Gold: 1970s Bell Bottoms And Inflation Are Back

If interest rates even rise one percent on the $30 trillion in debt, payments become extremely difficult to make. No matter what they say, the Fed must keep interest rates low or even negative to finance our way through this record debt that we have while managing the pandemic. The situation is similar to the 1970s when inflation rates hit 14% in 1981 after the US went off the gold standard. At the same time, the US dollar collapsed against gold more than 90% in purchasing power, debt exploded to record levels, and gold ran up to new highs.

Gold and Silver

We had another session of short selling with the average price of about $26.56. We came down right into the Variable Changing Price Momentum Indicator (VC PMI) Buy 1 level of $26.13. We also are getting a lot of volatility in the silver market. The paper and cash markets appear to be diverging, with a shortage developing in the cash market.

Silver is at a bottom and is testing a lower level of support. The VC PMI is identifying that, even though there is an overwhelming bearish sentiment in the paper market, silver has come down into an area of accumulation of supply, according to the VC PMI. The VC PMI is based on the reversion to the mean. It identifies daily, weekly, monthly and annual average prices, as well as extreme levels above and below those means.

On March 2, silver came down to $25.82 and then reverted right back up. It tested the previous low and showed that $26.13 is an area where buyers are likely to come into the market. The weekly Buy 1 level is $25.75. The low was $25.82, close to that level - within 10%, which is what we use as a rule of thumb. Therefore, it confirmed that the market had reversed. Today we see another test of this level. The price came down and we found more buyers than sellers. Therefore, the price reverted back up.

You don’t have to listen to all the chatter in the media. We just focus on what the market is telling us through the VC PMI. All over the Internet is news about the short squeeze in gold and silver. The price came up to $30.35 on Feb. 1 on the news about the short supply. Then the market discounted that news and returned to its equilibrium price or mean. Anyone who bought at the top got slaughtered. Do not follow the herd. Do not listen to the mainstream media.

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Disclosure: I am/we are long GDX. I wrote this article myself, and it expresses my own opinions.

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