Gold Price to Make a Parabolic Move? Highest Probability of a ‘Melt-Up’ Since 1980s – Jared Dillian

what we saw over the weekend when Iran attacked Israel was that Bitcoin actually went down I don't consider Bitcoin to be a store of value if we are in a period of time with geopolitical turmoil then I think gold should vastly outperform Bitcoin we are spending 1.1 trillion a year on interest payments and the only solution is for the Federal Reserve to cap the yield curve do yield curve control if you want to call it and directly monetize the debt and that is how gold gets that parabolic [Music] move hello I'm Michelle mccy thank you for joining us gold has been hitting new all-time highs recently topping $2,400 an ounce escalating Middle East tensions are now feeling safe haven buying along with other Tailwinds like record purchases by central banks and concerns over inflation soaring US Government debt and feat debasement and now some of the biggest banks are updating their for costs raising their gold price Outlook by 40% City group is now calling for a $33,000 gold price over the next 6 to 18 months Goldman is saying that gold is in an unshakable bull market revising its yearend forecast to 2,700 $100 an ounce and UBS is now calling for a $2500 Target well my next guest says that gold has the highest probability of a melt up since the early 1980s and that the precious metal will outperform Bitcoin this year Jared Dylan is a partner at Jared Dylan money and the host of the Jared Dylan show he also works as an investment strategist at molden economics Jared is the editor of the daily dirtnap a daily Market newsletter for investors that has been running since 2008 and prior to This Jared worked at Leman Brothers heading the ETF trading division there in 2005 and Jared of course is also a best-selling author his latest book is no worries how to live a stress free financial life Jared welcome to Kito good to have you with us thanks it's great to be here well Jared I really enjoyed your book and seems we share similar philosophies regarding money and happiness in fact you made me feel pretty good about splurging on small things like my daily Starbucks coffee we'll get into that later on in the show but seeing as in your book you say that the chair of the Federal Reserve is the most powerful person in the country and not the president let's first get your thoughts on what we just heard from fed CH Jerome Powell and Powell's saying that the US economy while otherwise strong has not seen inflation come back to the Central Bank schoal of 2% pointing to the further unlikelihood that interest rate cuts are in the offing anytime soon pal saying more recent data show solid growth and continued strengthen the labor market but also a lack of further progress so far this year on returning to our 2% inflation goal Nepal was speaking to a policy Forum focused on US Canada relations and he said that while inflation continues to make its way lower it hasn't moved quickly enough and the current state of policy should remain intact quoting him here again the recent data have clearly not given us greater confidence and instead indicate that it's likely to take longer than expected to achieve that confidence and that we think policy is well positioned to handle the risks that we Face adding that until inflation shows more progress we can maintain the current level of restriction for as long as needed so what's your read Jared on what we just heard from pal I think that's pretty rational um you know inflation actually bottomed about 8 months ago and it's been going higher ever since um you know the last reading was higher than expected uh came in at 3.5% on the headline and you know like I said this is pretty rational inflation isn't going away and you know if you go back about six months ago we did have a period of weakness in the data which is what inspired fed Governor Christopher Waller to give his speech uh where he was saying that that monetary policy was restrictive you know this is back when real rates were about 3% but inflation has come up now and real rates were only about 2% and you know you can make the argument that policy isn't restrictive anymore so the one thing I would point out here is that the bond market is looking kind of interesting you know rates have come up a lot um rates on two-year notes are getting to close to 5% and we have these geopolitical risks um you know specifically pertaining to uh Iran and Israel and there I I just think there's a lot of this is a very asymmetrical sort of environment where you know we could the economy could sort of truck along for a while but if we had you know a regional war or something bigger in the Middle East you would probably see rate Cuts pretty fast so 5% on two-year notes actually looks pretty attractive to me okay so with the exception of Middle East War breaking out and escalating to a higher level you think that the FED is going to stay steady what's your outlook in terms of fed Cuts then well you know if you go back to I think about December we were pricing in a ridiculous amount of rate Cuts we were pricing in six to eight cuts and now the probability of a June cut is down to about 20% I mean if things stayed the way they are right now um then you might make the assumption that we're not going to have any rate Cuts before the election I do think we will have one rate cup before the election probably right before the election itself as political a move as that would be deemed to be considering that the FED is supposed to be apolitical I mean