The enormity of one trillion … how an avalanche of new U.S. debt is a tailwind for gold … what “Dark Pool” prints are telling us about the timing of gold’s next move

 

Most people don’t truly grasp the enormity of the number “one trillion.”

I’ve always thought of it as a massive figure, but just how massive was a bit vague … until recently.

Our macro specialist, Eric Fry, finally put context around this for me in his most recent issue of Investment Report.

Here’s what blew me away:

One million seconds would equal 11 days. A billion seconds would equal 31 years. And a trillion seconds would equal 317 centuries …

If you turned the clock back 1 billion seconds, you’d be in 1989. But if you turned it back 1 trillion seconds, you’d be somewhere around 30,000 B.C.

I hope you’re getting an idea of must how mind-boggling one trillion is.

Now, with its enormity in mind, let it sink in that over the last four years, the federal government has increased the national debt by $7 trillion, much of that from freshly-printed dollars.

Here’s Eric with the significance:

… money-printing schemes are not good for the dollar’s value, all else being equal.

And as the history of finance has taught, a trend that is bad for the dollar is good for gold … all else being equal.

Today, let’s get Eric’s latest thoughts on why wise investors are making sure gold is in their portfolio today.

But then, we’ll do you one better.

We’ll turn to Stefanie Kammerman, the analyst behind Dark Pool Trader. It turns out she believes gold and silver are on the verge of their next leg higher right now.

Let’s jump into the details.

***The attack on the dollar is a major tailwind for gold

 

For newer Digest readers less familiar with Eric, he’s our big-picture, macro specialist. He’s also probably the most successful investor you’ve never heard of.

In 2016, some of the world’s best money managers and stock pickers participated in an annual investing contest. Participants included Leon Cooperman, David Einhorn, Bill Ackman … and Eric.

Eric beat them all. He posted a one-year gain of 150%.

Beyond that, over his career, Eric has dug up 40 different 1,000%+ returning investments. Most investors never get one.

So, when Eric is incredibly bullish on an investment or asset class, we pay attention. And that bodes well for gold today.

From Eric’s recent update:

Since the COVID-19 crisis struck down the U.S. economy in March, the U.S. Treasury has raised $3.4 trillion in new debt by selling Treasury securities.

But over that same time frame, the Federal Reserve has purchased a net $2 trillion of Treasurys.

In other words, the Fed has simply printed nearly 60% of the net new cash the Treasury has “raised” this year …

And as the history of finance has taught, a trend that is bad for the dollar is good for gold … all else being equal.

To illustrate this relationship between the Fed’s activities and gold, Eric presents a chart beginning in 2007. It shows the Quantitative Easing operation in 2009 and extends all the way through today’s coronavirus stimulus dollars.

Gold’s price is in blue. The Fed’s net stimulus purchases are in orange.

As you can see below, the relationship here is pretty straightforward.

***The difference today is that our current monetary debasement is taking place at such a massive scale and speed that Eric believes it could easily produce a $4,000 or $5,000 gold price

 

He isn’t the only one.

In his issue, Eric quotes Paul Singer, founder of the hedge fund Elliot Associates:

This is a perfect environment for gold to take center stage.

Fanatical debasement of money by all of the world’s central banks, super-low interest rates and gold mine operation and extraction issues (to a large extent related to the pandemic) should create a fertile ground for this most basic of all money and stores of value to reach its fair value, which we believe is literally multiples of its current price …

What this means is that the gains we’ve seen from gold so far could be modest compared with what’s coming … and those gains could materialize much faster.

Back to Eric:

If/as/when the gold market launches into a new rally through $2,000, it could move a lot higher very quickly. That’s because it is “under-owned,” as Singer points out.

Gold and gold stocks represent a surprisingly small portion of most investment portfolios.

Additionally, the size of the gold market is relatively minuscule …

Therefore, if investors shifted even a tiny percentage of their portfolios toward precious metals, the market could erupt.

As for gold itself, I’ve stated several times that I expect the yellow metal to top $3,000 an ounce by the end of next year — and to reach at least $5,000 during this bull market.

Now, this is encouraging enough for gold investors. But let’s brighten your day even more.

If Stephanie Kammerman is right, the next leg higher for gold and silver is right around the corner.

***Dark pool prints are suggesting a major, imminent move for precious metals

 

For newer Digest readers, Stefanie is the analyst behind Dark Pool Trader.

In her service, Stefanie monitors the dark pools — that’s a reference to the private stock exchanges where the Wall Street “big boys” place their trades.

These exchanges allow institutions and huge money managers to buy and sell massive blocks of shares without running the risk that other traders will see their hand.

This “camouflage” is necessary since this buying/selling pressure can easily push a stock’s price around by 5% – 10% in the span of a week.

But by monitoring the activity of these giant institutions on the Dark Pool exchanges, Stefanie gives her subscribers a shot at riding along with that momentum, potentially to the tune of 50%+ profits in a matter of just weeks, sometimes only days.

In the last few days, Stephanie has seen some massive prints for precious metals.

From her Monday update:

Everyone else seems to be trying to figure out what stocks to buy if Donald Trump wins … or if Joe Biden wins … but I am focused on gold and silver.

Just follow the prints. Just follow the Dark Pool. The “tape” always knows …

Gold is on its way up, and I don’t want us to miss this trade.

In her update, Stefanie explained that this past week saw enormous Dark Pool activity on gold stocks.

But not just gold — Stefanie is eyeing silver too:

This week, silver and gold started to break out of the sideways consolidation, which is very bullish.

You can see in the silver chart below that heavy volume came in this past Friday, October 9.

 

This tells me that silver is ready to rally … now.

We all know that stimulus is coming — and we know that it will be bad for the U.S. dollar and terrific for precious metals.

However, we do not know exactly when stimulus is coming … but it doesn’t quite matter when.

The market knows it — and the Dark Pool buyers know it — and everyone is preparing for stimulus.

As we wrap up, we have the long-term tailwinds of massive, global currency debasement and currency-printing.

And we have the short-term tailwinds of high-volume dark pool activity.

It looks like the next big move in precious metals is soon to be underway.

We’ll continue to keep you updated.

Have a good evening,

Jeff Remsburg