will likely worsen the U.S. deficit issue in 2017 .. 6 minutes

1 comment:

Anonymous said...

Rule does not envision a Dent style collapse of the world economy.

He imagines it can go on and on, just as it has for such a long time. Consequently, he does not see the danger others might see in manufacturing commodities. (e.g. other than gold).

If the world economy does not turn down soon, inflation in the USA will increase as a result of current full employment and Trump style restrictions on the supply of U.S. labour and cheap manufactired imports (which represent cheaper Far East Labour costs), resulting in continuing upward pressure on the 10 year yield.

While increased yield in 10 year government debt would indeed be negative for gold prices; inflation would be a force causing gold prices to rise.

In the final analysis, the U.S. and other developed economies need inflation to remove the enormous weight of debt that has been accumulated. Attempts to generate inflation (irrespective of the attendant moral dilemma) will likely continue especially with a real estate developer in charge of the hen house.

The longer Dent Style considerations hold inflation and GDP growth back, the more debt will accumulate; and so the more treacherous the debt environment. Default becomes a more probable.

I am inclined to suspect another 1929 one way or another . In those circumstances one need only look at historical charts to figure out the likely track of gold prices.