A Democrat lead in the Georgia Runoffs election should be positive for gold, as more stimulus can be expected from a Democrat-controlled Senate, but instead, gold prices fell today.
The day after the Georgia runoff election gold is down 1.4% on Wednesday. Gary Wagner, editor of the gold forecast.com is here to explain why that's happening. Gary. Welcome back to the show. Happy new year it's felt like yesterday. We had the live webcast, but it's already been what, two weeks. Happy new year and what a way to start the year.
Incredible action in the markets with a $50 rise on the first trading day of the month, a small rise the other day, and then a sharp sell off today. Uh, currently down about $30 on the day. But well off the lows. So first question, Gary, why, why is gold selling up? Because the democratic candidates for the Georgia runoff election seem to be taking the lead as of now, but you know, one would expect that a democratic league would be good for gold or at least that's what I've been hearing.
So the, the question is just as perplexing as possible solutions or answers to that. First of all, you, you hit the nail on the head with the opportunity for there to be a Congress, the Senate, and an administration that are all democratic, you would think on the surface, that would be extremely bullish for gold, but yet we're seeing the opposite action.
And so that. Perplexes me in a lot of ways. The other thing is we continue to see a run up in Bitcoin and us equities are just raging. I think the Dow was up about what 500 points today. I believe that the Dow had a lot to do putting a risk on market environment and taking away that safe Haven, uh, asset sentiment.
And that's one of the reasons I think we saw such a. Uh, a brisk sell-off. The other reason is when you consider them the market has run from about 1750, run up about a hundred, $120. This seemed to be a good opportunity for large players to pull profits and move them into us equities, which are at all-time record highs again.
Yeah. Gold has pulled up today from its lows around 12:00 PM. Eastern time. Concurrent with. The moves in the dollar that we've seen. So dollar the dollar has risen and now fallen off. So inverse correlation there what's been driving the dollar up today. I think what's been driving the dollar up is AA strong stock market.
And the belief that now that there has been a viable vaccine that is being distributed through the United States, there's that renewed optimism that there is a conclusion to the pandemic. Now there's some glitches there because there's new variants that are coming out. There are supply chain issues in getting the vaccine.
Globally to all of its citizens. And currently I believe their best estimate is around April, but nonetheless, we started this year off with the assumption that at some point, whether it's middle of the year, uh, a third, the way through the year, We will have herd immunity because the majority of global citizens will have taken the vaccine.
And that is the kind of optimism that would really make that happen. The second thing is we did get another round of fiscal stimulus and that means more money for American suspend. And that's going to have that kind of effect. Yeah. Are you sure this optimism is still related to the vaccine, Gary? I mean the, the, I, I'm not really feeling the optimism where I live in Canada, where we're still in lockdown.
The UK just went back into full lockdown. COVID cases are rising in the U S and major cities. It doesn't look great right now, Gary. It just, the vaccine is, you know, it's been introduced, but it hasn't been rolled out to the masses yet. It's still, it's still a long way off. I just don't feel the optimism right now.
Well, see you're, you're, you're absolutely correct in that assumption. And we feel the same way in Hawaii right now, the only individuals who have gotten the vaccine are first responders and healthcare workers. The next tier that will take a couple of months are going to be, uh, Very senior citizens living in assisted living homes and senior to homes.
But at the same time to the common man to someone like you or myself or our viewers, the vaccine still seems far away. And in terms of lockdowns, we never left the lockdown. And there are certain areas in the world that are getting much worse rather than getting better. So you have a mix, one mixes there's optimism that there's a solution.
But the reality reality of it is that solution is going to take some time to work itself through the supply chain and get to the people that needed it. I asked this question to another guest the other day, and that is let's suppose tomorrow, the vaccine were to be distributed to everybody. And let's assume that everybody in the world is now immune to COVID.
So if COVID is out of the equation, how quickly or at all, could the economy recover from its current comatose state? I mean, it's already been a little bit better than last year, but still millions, still unemployed supply chain disrupted. It's not going to have the recovery won't happen overnight. Right?
Gary? Not only that, but you have to realize that let's assume that tomorrow the pandemic was over. We had herd immunity, nobody was getting sick. We have not even begun to deal with the economic fallout. That's going to follow the end of the pandemic. Uh, the U S treasury department in two rounds of fiscal stimulus, uh, 3 trillion plus almost the Trone call it 4 trillion.