surely that's going to come with a lot of push back saying that the FED is playing into the Biden administration's hands if they cut right before the elections uh you know the FED is look I have um met some fed officials over the years and I've of learned a little bit about how uh the Central Bank operates and the FED is not immune to politics they're not impervious to politics uh in fact they're a lot more political than people give them credit for so I I do think one rate cut before the election is super possible so right what about a Fed hike because UBS is now saying that there's a real risk of the FED hiking rates to 6 and a half% next year uh there's a few murmur that we could actually even see a Fed hike perhaps not in 2024 but in the beginning of 2025 any thoughts on that uh I think that's entirely possible if um you know we continue on the current trajectory for inflation especially if oil prices go up um you know if we do have a war you're going to have infl are pressures globally uh you could see oil get to 9095 $100 a barrel uh I think in that case you probably would see rate hikes but um it's kind of hard to see out to 2025 there's a lot of things that can happen there's an election there's geopolitical stuff uh I think we get to focus on the next six months yeah fair enough too many known unknowns and too many unknown unknowns so Jared do you say that gold though has the highest probability of a melt up since the early 1980s in your newsletter you break this down saying that Commodities crash up and it's quite possible that there'll be a parabolic move in gold and in other Commodities break that down for us well I actually asked this on Twitter sort of rhetorically I said what if um what if gold does what Coco did you know Coco went from 2,000 to 10,000 in the span of a couple couple of months you know you get squeezes higher in Commodities gold broke out of a 13-year consolidation and what's interesting to me is you know you mentioned the price targets being raised at these various Banks which is not really a good sign for sentiment but the emails I typically get from people my subscribers you know they're saying when do we sell gold like when do we take profits and I'm like guys like we literally just broke out of a 13-year consolidation and it's been going up for a month and you're asking when to take profits like that doesn't make any sense you know Coco by the way was also a technical breakout I mean there were fundamental things going on but it broke out of a 47-year base so the longer the consolidation the more impulsive the move higher and the longer it's going to last but can we really make the comparison to Coco with golden Coke I mean there were other factors as you said fundamental issues that saw Coco surge there were Pro harvests in West Africa which produces the bulk of the global Coco Supply you had certain weather patterns that led to dry weather in Ghana and Ivory Coast to of the world's biggest producers of cocoa beans you had supply chain issues you had increasing demand for Coco General inflation I I get the technical analysis aspect but can we really make that sort of comparison with Co making such a surge and gold making such a surge with those differing fundamentals well I mean obviously they're two different Commodities they're going to have two different fundamentals but the fundamentals of of gold are potentially just as powerful I mean what we have is we are spending 1.1 trillion a year on interest payments the US government is if you go back to 2019 it was 300 billion a year and depending on who gets elected or maybe not depending on who get gets elected deficits are probably going to be larger in 2025 and 2026 so we're going to get to the point where interest payments are taking up a significant portion of the budget and the only solution is for the Federal Reserve to cap the yield curve do yield curve control if you want to call it and directly monetize the debt and that is how gold gets that parabolic move and I don't think this is going to happen imminently it's not going to happen in 2024 but I think it is going to happen in the next presidential cycle I think sometime between 2024 and 2028 we're going to have to make these decisions all right so one of the factors that you're saying here is gold functioning um as as a way to counter debt monetization so break that down for us in the timeline that you see this happening well you know the things in markets always take longer than always takes longer than you think so it could it could take longer but you know de gold let me back up a second the one thing the one economic variable that gold is most correlated to is budget deficits hands down a lot of people think it's correlated to inflation it's not a lot of people think it's correlated to real real interest rates it's not it's really about budget deficits and you saw this back during the Obama Administration gold skyrocketed from 2008 to 2011 when we were running deficits at 1011 12% of GDP then in 2012 we got a republican Congress we had gridlock and gold actually dropped from $1900 an ounce to 1050 an ounce it's perfectly correlated with budget deficits so the only reason you sell gold here is if you think that budget deficits are going to come down that we're going to have some kind of deficit Hawk in the white house or in Congress all right and you've been tweeting about this saying you wouldn't be surprised uh if if we saw full-blown debt monetization in 2024 to 2028 that is the end game what do you mean by fullblown monetization well so