Even though a bear case for gold is unlikely to happen, investors should not be sailing with their eyes closed and ignore the possibility of a pivot in fiscal and monetary policies, which would drag gold prices down, said Lobo Tiggre of the Independent Speculator. “It’s not something that keeps me up at night. It is something worth thinking about,” Tiggre said. “Here’s the scary thing, [gold] could go quite low. If you look at the big correction in the middle of the 1970s bull market, that was on the order of 50%.”
Is gold headed for a straight line upwards? Well, here are all the possible scenarios in which this bull case may not hold Lobo Tiggre of the independent speculator is back and he is talking to us about a potential bear case for gold. Low about welcome back. You and I have spoken several times before, and I remember asking you this question.
What could possibly drive gold lower. And that's the focus of our discussions that you're going to elaborate on that question now, before we continue, I'd just like to preface this by saying you're not, you're not actually recommending people to sell, are you okay? No, not at all. Uh, it's funny that you bring it up because we've, we've brought this into our conversation several times over recent months.
And when we talk, when gold was above 2000, I, as I always do, I look at the upside and the downside. I want to have a balanced view and point a, we get hate mail. People were like, does idiot. He's talking about selling gold when it's at 2000. Well, you know what? It's not a 2000 anymore. And I wasn't talking about selling gold.
I was talking about, um, maybe some profit taking or at the very least locking in your profits. I have a strategy. I call the upside maximizer free report on my website for anybody interested, but the point wasn't sell gold or term bearish gold, the point was don't close your eyes. Look at the data, see what's happening now.
And that's, um, given your prompting in our last interview, what I want to talk about today, right? Let's let's set us up here. What's your, uh, what's the thesis for your, for your bear case? Right. So the core idea here is something that came to my mind when you asked about it last time. And that is, we were actually talking about the vaccine and the virus news and how, you know, that seemed the good news.
There seemed to be a headwind for gold. And I was arguing that really the vaccine was as irrelevant gold was on an upward path before anybody even heard of COVID-19. And you know, that. That coming and going of that tailwind really was just a distraction, but it occurred to me that there's more to it than that.
And so that thesis is that's still true. And if you look at a chart of gold prices in recent years, specifically since the power pivot, because I do see this as a monetary phenomenon. So you look at the gold since late 2018. And it's been a volatile, upward climb, but it's actually been a pretty straight line.
And then in 2020, you see this big bump above the line, uh, clearly a response to the COVID situation. Uh, but the line is there anyway. And if you follow that line, you just lop off that COVID lump. We would still be at gold prices near where we are today. We wouldn't have reached $2,000 announced yet, but we would be headed in that direction without COVID-19.
So here's, what's different. COVID-19 did happen and brought on easier money, faster. Like the fed was already rethinking raising interest rates before COVID-19, but then COVID hits and boom, right there. Brace goes straight to zero. They don't work their way down. They just go off a cliff. And then of course, Congress steps in with fiscal stimulus, um, free money and gold response, you know, responds with Gusto.
So. Gold was on its way upward anyway, without COVID-19. But the response, the government response to COVID-19 brought forward a lot of the monetary and fiscal policy that we might've been looking for to take place over the next few years, even. I mean, we're talking trillions already, maybe trillions more before this month is out and that would have happened anyway, I think over time, but it happened all in 2020.
So if you brought all that gold, uh, pro gold. Uh, factor forward monetary and fiscal policy forward. What happens afterwards? Right? That's the bare case. So if a lot of the bull factors for gold were brought forward, we could potentially see gold lag for some months, maybe even years, if it, if it takes that long for a monetary and fiscal policy to take off again, postcode, I'm not sure I follow local.
Are you saying that the, uh, factors driving gold up. This year we're too artificial. The, the, the, the run-up was too quick. It happened too quickly. Yes, yes. Like that, that bump on that chart. Okay. The multi-year trend was artificial and, and this is real and it's relevant right now, right now, as you and I are speaking, uh, the U S uh, uh, Congress is working towards this compromise bill we're looking at plus or minus a trillion dollars in new stimulus.
And that really made gold put a U-turn and come back up again, heading back towards 1900 as you and I speak. Yeah. Okay. It was not the case before the stimulus. So you can see the response to government policy in the gold price. What's wrong with artificial stimulus though? What's I mean, that's the core, that's the core argument behind NMT.
Isn't it? You get artificial stimulus. But investors don't care. They're there. They're seeing gains. The gains are real. It doesn't matter if the stimulus is artificial with the drivers, you know, the bank account up, you know, that's real. No, I, I wouldn't argue as, as a person who speculates on gold related, uh, equities, uh, there's nothing wrong at all.