Those are real debt dollars. In other words, when the federal reserve adds to their asset sheet, they're adding to the pool of liquidity, but they are not doing what the treasury is doing, which is printing money. With no basis. And what does that do? Obviously, if you have a supply and demand scenario and you increase the supply, the price has to go down.
So what we're going to see in terms of the economic fall, fall out, I believe. Is some tremendous downside in the value of the U S dollar and that's something we haven't even begun to tackle. The second issue that you brought up is true. Granted, once everything is done, there's still millions of Americans out of work, millions of Canadians out of work globally.
We have a high unemployment rate. The sad fact is that many corporations have learned to readjust to this new normal so to speak. And so I don't think that all of the jobs that were available and active pre pandemic days are going to be around post pandemic days. In other words, companies have learned to streamline.
So you're not going to see that kind of a pickup. Lastly, there are going to be certain. Areas in, uh, whether it's the travel industry or for example, movies in theaters, bowling alleys areas where there's a large congregation, even when the pandemic has ended, I believe there's still going to be a lingering.
Effect in which people are reluctant to get on a plane. They're reluctant to travel. They're reluctant to hang out in large crowds because we've lived with the isolation for so long. It's not like a switch that we can simply turn off. So I think that those combination of factors are going to make the end of the pin debt, the pandemic, and incredible, an incredible feat for mankind, but it will certainly not be the end.
Of the pain. Yeah. You brought up a key point going back to what you said, their decline in the U S dollar. Now, as we've seen today and yesterday, the U S dollar has been correlated with stock movements. Do you think a fall in the us dollar is going to be, uh, mirrored by a correction in the us equities market?
Scary. Well, you've got an interesting double-edged sword there. Also think of it this way. The U S equities markets are not. Purchased only by us citizens. It's a global commodity, a global entity. So as the dollar loses value, uh, Europeans, where they've got a currency, that's gaining value against the dollar, gets a bigger bang for the buck when they go into the U S markets.
So a lower dollar. Means more to us here in America than it does for the rest of world, because the rest of the world that is a huge buying opportunity to be involved in some of these high tech companies at a greatly reduced discounted price due to dollar week. But Gary, if I know the dollar is going to weekend as a foreign investor, wouldn't I sell my U S holdings now, because I know my holding as well will dissipate in value over time, just because of a weakening dollar, right.
Well, you're absolutely correct. But what I'm talking about, if you're sitting with U S dollars and the dollar is going down, when you put them into the us equity market, the equity, the company itself is growing and gaining value that should more than compensate for the fall in the dollar. Sure. Okay. I thought I, that some people ask me this privately is, Hey, should I, should I be, should I be getting out of the markets now waiting for things to recover, settle down a bit and then get back in, uh, maybe a price correction is all the way for all sorts of markets.
What do you think, Gary? I can only tell you from my personal experience today, you had the thanks socks get hammered. Um, I've been aggressive with Tessa once again. I am also looking at the Greystone trust as a way for. An individual investor like myself, that is a novice in terms of understanding cryptocurrencies and Bitcoin, to be able to take part in that incredible price rise that has occurred over the last couple of weeks.
The other thing, and it might sound odd, but it is true. Is there has been tremendous growth in the cannabis stocks. They have been moving up in 10 and 15% daily, uh, gains over this last week. So there are sectors within us equities right now that are doing exceptionally well. There are others that will continue to falter.
And when I think about the hotels and the transportation industry and things that truly were devastated, uh, by the pandemic, those are the ones you might want to stay away from. I know I was watching a financial news network about a week ago, and they were talking about the place to go back into the cruise lines.
And I thought to myself who the heck wants to get on a ship right now locked in with, you know, 2000 people. To me, it seems a little dangerous and careless, so to speak. And so I don't see. A great advantage, except that it's a stock that was more expensive is now cheaper. That doesn't mean that we'll get, um, it won't get less expensive later on.
So I believe that there are certain sectors. Within the U S equities markets. My mentor taught me that we, we don't participate in a stock market. Rather. We participate in a market of stocks and that's always stuck with me. So there's always going to be opportunity there. If you simply know where to look and feel, what does that mean to be pitfalls market of stocks?