basically um we are dependent on low interest rates to finance the government and if interest rates rise much further than they already are so interest rates across the curve are a little below 5% but if we had rates of seven or eight% then we would be functionally insolvent as a country and that is when the federal government would apply political pressure on the FED to Peg the yield curve across the curve which has been done before I mean this happened in the 1930s and the 1940s we pegged 30-year Bond at 2% so this has been done before so we would Peg the yield curve and the FED would print money in unlimited amount of money to buy an unlimited amount of bonds at a particular point in the yield curve so this is you know this is uh this is this has happened a couple times in history happened in vimar Germany happened in Zimbabwe Argentina is kind of pushing back on this right now but you know this is a lot of people aren't thinking about this and this is something that could be in you know in the next 5 years and you're saying regardless of who wins the elections that any Administration who wins 2024 to 2028 is the time period where you see this full-blown monetization I think it happens faster if Biden wins then I think it happens very fast um you know Trump is politically he's not a small government Republican um you know the the size of the deficit increased a decent amount while he was President the pandemic didn't help he did a lot in stimulus but even beyond that in discretionary dis spending discretionary spending went up so neither of these two candidates are really deficit Hawks you know I I just don't think we've gotten to the point where people really realize the extent to which the deficit is affecting their personal lives and it becomes a political issue you know when I was in fourth grade back in 1984 all anybody could talk about was the deficit and the deficit back then under Reagan was pretty manageable it was about five or 6% of GDP now it's about 7 or 8% of GDP and it's an intractable problem and as a political issue nobody really cares about it so Jared what does that mean then in terms of the price of gold if that does in fact happen if it plays out and you have this full-blown monetization what is gold at come 2028 uh I mean it's going to go a lot higher uh that's it's pretty much all I can say I do want to talk about the short term a little bit um yeah definitely want to get your thoughts on the short term but do you have a projection for 2028 like a rough range I don't want I don't want to make a projection I don't all right well let's talk about the short term because we have seen gold hitting new all-time highs and now we have an added factor which is this escalating tension in the Middle East with Israel going to respond to Iran's unprecedented assault of last week and we still don't know exactly what Israel is going to do but it has made it quite clear that there will be some kind of retaliation at some point markets for the most part aren't really moving on that right now so what do you make of the very shortterm movement that we can expect in Gold yeah I mean you mentioned what's going on in Israel and you know as you know uh Commodities generally top around geopolitical events um you know the all the price targets being raised kind of concern me I don't think that gold is getting to 27 or 2800 this year I think it's going to top in the short term I think we'll have Trend exhaustion sometime in the next two weeks which will happens at some point in the 2500s now me personally 40% of my net worth is in Gold it's it's an enormous position and sometime in the next two weeks I plan to fully hedge that position I'm going to hold the position but I'm going to fully hedge it because I expect about a 10% correction so you see gold hitting 2500 and then a 10% correction from there yes yes as as people watch take some profit off the table what would what would uh make that 10% pullback happen uh I mean you never know why Trends end but uh it's you know I really focus on sentiment uh sentiment has been getting a little bit hotter gold people including myself have been a little bit more bullish on Twitter I think what you'll see is sort of an exhaustion of bullish sentiment in the short term and then a price pullback and then you can you know I think I think it could pull back to as much as 2250 2300 uh which at which point I think it would be time to buy again so so do you have a support level from a technical analysis point of view that you're comfortable uh seeing gold hold even with 20 2250 for sure yeah 2250 and at that point you're getting back in and and buying that pullback um Jared in one of your latest newsletters uh you make the comparison to gold and Bitcoin and you write that we've entered a period of time where gold will actually outperform Bitcoin this year what what is underpinning your conviction there break that down for us well I mean I it's actually it's happening as we speak so gold is up 10% in the last month and Bitcoin is down 10% in the last month and if you look at a chart of gold the gold ratio over Bitcoin uh it's been going down relentlessly over the last couple years and it's kind of made a double bottom and it's turning higher so just from the technicals I think Gold's going to outperform but you know we saw what we saw over the weekend when Iran attacked Israel was that Bitcoin actually went down I don't consider Bitcoin to be a store of value I'm not really sure what it is I think it's sort of a bet on technology or innovation or cryptography