Election day has passed and my phone is ringing off the hook from friends who want to know how the election results will affect the gold price. To all you Inquisitive Cats I say, “The secret may lie in understanding the last 4 years of market and economic activity.”
September 15, 2008 was the day Lehman Brothers collapsed, hence what I refer to as the day the great recession of 2008 began. It was the largest bankruptcy in the history of the country and served as the impetus to commence money printing. On that day, Gold traded at $790 an ounce.
The days, months and years to follow saw the passing of the “Troubled Asset Relief Program” (TARP), followed by QE1, QE2, HAMP, HARP, the Twist, Various Refi and MBS purchases, a multitude of stimulus programs to sell more of everything from cars to windows to homes for your new windows and QE3. I wrote that all in one breath so I couldn’t name every stimulus package that was passed. You get the point.
The bottom line is that each year since, we’ve seen budget deficits in excess of $1 trillion all accommodated by multiple lifts to the debt ceiling. That brings us to today where America lies in two camps. One camp is the “we’re making progress camp.” The other camp is the “we’re in worse shape than before camp.”
You know which camp you’re in. If you’re in the latter of the two mentioned – just in case you haven’t heard – you lost the election. To me that suggests if those who believe we have made progress toward recovery over the last 4 years are still in charge, we are going to get a whole lot more of what they believe has put us on the path to recovery.
QE3 really could turn into QE Infinity and $16 trillion of federal debt could turn into $22 trillion. Unless of course we drive off a Fiscal Cliff. Currently, Democrats and Republicans are co-piloting the bus headed for that fateful place. “Get your hands off the wheel!” says one to the other. To which the other responds, “Get your foot off the gas!” There’s more drama here than in the corner at the Homecoming Dance.
I’m gonna take a wild guess here. We’re not driving off a fiscal cliff thus ending civilization as we know it – not yet anyway! I’m just guessing …… But I think we can expect QE into infinity, rising debt, more plausibly-deniable inflation, continued market volatility and a can that’s been kicked so many times that it’s turned into a ball that rolls quieter and further when kicked down the road. But that’s just me.
Now to the question, “What’s in store for gold in this post-election era?” “Why can the gold price reach $3,728.26 in 4 more years?”
I just did the math. If gold was $790 an ounce on the day this debacle began, the gold price has risen 2.1708 times since then, based on a spot price at time of this writing of $1,715 an ounce. No Magic – No Secret – Just simple math and a very simplistic way of viewing the future.
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As always, gold at $3,728.26 is not a guarantee, my crystal ball is cracked. The purpose of this article is to provide you with many opinions, some of which are even mine. Before making any choice to own gold or other precious metals, do your own research, arrive at your own conclusions and always make informed decisions. Lear Capital can help by providing various special reports, news and research data. It’s all FREE so what are you waiting for?
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