You know, bring on more artificial stimulus, gold prices go nuts higher. I'll make a bunch of money. Um, as a person who lives in these United States, I think that's disastrous economic policy and it will have all kinds of negative fallout down there on so as a human being, I think it's the wrong thing to do as a gold speculator.
Uh, I think it's, it's very good news, but sorry, just real quick. What's wrong with it though, for us is specifically to this bear case I'm making is that it brings forward more wrong policy. That might've happened over the next few years. If that's been all crammed into 2020, we might see less artificial.
Uh, stimulus going forward and that could be a real headwind for gold. Yeah, that was my next question you wrote in an op-ed that you think I'm just going to quote this here. A major reversal of monetary and fiscal policy of post COVID pivot would be barest for monetary metals possibly for years. How likely is this pivot?
How likely is this reversal of monetary and fiscal policies? Well, it still may depend on the outcome of the elections in the U S and particularly what happens with the Senate and whether the Senate can be a break on the, uh, uh, presumed Biden Harris administration. And that does usually politics is kind of, you know, uh, either side bothers me.
I don't like either, either party, but in this case, I do think it makes a, a potentially very. Large difference to investors, how that plays out in the weeks ahead. Um, but to your question, if, um, you know, as the perception that, you know, COVID has been defeated as happy, happy, joy, joy, again, I think we can expect a great deal of pent up demand for travel holidays.
You know, other things that have been put on hold all year in 2020 to come forward. So you could see a real surge in measurable economic activity that could make everybody think, Oh, things are great. We've we've beaten the virus. Oh, and this is sarcasm for the sarcasm impaired out there. Ooh, we'd beaten the virus.
So, um, it's time to go out and spend tons of money if. The public reacts in this way, their public servants may say, Oh, well, we don't need any more, uh, a commodity to monetary policy. We don't need any more fiscal stimulus because economy recovered. We're doing great. So you could see that pivot. I'm not predicting this.
I'm not saying this will happen. I'm defining my bare case. If the post COVID rebound is so sharp and everything looks so rosy. You know, w why would the, why would you need to keep, uh, the easy money spigots, uh, stuck on the, on position? Okay. Uh, you've also mentioned something important in your op-ed, which has real interest rates.
Again, an important driver for gold. You wrote that a real interest rates are likely to stay low. Which is seriously going to, uh, hamper the possibility of this bear case from coming into fruition. Why would real interest rates stay low? If you're talking about an economic recovery, why wouldn't rates go up again, going back to this pivot?
Sure. Uh, they could, I think Congress is more likely to pivot than the fed or at least faster. The fed should be the more level headed or steady as she goes. And the fed has signaled, you know, we're not even thinking about thinking about raising rates for a long time. And they have repeatedly said, you know, probably not for years.
So if suddenly the fed starts saying, Oh, you know what, you know, mid 20, 21, maybe we should start thinking about raising or thinking about thinking about raising rates. I think that sends a very scary signal. I think that they would be concerned about torpedoing the recovery of themselves. So I think it's very unlikely that the fed would move too quickly to raise rates.
Now Congress is another thing they could just, you know, there's already disagreement in that house or those houses about how to proceed. So if the perception is, Oh, we beat COVID, we don't need any more free handouts and easy money. I could see the Congress, uh, closing those bigots more quickly, but I don't expect that from the fed, I guess depends how you measure real interest rates, what you put into that measurement.
Right? Because I, I correct me if I'm wrong global, but I don't think the bond markets really need the federal reserve to raise the fed funds rate. I mean the long end of the 10 year, 30 year treasury curve, that could go up. If the economy is anticipated to improve. All right. Sure. And I've been thinking about that too.
And if, you know, if the fed leaves rates the same, however, an inflation does start kicking up, then real rates will be dropping. And so you could even say that the fed should then be prompted to raise rates, to keep, you know, real rates at a more steady level. And that, you know, would be interesting if they were to do that.
Uh, but my, these, this again is just that I think that would send all the wrong signals. They would be very cautious. About changing their tone. I'm not saying it won't happen. I'm just saying, I don't think it will happen quick. I think we'll be late 20, 21 before they change what they're thinking about.
Thinking about, let, let me give you my, my bear case. Let's see if you agree with me. I have to actually just to add to what you're saying, the first one is that, um, going by your, your judgment on the economic recovery, let's say we do see an improvement next year. People will be flocking to. Industrial metals.