or something like that um I don't consider it to be a true store value so if we are in a POS if we are in a period of time with geopolitical turmoil then I think gold should vastly outperform Bitcoin only if there is a geopolitical turmoil that leads to a major Bitcoin sell off yes because I mean if if we look at Bitcoin uh currently trading at around 62,000 as you mentioned not really functioning as a safe haven in response to the Iran Israel news it is up though around 48% here to date spot gold is trading at just below 2400 up around 15 and a half per year to date but if gold were to rise from here to $3,000 which is a slightly more than the conservative estimate that's a 26% increase the conservative estimate that uh many of our guests have given us for Bitcoin this year as well as many of the big analysts at the major Banks is that Bitcoin could hit $100,000 by the end of 20 2024 and that would be a 60% increase but that's not the scenario that you see you see Bitcoin dropping drastically but only if there's a big geopolitical upset yeah I mean look like you know flows into Bitcoin because the ETFs have just dramatically increased the price you know that that particular Financial Innovation the Bitcoin ETFs allowed a lot of people to put a lot of money into Bitcoin and we got a run from about 49,000 to 70,000 I think that's pretty much over at that point those flows are tapering off so yeah that's that's the basis of my call so all right well still to be determined if the spot Bitcoin ETFs in the US are indeed tapering off but what about flows from other ETF markets like in Hong Kong and South Korea for example uh what do you mean I haven't heard about this okay well Hong Kong has just conditionally approved spot Bitcoin ETFs as of April 15th South Korea is looking at doing the same so you've got spot Bitcoin ETFs opening up in Asia and other markets arguably creating even more new demand oh I didn't I didn't know that okay all right well you have to watch Kitco for the latest Bitcoin and the latest gold news uh and of course we've also got the event but I get it I get it you're not a fan of Bitcoin you do not see it as a store of value Asset in fact it's an interesting point that you make in your book that for you Bitcoin is a very stressful asset and in your book you're all about minimizing Financial stress and you said that you find Bitcoin far too stressful an asset for you in the Quest for happiness and minimizing Financial stress there yeah I mean something you know Bitcoin has a pretty good return but something that has a lot of return also has a lot of risk and if I have an asset that returns 8% a year with uh in a historical volatility of 20 vers versus an asset that returns 15% a year with a historical volatility of a 100 I'm going to take the less volatile asset you know like that's it's really what the I I don't know if you want to talk about the book right now but that's really what the book is about is minimizing your financial stress you know what what's funny is if you add Bitcoin to any portfolio it makes the sharp ratio go up but that's really only because it's been going up ever since Inception if we ever had never mind it's I hate talking about this you hate talking about Bitcoin or what go on finish that thought well what I was about to say is if we've ever had uh a true bare Market in Bitcoin but we have had a couple of bare markets in Bitcoin uh but not not not ones have lasted for you know a decade or more so right well we haven't had a Bitcoin bare Market that's lasted 10 years because Bitcoin has only been around less than two decades uh and some people say that in fact it's riskier to not have any exposure to bitcoin than to have exposure to bitcoin but perhaps you can come on and challenge one of our guests that are big Bitcoin proponents or Bitcoin Maxis we'll save that conversation for another time but for now as we're running out of time let's get more your thoughts on your book and you say that the source of financial stress is in fact risk and death that those are the two primary sources of financial stress and you aim to minimize Financial stress in order to be happy you say that the goal isn't to be rich the goal is to be happy though if you're doing it right you can probably have it both ways and you say that most people believe that the antidote to financial stress is more money but it's not a stress-free Financial life is a function of how you strug structure your financial affairs and your attitudes towards money and you cover both in the book and you also say that there's a fallacy in the personal finance discipline that having money is the product of a million small daily decisions in fact you're right I like this line the greatest lie ever told you can get rich by cutting expenses to the Bone austerity is tough it's tough to maintain day after day week after week month after month and it's even tougher to maintain over 40 years this program that you're signing up for denying yourself simple common luxuries that everyone else has for an entire lifetime is too hard yes some people do it and they do it successfully but it results in unnecessary suffering and deprivation and most importantly distorts your relationship with money and you say that if you get the big decisions right then you don't have to worry about the small decisions so break that down for us sure here's the book uh no worries how to live a stress-free Financial life um um a lot of the personal finance literature in America is obsessively focused on cutting small expenses like