Looking Past the Short Term

McAlvany Weekly Commentary

This week, the markets breathed a sigh of relief after a contentious election season. Let’s take a look at where prices stand as of November 6: The price of gold is down about 4.5% or $125 from last week. The price of silver is down a little over 10% or around $3 from a week earlier. Platinum is down about 7% or $74 from top to bottom over the week. It is sitting down below $1,000 again. Palladium is down 15.5% or $190 from where it was last week, hovering around $1,020. The S&P 500 jumped up 3.8% to 5,930, a new all-time high for the index. Gold Dips on Trump Win As discussed in our election market expectations episode, with a potential Republican win in the election, there would be an initial gold decline. It's an immediate response of exuberance of a healthy turnaround in an economy, hopefully some fiscal responsibility. We'll see if that actually ends up being what plays out. At the same time, we see the S&P 500 reaching an all time high. So is the NASDAQ, up over 2.5% today, while the DJIA is up 3.6% or 1540 points as of the day after the election. These are other indications of market exuberance with an expectation of a turnaround in the economy with the Trump administration. If we look at the first election win for President Trump in 2016, we saw a very similar price action as in other elections. It was a short-term, two day response followed by a reversal for a few weeks before resuming that decline. But when Trump won in 2016, we actually saw an unchecked decline of about 13.5% in the gold price. It was a very short period of time — just by December 22nd, 2016, we had bottomed after that November 4th date. We believe that the opposite would've been true if Harris had won. You would have seen a gold spike as a vote against fiscal policies of the left as well as a continuation of some of what they had been doing, and the equities markets likely wouldn't be rallying. De-Dollarization and BRICs News and talk radio veteran John Loeffler, former host of Steel on Steel and co-host of the Financial Sense News Hour with Jim Puplava, joined as our guest in the studio. We asked Mr. Loeffler for his take on recent BRICS discussions of de-dollarization and the US debt dilemma. While it’s impossible to say what’s next, he did share some wisdom on what could happen. “Every fiat currency historically has a shelf life of no longer than 200 to 250 years before it gets inflated into oblivion. And that's what we're watching happen right now with the dollar.” “It's significant that the BRICS discussion is revolving around de-dollarization. In the case of the BRICS countries, they're going to use the stabilization of their own currency with gold and or other precious metals as some kind of a hedge or a block against getting their currencies pulled down as the dollar ceases to be the currency of last resort around the world.” “In other international circles, you’re beginning to hear discussions of the post-dollar era. That means everybody else is thinking about what will happen if the dollar dies or if it ceases to be the currency of last resort that they're actually talking about.” Seek The Truth, Plan Ahead Will the US get the debt under control? It seems unlikely. As we discussed last week, austerity is never popular. Every time the Fed Chair makes an economic prediction — no matter if it’s Janet Yellen, Ben Bernanke, or even Allen Greenspan — they never get it right. The job of the Federal Reserve is to maintain expectations, not tell you the truth. So the most important thing to do is to find sources of information that have been telling you consistently the truth, warning you of things to come bravely and also as you say, have a plan, but be flexible. Plan Your Metals Strategy Now is the time to develop an economic game plan for yourself, for your family, for your loved ones. The Federal Reserve won’t protect your wealth.