So platinum, copper, silver as well. If you want to consider a silver and industrial metal and, uh, that capital flowing into those metals will take money out of gold. Do you see that happening? No, I do see the, I do see the entry increased interest in industrial metals. In fact, we're seeing that already.
Like I'm, I'm concerned about shutdowns this winter whacking industrial metals. And that's why I haven't gone in that space, but the prices are going, I mean, we've seen seven year highs and copper and iron, you know, zinc is doing great again this year, sweet as a whole, not without exceptions, but the suite is a whole of industrial minerals is headed upwards again.
And you know, that's really interesting, but here's the thing. Overall, if you look at the big picture, even though we like to, we go bugs. Uh, like to think of the monetary metals as being different from other commodities, they do tend to correlate most of the time. In fact, the correlations are very high. If you look at the big picture on the order of 80 90%.
So an overall bull turn in the commodity Supercycle is actually bullish for gold and silver, as well as other metals, they do tend generally to move together. And it makes sense. I mean, if you've got the economy booming, inflation, rising, Uh, people got more money in their pockets. Certainly people in China, in India who have more money in their pockets, we'll buy more gold.
Uh, we're going to talk about the, uh, the commodity Supercycle and just a bit, my second bear case goes back to your, uh, thesis about vaccines not being relevant. Well, I let, let me, let me, um, pause it a counter argument to that. As we've seen in November, several times when Pfizer Moderna have announced their vaccines being effective, the market will the in particularly the gold market really didn't like that news.
Uh, so I understand where you're coming from, the sense that they're the bigger macro drivers for gold are still relevant, even without a vaccine being prevalent. But as we've seen in the last month, the vaccine news are they're, they're, they're real in terms of their effects on gold prices, even for a day or two.
Yes. I don't disagree with that at all. I would say two things. One is the fact that something is a mistake, a delusion doesn't mean it can't be a very popular delusion and that has an impact on prices. But remember that, that at least my thesis is. And if you go to that chart, I think the data backs it up, right.
Is that bump that COVID bump on top of an underlying trend was a tailwind. The disappearance of a tailwind can feel like a headwind for awhile. It might look like it for awhile, but as long as the fundamentals don't change, it really is a distraction. And the other thing is, is how much, how much vaccine news can there be?
Right? We've got three of them now, 90% fuss effectiveness and all this stuff. And please don't send me hate mail about the medical facts here. I'm not a doctrine. I'm not talking about the medical facts. I thought you were terrible as, as an investor, right? I'm saying, look at this news and the impact, just as you're saying, Dave, look at the news and its impact.
You know, how many more great vaccines can we have? How many need do we need before? You know, it becomes ho-hum. I suspect that a lot of the, um, a lot of things, the body blows from the vaccine news. I think we've, we've. We felt those already. I doubt, you know, a fourth or fifth or a 10th vaccine will really change much.
Okay. Let's talk about the first chart again. You mentioned a commodity Supercycle. So let me, let me ask you this. How do we not have COVID this year? Where do you think gold would have ended up given where it was already in this Supercycle? Well, according to that chart, we'd be looking at about 1900 now.
So not too far from where we are, actually, the chart is a few days old were seeing COVID had only a hundred dollar impact on gold. Well, no, because at the time we were lower down, so it was like a $200 impact. Perhaps I don't have that off the top of my head, but we're starting at a lower point earlier this year.
Yeah, it just seems to me like, you feel like that COVID really didn't really matter that much for goals. Well, but it didn't, but it did in the sense that it did take going to a new nominal all time high. Like I think that the trend was there anyway, but when you have that kind of headline, when you have.
Uh, you know, mainstream analysts, you've got bank of America and even the wrong way, Corgan's at Goldman Sachs, suddenly liking gold, you know, that does impact the investment environment and it impacts demand. Uh, and then on top of that, you've got, uh, you know, the, the big move from Berkshire Hathaway don't want to get distracted, you know, on that.
Uh, and I don't think by the way that that was moved by all time, highs in gold, I think that was just somebody in Berkshire, not Warren. Saying, Hey, this business is making money and it's relatively on sale offline. You're giving me another bear case, which is the possibility of central bank selling. Can you walk us through that?
Well, first of all, central banks have not really been actively buying this year except for a few. And, uh, that hasn't really had much of a negative impact on gold. So walk us through why this is relevant. Well, I, I don't know where this is really coming from. I suspect some. One of my peers, my esteem peers wrote an article that scared a lot of investors.
And so I've had questions about it. It's not my, uh, it's not my thesis, but there's somebody out there who's saying that particularly countries like Russia that have been accumulating gold as they feel the squeeze of sanctions. And so on that they might start selling gold and a substantial gold holder like Russia.