standing in the grocery store and trying to figure out the cheapest can of soup or not buying coffee on the way into work you know the accumulation of small decisions does not add up into anything big it's really meaningless there's three things you have to focus on the house the car and the student loans buying a house is the riskiest financial decision that you will make in your life it could go well or it could go poorly so if you get it right you don't have to worry about not buying coffee on the way to work buying a car is a slightly smaller financial decision but if you do that wrong it can it can you and student loans you know we all know what's going on with student loans so uh those three things and you get those three things and you don't have to worry about the little stuff uh right you certainly made me feel a lot better about indulging in uh my morning coffee because as you say you have lots of personal finance experts like Susie Orman even Mr Wonderful Kevin eari gives people a hard time for buying coffee rather than making it at home but you make the point that money is about making your life easier is about making uh yourself uh Happy is about lubricating your daily existence and not necessarily exceeding your means and not necessarily living below your means uh and you have an interesting chapter in the book uh where you talk about the uh well CFS I'm going to let you tell our viers what that means as well as the high roll is and how this trick is having the right attitude and finding the balance between the two the cheap fs and the high rollers yeah well I mean there's basically the the way I see it is is that there's only a very small percentage of people in the United States that have what I would call a healthy relationship with money and you have a healthy relationship with money when you don't think about it all the time now I don't really I don't really mean in the context of your job you know I publish a financial newsletter so I have to think about money all the time but in terms of my personal financial well-being I don't think about money I have a healthy relationship with money if you are cheap if you are a person who really is really cheap or if you know somebody who is really cheap and I'm sure everybody knows somebody this is a person who is obsessed with every single expense and they're thinking about money all the time if you have a person that spends a lot of money and they go deep into debt they have a lot of credit card debt they have car loans they have tons of debt they're obsessed with the debt they're always trying to make the next payment these two characters the CF and the High Roller have an unhealthy relationship with money the goal is to have a healthy relationship with money and you give a lot of tidbits in the book about having the right attitude towards money about how important it is that you find a partner that shares the same relationship to money as you do so I really recommend our viewers check it out it was actually a very fun read before we let you go let's quickly touch on the awesome portfolio uh because you just mentioned that you have 40% in Gold but in the book you say the ideal portfolio should have stocks bonds Cash Gold and real estate and I believe you break it down into to 20% each in the awesome portfolio is that still your outlook is that what you would suggest for people depending on their risk profile but is that the general breakdown of what you think should be the awesome portfolio yeah um and a lot of people ask me why I have because 20% gold seems like a lot for people even you know most people don't have gold some people have 1% or 3% or 5% 20% seems like a lot but gold is what I call the Dennis Rodman of asset classes let me explain what that means Dennis Rodman is in the Hall of Fame basketball player um he didn't score he only scored like six points a game and there was a big discussion about whether he he should even be in the Hall of Fame but what he did was he rebounded and he passed now if you had a team full of Dennis Rodman's it wouldn't be a very good team because it doesn't score but if you take Dennis Rodman and you add him to a team players that can shoot then it becomes the best team in the league and that's the role that gold plays in the portfolio gold is not correlated to anything its correlation to stocks is weak its correlation to bonds is weak and because it is not correlated to anything it brings down portfolio risk so whenever you add gold to a portfolio you make the risk characteristics better and you bring down the volatility of the portfolio and if your portfolio is not volatile then you're happy then you're not stressed then you can sleep at night all right well I think uh the book helps people sleep better at night so I recommend it thank you so much for your time Jared Dylan really appreciate it thank you thank you very much thanks and as always thank you to our viewers for watching for me Michelle mccor and the rest of the Kitco team make sure to subscribe and we'll see you again soon [Music]

Channel: Kitco NEWS

Views: 71,945

Keywords: gold, silver, finance, news, investing, investing news, finance news, financial news, economy, precious metals, gold price, silver price, gold price today, silver price forecast, gold price forecast, kitco news, geopolitics, Iran, Israel, cocoa, commodities, gold melt-up, gold record highs, No Worries: How to Live a Stress-Free Financial Life, Jared Dillian, Michelle Makori

Id: hkMf7eZE69k

Length: 30min 52sec (1852 seconds)

Published: Wed Apr 17 2024