What does that mean? Market of stocks? What it means is that where a lot of times people are concerned about how the Dow did, how the standard and poor pours $500 is performing, how the NASDAQ composite is performing. That's an index of multiple stocks, and it is more important in terms of stock selection that you look at individual companies.
What they do. And the potential for growth in that particular sector or company take, for example, zoom, zoom has grown by tremendous percentage points because we live in a new normal, and that new normal is working from home. So you have a scenario where they were uniquely positioned pre pandemic days to do exceptionally well.
When the pandemic, uh, became a part of normal life. Yeah. Okay. Let's go back to gold. Now tell us about the trades you made. Since last we spoke, you've had some, uh, you've had some stops. You've had some, uh, entry points. Yeah. The last trade that we put on was put on, on December 17th. I remember it was a Sunday and the market had traded.
Roughly to about 1885. I started seeing it move up and I felt this was a real good opportunity. So we entered the trade originally at 1890, of course, for the next four to five trading days, we were under pressure by about $10. Then when the market moved tremendously higher, which was the other day and it moved up $50.
The day before that I moved our SOPs too. 19. Oh two zero, zero. And when I woke up this morning and I looked at the load today, which was 1902 60, I thought, God, I am a broken clock. I am right. At least twice a day. In other words, we're not out of the woods yet. We're sitting at 1921. But I feel a lot more comfortable being long from 1890 with the market trading at 1921.
Then when it was sitting at 1902 60. So we got fortunate in that we were not stopped out of that trade. We're also in silver. We have nice profit there, but my longterm moves that I really believe. Are important for all investors to, to look at in terms of a rebalance of a portfolio are GLD and SLV, because I believe because of the lack of leverage, meaning when you purchase share of the, I share silver it's value as one ounce with the gold trust, one 10th of announce.
The moves are significant over time, but without having the leverage, you don't have the, uh, that increased volatility that tends to keep most investors and traders up at night. So I like, uh, GLD and SLV right now. Perfect. You have an interesting chart that you've prepared. Bitcoin gold with that one is that by far is one of the more interesting ones.
And as well, let me go ahead and pull this one up here. Yeah. So you and I talked a little bit about offline, so let me just set this up for the audience. So the green chart here, there, the green line, rather on the chart. Is Bitcoin. And the one at the top is gold and well, the charts speak for themselves.
Bitcoin has risen exponentially while gold has also gone up at a, obviously not with the same magnitude. So if I understand correctly, what you're saying is some of Gold's a lackluster behavior, should I say over the last couple of months has been due to the rise in Bitcoin? Well, what I am saying is that there absolutely.
Is a limited pool of investment dollars. That's the whole idea behind liquidity theory and liquidity 30 basically speaks about the fact that investors want to put their money where they think they'll get the best return. When you look at the. Parabolic rise that we have seen for the last two months in Bitcoin.
I mean, it was trading at 10,000 back in September and is now at 35,000. And then when you look at that, that same move, let me try to draw a line straight up here. When you look at the same kind of time period here, we were sitting at about call it 1913, 1940. It hit that top, went down to just about 1790 and then started to move back up.
So we've really had this even. Scaling it so that we're smoothing the structure. We certainly can't see a defined parabolic rise. We can't even see a consistent rise in the market. Now it has gained, but what we're witnessing in Bitcoin of course, is an a historical. Historical event that no one's ever seen.
I've heard this argument before that Bitcoin has stolen. Gold's thunder. So my question is, if you look at, if you look at this chart that Bitcoin has gone up and gold has gone down. Okay, well, th the same, I guess the same logical argument could be applied to the S and P 500, right? The stock market, the stock market has also gone up.
Couldn't you argue that gold has gone down because people have placed their money in equities. Why, why in particular, do we have to, uh, Do we have to, uh, say that people, the gold investors took money out and put it into Bitcoin, simply put the re potential return. And the actual return that we've been seeing in Bitcoin is unprecedented where you're seeing 10 and 15% moves almost on a daily basis.