If they were to liquidate a fair amount of their gold holdings. Uh, you know, just for budget reasons, same way anybody else would dip into their savings could be very bearish for gold. It could, uh, provide another headwind. Uh, I, I'm not convinced that this will happen. I suspect that they have very good reasons to want to hold on to that for the future.
And even if it does one, these are transient things. And two in the past, we've seen cases like this where. You know, people were really panicking about it. I remember the IMF about 15 years ago was going to sell 400 tons of gold and people say, ah, this is it. It's the end. It's going to crash everything. It was a total non event.
The market swallowed it up almost whole. Um, so. I think the overall trend is actually still the central bankers are more buyers than sellers. They haven't been grouping. And if they, if they did, uh, I think that would signal a big change that we haven't seen yet. Okay. Yeah. I, I, I don't even know how much, uh, whether or not their holdings, the central bank holdings will be sufficient to move the markets.
Let's let's let's suppose every central bank in the world, what to dump their gold to zero. Would that have a significant market impact? Yes, I think it would, there is at least supposedly I do think that the Russians have probably the gold date. They say they have the Chinese probably have a lot more gold than they say they have.
You know, the big question Mark is, does the U S actually have any of the gold? They say they have it Fort Knox. They won't let anybody look. They won't audit it. They say it's unimportant. We only have it for traditional reasons. Okay. Um, but you know what, in recent times, Canada went to zero. Go figure right.
That had no or no lasting. Yeah. Tying this all together now, Lobo, I know you hate giving forecast, but I'm going to ask you anyway. Suppose his bear case were to happen. Well, first of all, two-part question. What is the likelihood, the estimated likelihood of such a bear case from happening and should it happen?
How low could go get, right. Okay. So part one you're right. I don't like putting a number on something like that, but. I think it's an important enough. It's significant enough. The odds are good enough that this is worth talking about. It's certainly worth thinking about preparing for, in case it happens. I wouldn't give it 50 50, probably not even 40, 60.
I don't think it's likely. I do think the monetary and fiscal writing is on the wall. Everybody sees it and we're likely to see more stimulus, not less. And that's very bullish. Um, But this pull forward could, could really affect things next year. And, and we just can't risk ignoring that. Is it more than 10%?
Probably more than 20%. Not sure. More than 20, less than 40 somewhere in there. I think it's a real, real shot, but it's not something that keeps me up at night. It is something I think is worth thinking. So question number two, how low could it go? Uh, here's the scary thing is it could go quite low. If you look at the big correction in the middle of the 1970s bull market, that was on the order of 50%.
If you look at the big correction, if you want to call it that the bear market that we suffered since 2011, that was on the order of 50%, not quite. So if you had a multi-year bear, uh, you know, uh, a 50% retracement could take us all the way down to one K plus school. I do not expect this. I'm not forecasting that no, I just it's.
It's um, irresponsible to ignore the possibility. I think a more likely correction easily down to 17, 1600. I think maybe the 1500 level is a more like if, if the ball really sets in, I think 1500 is. That plus or minus a hundred bucks, the kind of range I would expect a serious correction to take us to.
Well, final question. I know you're actually more bullish. Long-term this is just a scenario looking at, but as a gold bug, a self proclaimed gold bug, why would you even bother looking at a bear case? What's in it for you? Well, you don't want to be dogmatic. You don't want to be so convinced you're right.
That you ignore data that says you might be wrong. And I think this data of fiscal and monetary policy having been pulled forward into 2020, I think that's real. I think it's pertinent, especially for people who see golden silver as monetary metals. This is monetary policy. It is relevant and it has been accelerated and exaggerated in 2020.
And that matters. You just, you can't sail a ship with your eyes closed. You have to look at the changing weather conditions whatever's happening. You have to look at the data. No, I'm not a bear. I'm just saying I don't want to be a blind bull. And if things turn South, they could turn South sharply strongly.
And therefore, please, please, please. You know, don't leave all your risk on don't. Don't assume I can never be wrong. We many of us thought that in 2011, right? All the fundamentals running aside, it's got to keep going up. Well, guess what it didn't that that happened again. And, you know, please, if you don't use my upside maximizer strategy, do your own version of taking profits judiciously.
Don't sell all your gold, but make sure that your big wins that you've had this year do not slip through your fingers. Okay, Lobo. Thanks for that. And, uh, I look forward to following up with you. You too, David. Thanks. Thank you for watching. I'm David Lynn.