Timeing is definitely the key MiStagic, l agree with you on the impending market melt down. So far, basket case IOU Uncle Sam has managed to kick the can down the road and avoid a recession. That strategy works only so long before the proverbial hits the fan. We can pretty safely assume that the resilient gold price is a reflection of smart money early movers taking a position in gold to preserve their wealth prior to the impending storm. Federal Reserves around the world as we know have been actively buying gold bullion to sure up their Fiat Currencies too, because the Banks know a storm is brewing. China has recently stopped gold purchases, but l don't read anything sinister about that (it might be a transitory break or they may have reached a target).
Nothing much is said about mid tier Banks becoming insolvent in the U.S. anymore. The Federal Bank Term Funding Programe ceased on March 11th ; an initiative to help support regional US Banks remain solvent. Banks borrow short term money and lend this money medium to longer term. Normally short term money is borrowed by the Banks at lower interest rates than what they lend it out for. The interest differential is the Banks profit. Here is the catch....
When we have an inverted yield curve as currently exists in the USA, short term Bond rates have higher interest rates than longer term Bonds such as 10, 15, or 20 year Treasuries. ln real terms, it costs more for Banks to borrow money than they can lend it out for. Many 30 year motgages were underwritten at 3 %, but those same Banks are faced with 7 or 8% borrowing costs. The Bank Term Funding Program was implemented to address this dilemma but its ended. Consequently, there are a swathe of what are called "Ghost Banks" across America, that are technically insolvent. The problem is there and it hasn't gone away. According to George Gammon ( a respected U.S. economic commentator), Google him - the inter connectedness of Banks in the States and abroad, makes this a huge threat to Fiat backed currencies. Contagion is like a pack of cards and it just takes a few small failures to cause an avalanche. To put things into proper perspective, there is about ten times more risky credit circulating than there was in the GFC of 2008. This is why gold is holding up so well, when normally it wouldn't. Remember gold has always been counter cyclical to high interest rates, a high U.S. dollar and a booming stock market.
Sorry to be long winded but this is fundamental to the gold story. The Government says soft landing or no landing in a recession. Many commentators say hard landing and jump right past recession to use the term depression. Many here will have differing views, but ostensibly gold is telling us something. George Gammon thinks that when the Fed pivots, it will be in much bigger cuts than what is currently speculated. The rate cutting will be a signal that its time to get out of equities even though we might see a short term blow off top in the US stock market.
So, l agree with you Mistragic. l too only hope Red 5 reaches or nears that 50 cent Fair Value level and lm out with my profits too. I will sit on cash and buy back into gold miners that get sold off, because the case for gold could not be stronger after the shake out. Hopefully as Georisk suggested, those 400 million odd shares get cancelled sooner than later. Tumoltuous times ahead one way or the other.
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