But I have to put a huge caveat to looking at this chart, especially when we consider what Bitcoin is doing now and what it could be doing later. Because the one thing that I have learned over time is any time you have a market that has say that straight parabolic rise up. What do you typically get?
You get a parabolic fall. And so at some point, and I don't know when that will be, but at some point when this market does correct, it's going to be a massive, massive liquidation. And again, Bitcoin is not something you can, okay. I'll take delivery of those Bitcoins and I'll store them not on the CME and not, uh, when you work with the trust, you can of course, with the cash market, but storing them is simply storing digital numbers in a wallet.
So it doesn't have that same sense or feel of having a hard asset behind it. So the, the thing about Bitcoin is. For example with me, I have approximately 6% of my overall portfolio exposed into other Graystone trusts, a very, very small percentage it's doing well, but I also recognize that at any point, that profit could evaporate overnight.
Here's my question about Bitcoin that I don't understand. If you take a look at Bitcoin's chart, the price today is at the highest level it's ever been, which means that at any point, if you have bought Bitcoin at any point in its history, you would have made money today. Why are people not taking profits?
Why is it still, why is demand still pushing the price up? Well, there, that's an easy answer. Greed. The reason they're not taking profits, as they believe it will be much higher tomorrow, if you truly believe that we were at some sort of a top. And of course the excellent point that you've just made is when you're in record territory, there's very few ways to project where a top will come in.
And it seems as though. The popularity of Bitcoin is growing. Not as much with the individuals, although it is, but with the institutional players, the fact that PayPal is accepting Bitcoin as a viable means of buying and selling stuff. And you're getting acceptance where hedge funds money managers are all including Bitcoin as a part of their portfolio.
That's going to maintain a certain level of demand that quite frankly, you didn't get a year ago because a year ago, the only players in Bitcoin were individual speculators. There were very, very few large hedge funds or money managers that were putting a lot of money behind Bitcoin. There were a few and they were ahead of the curve.
Yeah, but the bottom line is when you're in uncharted territory, it's very difficult to predict where the top will be, what will cause the top is a fairly easy prediction. And that is that at some point, the money managers or the hedge funds that have accumulated this will begin to liquidate. And when they do that's, when you'll see.
The actual price of Bitcoin come down because they're holding such a large percentage. Yeah. Especially if you're, if you're talking about institutional money coming in these fund managers probably have a mandate to allocate only a certain percent of their portfolio into certain assets. And so if that asset allocation exceeds a weighting that they're limited to, they have to, they have to rotate money out of that asset into something else.
Right. That's right. The other thing is. Originally, when I got in the industry, I developed a software application for candlestick recognition. My partner, his name is Brad Matheeney is now a, a systems programmer for some of the larger hedge funds. So he creates, I guess they're called robots, but he creates the automated trading systems.
Now what he told me, amazed me. And he said that a system can not have a drawdown. Of more than two and a half to 5% before it is not a viable investment vehicle for a large institutional investor. So that means that if you start to get a drop in price, some of the big money is going to pull out rather quickly because it doesn't meet their, their parameters of the risk reward behind the trade.
Okay, so final question then, would you be selling your gold right now and buying Bitcoin, let's say an equal amount of money if you were to sell, I'm not, I'm not saying put more money into the market. Let's just take, I don't know, a thousand dollars of global just sell a thousand dollars of gold right now and buy a thousand dollars worth of big.
No, I would keep the thousand dollars worth of gold and I would additionally buy Bitcoin. Interesting. Right. I believe there's room for both. That's the whole thing. Okay, Gary, thank you for coming on and for giving your update, happy, start to the year and a successful trading. We'll catch up with you again soon.
Thanks. And one thing before I go for those that are really interested in Bitcoin, uh, Joseph, which of course he's my son. So it's a, it's a, it's a shameless plug, but he has been doing a Bitcoin minute or a review that is available to our premium members, but also available to anyone who wants to take a look at it.
It's at the gold forecast.com. He does a daily blog. I believe he went long Bitcoin at 2190. 21,900 and he's been raising the stop. He's been really, really good with predicting Bitcoin. Fantastic. All right. Well, happy to get to, happy to get more of your thoughts on Bitcoin next time. Thank you, Gary. My pleasure as always thank you for watching.
I'm David Linn. Stay tuned. .