Topic_ jim rickards’s outlook for gold in 2017 _ mgtow


Gold ended 2016 about 8.5% higher than it started the year and is off to a good start in 2017. Cnbc pre market futures But you wouldn’t know it from the wails and moaning of gold investors and analysts.

The reason for the gold gloom is obvious. Gbp usd exchange rate forecast Gold may have been 8.5% higher in 2016, but it ended the year 16% lower than the July 6 high of $1,366 per ounce. Gender roles in india As the saying goes, “What have you done for me lately?”

Certainly if you read the gold headlines in July, raced out and bought gold ETFs from your broker only to lose 16% since then, you’re not feeling great about gold right now.

I’m not a day trader, and I don’t have a crystal ball when it comes to short-term highs and lows. Love quotes for husband There’s no secret formula, but when the TV talking heads are trashing gold, that’s a good time to accumulate.

There has been no change in my intermediate-term forecast for gold prices, which is that gold will rise to $10,000 per ounce in stages (slowly at first and then quickly, to paraphrase Hemingway), probably in the next three–four years.

The $10,000 scenario has three possible vectors: (i) a global liquidity crisis in 2018, if not sooner, (ii) a return to a gold-based monetary system to restore confidence or, alternately, (iii) the use of the IMF’s special drawing rights (SDRs) to reliquify the system, which will be highly inflationary.

The dollar price of gold is simply the inverse of dollar strength. Exchange rate hkd usd A strong dollar implies a lower dollar price for gold. Stock market terms and meanings A weak dollar implies a higher dollar price for gold.

Fed forecasting is surprisingly easy despite the sturm und drang of the talking heads. Gold prices today per ounce It’s a matter of considering what we know, and what we don’t know, and observing the indications and warnings that presage the unknown.

This is because the Fed needs to raise rates to 3.25% before the next recession in order to cut them back to 0% when the recession hits; approximately the amount of cutting needed to pull the economy out of recession.

Simply because the Fed wants to cut rates does not mean they will. Euro pound chart The entire course of 2015 and 2016 was a case study of not being able to raise rates more despite wanting to.

There are many examples to illustrate this. Hidden messages in songs The Fed was on track to raise rates in September 2015, but did not do so because of the Chinese devaluation and US stock market correction in August.

The Fed also did not raise rates in September or November 2016 because of the US election, but that’s a one-off constraint on policy. Usd to can The Fed is highly political, protestations to the contrary notwithstanding.

So, forecasting the Fed is straightforward. Market futures oil If you do not see any of these hurdles, the Fed will raise rates every March, June, September, and December from now until the end of 2019.

That rate hike is not fully discounted in the market yet. Equity meaning in hindi The Fed’s job from now until March will be to communicate the likelihood of a rate hike through speeches, leaks, and various statements.

What about Trump? The Fed has not changed its policy bias as of now because they simply do not have enough information about Trump’s actual policies. Call and put options examples (Ignore the “dots” from the Federal Open Market Committee (FOMC) meeting in December. Eur usd chart live They are nothing more than the median of 17 blind guesses forced upon the FOMC participants).

But using causal inference (also known as Bayes Theorem), my estimate is that Fed chair Janet Yellen expects Trump policy to be stimulative because of the combination of tax cuts, reduced regulation, and higher spending on defence and critical infrastructure.

There’s also the fact that monetary policy works with a lag. Gender theory The Fed does not want to get behind the curve on inflation. Call option vs put option Yellen will lean-in against Trump stimulus with rate hikes.

There’s no evidence for a Laffer Curve effect that will make up for tax cuts with higher growth despite claims. 500 kroner to usd The most stimulative tax cut would be a reduction in social security taxes (this helps poorer people with a higher marginal propensity to consume), but that is not on the table.

Spending increases will also be held in check because the US has $20 trillion in debt and a debt-to-GDP ratio of 104%. How to convert inr to usd Congress will balk at busting budget caps.

Neo-Keynesian solutions work best, if at all, in the early stages of recovery not the late stages. Funny jokes and riddles Further deficit spending will push the US toward the same debt-deficit death spiral already achieved in Greece.

In addition to the lack of stimulus from Trump’s tax, regulatory and fiscal policies, there may be additional headwinds to growth coming from Trump’s trade and foreign policies, especially as they relate to China.

This disjunction between the Fed’s (and the market’s) view of the Trump reflation trade and the reality of little or no stimulus in the pipeline will cause a head-on collision between perception and reality.

The Fed will be late to react, but either outcome will throw the Fed off its rate hike path once again. Convert fraction to mixed number calculator The Fed will be forced to ease by forward guidance; rate cuts are still some way off.