Jim Rickards: The Gold Markets Are Utterly Beaten... Now is the Time to Buy

Look, gold just finished a four-year plus bear market. It lasted from August 2011 to December 2015. In that bear market, gold went down about 45% peak to trough, and if you use the about $240 price from 1999 and just scale that up to $1,900 and then back down again to $1,050, which is where it was in December 2015, that was a 50% retracement. And by the way, my friend Jim Rogers, one of the greatest commodities traders in history, co-founder of the Quantum Fund with George Soros, a legendary commodities trader, he said to me … and he has a lot of gold. He expects gold to go much higher, as do I, but he said, Jim, “Nothing goes from here to there.” Meaning, he’s reaching way up to the sky up into outer space. He says, “Nothing goes from here to there without a 50% retracement along the way.”

And I think that was very good advice. Well, okay, but we’ve had the 50% retracement. That’s behind us. We’re in a new bull market now. There was a bull market from August 1971 to January 1980 and gold went up over 2,000%. From January 1980 to August 1999, there was a very long, 20-year grind it down bear market, and gold went down about 70%. Then you had a new bull market that lasted from August 1999 to August 2011 and in that 12-year bull market, gold went up over 700%. Then you had another bear market from August 2011 to December 2015 and as I said, gold went down 45%. We’re in a new bull market. It started in December 2015.

Now, here are the facts, gold goes up and down. Lead’s volatile and we know there’s manipulation. People get discouraged and they buy gold and then some hedge fund or China comes along in the gold futures market and slams the price down. “Oh, gee, why did I buy it?” I get all that. I understand the discouragement. I understand how difficult it is to watch stocks go up and Bitcoin go up and I’m sitting here with gold and it just seems to be going sideways, but it’s not true. In 2016, gold went up over 8%. In 2017, gold went up over 13%. So far in 2018, gold is up 3%. You take the entire period from the bottom of the last bear market to the beginning of the bull market, December 2015 to today, gold is up over 25%. It’s been one of the best performing asset classes of all the major asset classes. It’s not crazy like Bitcoin, but Bitcoin’s collapsing, which I also predicted some time ago.

So, the truth of the matter is 2016-2017 are the first back-to-back years of gold gaining since 2011-2012, although at that point, it was already off the top. It’s more a statistical anomaly that gold went up in the year 2011. Yeah, it did, but it was way down, way off the peak in September of that year. But now we have two back-to-back years of gold going up very significantly. We’re in year three, 2018, is year three of this bull market. It’s off to a very nice start. The fundamentals are good. Their technicals are good. The supply and demand situation is good. We haven’t even gotten into other potential catalysts, including War with North Korea, loss of confidence in the dollar, financial panic. Even a normal business cycle recession or if inflation gets out of control, there’s just a whole list of things that are going to drive gold higher.

And the last point I want to make, Mike, is that gold is doing this performance against headwinds. The Fed has been raising rates. When you raise nominal rates and you tighten real rates, that’s normally a very difficult environment for gold and yet, gold’s going up anyway. Can you imagine what’s going to happen when the Fed has to back off… because right now, as I said, they’re over-tightening. When this economy slows, and that data starts rolling in later in the first quarter and early second quarter of 2018, the Fed’s going to do what they call “pause.” It doesn’t mean they’re going cut rates. That’s somewhere down the road, but they pause, which means that they…

Right now, they’re like clockwork. They’re going to raise every March, June, September, December – 25 basis points each time, boom, boom, boom, boom like clockwork. But, every now and then they don’t. They skip. They pause. Well, if your expectation is they’re going to raise and then they don’t, they pause, that’s a form of ease. It’s ease relative to expectations. That’s what’s going to happen later this year. All of a sudden, this headwind’s going to turn into a tailwind and gold’s going to get an even bigger boost. I see it going to $1,400 over the course of this year, perhaps higher. My long-term forecast for gold, of course, is $10,000 an ounce, but that’s… and I’m not backing away from that. That’s just simple math. That’s the implied noninflationary price of gold if you need to use gold to restore confidence in a monetary system in a financial panic or liquidity crisis where people have lost confidence. That’s not some made up number. That number is actually fairly easy to calculate, but you don’t go there overnight. You got to get to $2,000 and $5,000 before you get to $10,000.

I think right now, we’re in a new bull market. It’s going to run for years. We’ve got that momentum. We’re off the bottom, but people are always most discouraged at the bottom, right? Well, that’s the time you should buy. It’s just human nature. I’m not faulting anyone. I’m not criticizing anyone, it’s just human nature to say, “Oh man, I’m so beaten down. I’m so sick of this. I’m so tired of this.” Well, that’s usually the time to buy and guess what, it is.

- Source, Jim Rickards via Value Walk