Why Gold Will Crash to US$931 per Ounce

Have you heard the news?

Donald Trump is the official US Republican Party presidential candidate.

Whether you love or loathe him, I’m sure you can appreciate one thing: at least he isn’t in the back pocket of Goldman Sachs. Trump pays for most of his own campaign, which is great.

Trump isn’t a career politician, which is why the establishment — and mainstream media — hate him. You see, these guys don’t want change — they like things how they are.

After decades of failed policy and political corruption, with the bankers running the White House, Trump offers change. His ‘out of the box’ thinking offers new perspective.

Career politicians are seriously out of touch. The financial system is heading towards a major crash, thanks to their policies. While the majority will lose everything, you can protect yourself by buying gold stocks. Of course, it matters when you buy. And the right moment isn’t here yet.

I’ll explain…

Australian career politicians are all the same

To start, let’s talk about politics. Or should I say ‘the circus’.

According to the ABC, Bill Shorten has branded Donald Trump ‘barking mad’. He hit out at the US presidential candidate for his ‘erratic views’.

Someone has to say it: Bill Shorten should focus on Australia…and that’s it. If Trump becomes President, toughen up and work with some fresh ideas — something he wouldn’t know about.

For the record, I’m not a fan of either political party. At the end of the day, they are both the same.

‘Billion dollar Bill’ stands for more spending and higher taxes. It’s really no different to Rudd or Gillard leading the country.

Australia’s Prime Minister — and former Goldman Sachs partner — Malcolm Turnbull is no better. He wants to raise the GST by 50%, but won’t bring it to the election. No doubt this will be done on the sly, once he gets into Parliament.

Unfortunately, Australia has the most Marxist leaders in the world. Politicians will raise taxes on nearly everything they can get their hands on.

Based on historical actions, during the next financial meltdown, expect our two leaders to throw everyday Australians under the bus, at the expense of bond holders. When the economy crashes and the bond bubble pops, taxes will go through the roof. This will crash employment, sending Australia into a period of major civil unrest.

While most won’t agree, Australia desperately needs its own Trump.

Trump offers new ideas

We need someone who can challenge the establishment.

Someone who offers fresh ideas, rather than the ‘same old, same old’.

We need someone who isn’t a career politician and a Marxist. Someone who understands that cutting taxes is the way forward. According to Bloomberg,

Trump’s economic positions have been difficult to pin down, though his thinking on taxes seems to boil down to: lower is better. And he’s declared that he’ll tear up most of the Dodd-Frank Act on financial regulation that was the government’s chief answer to the 2008 crisis. Trump has announced he’ll soon put out a detailed economic plan.

It will be good to see the finer details. Lower taxes are good start. But they won’t get the economy cranking. For this to happen, taxes need to be abolished.

Kris Sayce, Port Phillip Publishing’s publisher, has often told Port Phillip Insider readers ‘taxes are theft’.

Kris is dead right. (And I’m not just saying this because he’s the boss!)

In this day and age, you don’t need taxes. Taxes are redundant and money is becoming electronic. In this case, government can just print money to pay for what it needs (i.e. health care, roads and education).

Of course, there must be a ‘printing cap’, adjusted to inflation and a percentage GDP. This would keep outlandish spending in check. Once this is done, you can cut down the size of government and eliminate the waste. In my view, there are far too many bench warmers on good salaries.

I admit, while it’s good to dream, this probably won’t happen. To start, politicians won’t give up their power easily. Instead, they’ll keep supporting the same policies — more government spending and higher taxes.

Gold is the ultimate hedge against government

It’s clear the Australian economy is declining. If business owners are hit with more taxes, they’ll have to cut wages. And, potentially, downsize their businesses to survive.

If this happens, the Australian economy will grind to a halt. Gross domestic product will crash, unemployment will jump, and deflation will rise. Meanwhile, as debt skyrockets and the budget blows out, the Australian government will have no choice but to default on their sovereign bonds.

Only at this point will the government restructure. They’ll have no other choice.

Unfortunately, it will be too late. Everyday Australians will have lost confidence in government. They’ll be buying gold — the hedge against government. I expect gold to skyrocket in the years to come. For this reason, if you own the best gold shares, you’ll outperform the market. That is, if you buy at the right time.

You might disagree. But either way, the time to buy isn’t now.

Callum Newman, Editor of Cycles, Trends and Forecasts, wrote in Money Morning on Friday:

Interest rates follow growth. As interest rates currently sit, major commercial banks actually have an incentive to borrow short to lend long back to the government. This actually inhibits credit going into the real economy.

It’s inevitable that there’ll be consistent forecasts of doom once the Fed actually does raise rates.

Obviously Callum and I disagree on some points. I argue that multiple US rate hikes are guaranteed this year. Public and private pension funds are going under across the states. If rates don’t go higher, it will be a bloodbath. I talked about this last week, here. This is one reason — of many — why I’ve warned the US Fed will raise rates next month.

The higher rates go, the higher the US dollar will fly, and the more gold will crash.

With the writing on the wall, it certainly doesn’t look good for gold bugs in the short term. In my view, gold should crash to — at least — US$931 per ounce before the bear market is over. That may not be next month, or the month after, but it’s coming soon.

Gold bugs argue every bear market rally is the start of something bigger. This time is no different. Common sense shows it still isn’t time. When the time comes, I’ll recommend the best gold stocks to Resource Speculator readers. If you buy these stocks, at the right time, you stand to make huge money in the years ahead. Until then, keep your powder dry.

If you want to know more on this story, click here.


Jason Stevenson,
Resources Analyst, Money Morning

Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

Money Morning Australia is published by Fat Tail Investment Research, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.

Money Morning Australia