Gold Continues to Consolidate Ahead of the Next Breakout

Gold continues to consolidate below $5,000 while the forces that inevitably drive it higher pick up steam. We don’t know the day and the hour of the next major breakout, but we know what signs to watch out for. Here are a few of them…

We’re starting with the big one, federal debt that it already unpayable while the guardians of our fiscal health refuse to stop it from spinning further out of control.  That will make the landing even rougher.  Our use of the term “hit the wall” is not idle.  Former Goldman Sach/Treasury head Henry Paulson used that term in a “when, not if” context  in a recent Bloomberg interview.  Paulson, the 2008 big-bank-bailer-outer, said, “We need an emergency break-the-glass plan… ready to go when we hit the wall.”

“It will be vicious.”

Yes, it will.  The visible national debt is $39.2 trillion.  This year Washington will spend $7.5 trillion with revenue of $5.5 trillion.  So we’re looking at a $2 trillion deficit this year.  And that is before the bond market cracks and interest rates race higher.  

It will be vicious.

The private credit market consists of non-bank lending to special situations, distressed debt, and asset-backed finance.  The U.S. private credit market is about $1.3 trillion.  It offers higher yields than public markets but carries illiquidity, credit, and macroeconomic risks.

We’re early in the advancing credit meltdown, but because it is characterized by illiquidity, Blackstone, BlackRock, Blue Owl, and others have had to dump assets, cap client fund withdrawals, and quell investor panic.  Paulson said it this regard, “Should enough investors back out… the Federal Reserve would step in as a buyer of last resort.”

You know that means they will print money, not to bail you out, but to bail out big, influential houses like Blackstone and BlackRock.  Be prepared to start hearing the phrase “too big to fail” all over again.  

Such bailouts mean money printing, of course.

Every driver in America knows gas prices are up 50 percent. But that is only the beginning of the cost load that will suppress American business. A sophisticated economy depends on more industrial products than gasoline and on processes that are being suppressed and under stress in the Gulf region and Iran war. Among those products are aluminum (dependent on costly electrical processes), and helium, essential to the world’s semi-conductor production. A third of the world’s helium comes from Qatar. Sulfur from the Gulf economies is essential to the production of phosphate fertilizers.

We could go on.The Iran war threatens the world’s supply of rubber and plastics.You get the idea.The disruption threatens to be much more widespread than most people suspect.What do the Deep State Money Manipulators always do in the face of collapsing growth?They can call their response monetary stimulation, liquidity operations, jump-starting the economy, quantitative easing, or other names yet to be coined.

A downturn in the economy, especially as the November election draws near, will mean certain money printing. These are war outcomes that pale against the actual human cost of a spreading war. Nevertheless be aware that like wars before Iran, including Vietnam and Iraq, today’s American wars are financed by inflation.

While there are other advance warning signs of inflation’s next big surge and an acceleration of the dollar’s debasement, these three should be on your radar. Our objective at Republic Monetary Exchange is to keep a close eye on conditions for the benefit of our friends and clients.