On the heels of the Dow tumbling as gold and silver continue to move higher, Felix Zulauf Says Gold To Rally In 2016.
By Bill Fleckenstein President Of Fleckenstein Capital
June 13 (King World News) – Overnight markets were weaker, with Asia losing around 3% and Europe 1.5% to 2%., with the proximate cause being some combination of markets that were ready to decline and the potential consequences of the “Brexit” vote, with perhaps a smattering of angst over the terrorist attack in Orlando…
Continue reading the Bill Fleckenstein piece below…
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However, I am hesitant to attach much significance to the latter from a financial market perspective given that the modest overnight loss in the SPOOs was nearly completely eradicated in the early going, as American investors chose to ignore the weekend’s bad news, as they have with nearly anything of the sort for quite some time.
In fact, after a couple of hours of trading, the S&P was down about 0.2%, the Dow about half of that, and the Nasdaq slightly more, even with the Microsoft acquisition of LinkedIn. After that jam job, however, the stock market slid for the rest of the day and closed on the lows, off about 0.75% (with the Nasdaq slightly worse). Away from stocks, colored paper was all over the place, with the green variety weaker on balance. Oil was a nonevent, fixed income saw the blow-off continue, and silver gained 0.5% to gold’s 1%.
Urkel In the Eccles: Did We Do That?
The race to zero in the worldwide fixed income market is proceeding apace, and so is the pressure on the world’s too-big-to-fail banks, as they march on plumbing new lows. Obviously, though the politicians and the public in general don’t like the banks because of what they helped precipitate in 2008, I’m sure central bankers are not happy to see the banks splattered, especially as a direct result of their manipulation of interest rates. Just as too much money printing perversely caused the oil price to collapse via junk bonds and fracking, zero-percent interest rates across the curve make it rather difficult for large, leveraged banking behemoths to do well, as central banks persist in warping everything.
Included below are three questions and answers from the Q&A’s with Bill Fleckenstein
Bonus Q&A
Question: Fleck, The absolute strangest analysis of our current situation is that the Yen is getting stronger as a “Risk Off” trade – its a safe place to park your money?!!! I know the Yen has been getting stronger, but surely no one in the right mind can believe its because its “safe”?!!
Answer from Fleck: “Guys have been short it. Thus, it is rallying as they take off positions. It is not a flight to safety.“
Question: I know that miners generally give you leverage over gold and that has certainly been the case since Jan 2016, when gold has gone up 20% and ABX has gone up 160%, or 8X. What happens to this leverage as gold goes up? Suppose, for example, gold were $5000 and then it went up 20%. Would it be reasonable to expect ABX to go up 160% for that 20% rise in gold? I know a thousand things determine the actual price of gold and miners. I’m just interested now in what happens in the basic math that generates the miner/gold leverage, as the gold price goes up. Thanks
Answer from Fleck: “What has happened in 2016 is a rebound from very depressed levels. I.e., they went too low due to fears of collapsing metal prices, so they have rebounded more than gold itself. In your scenario, ABX would almost certainly not rally as much as you suggest. It would most likely appreciate more than gold, but it would depend on the valuation at the time that gold started rallying from $5,000.”
Felix Zulauf – Gold To Rally In 2016, But Is His Price Expectation Too Low?
Question: (Felix) Zulauf 6/11: Business fundamentals are weak. …currencies in Asia have started to weaken. The market is wrong in assuming that economic growth in China is reaccelerating … Credit data are pointing downward. Inventories are high in the U.S., China, and Asia’s major exporters. …Also, the automobile cycle, which has been an important driver for the world economy, is peaking. In the U.S., car-loan delinquencies are creeping up…. Polls in other nations, including Portugal, Italy, France, and Spain, show that 50% of the population would like to leave the euro today.
What company wants to make long-term investment commitments in Europe if it can’t be sure of the institutional and regulatory framework?… Almost all asset prices are high historically. …The risk is high and rising that something will go wrong in the world economy. …The private sector in the emerging world is more levered than in the developed world. Return on equity in the EM [emerging market] universe is below the level of 2009, and those countries are highly indebted in U.S. dollars. …I foresee a deep crisis in that part of the world. It could begin by mid-2017, at the latest. I am bearish on equities and constructive on high-quality bonds. Also, I expect gold to rally this year to $1,400.
Answer from Fleck: “Hard to argue with any of his conclusions except his gold price expectation is too low. 🙂
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***Also just released: James Turk – Are Gold & Silver Set To Skyrocket Just Like Bitcoin? CLICK HERE.
***KWN also released an absolutely jaw-dropping interview discussing the gold and silver markets with the man who advises the most prominent sovereign wealth funds, pension funds, hedge funds, and institutional funds in the world and he discusses the gold and silver markets, coming chaos and much more! To listen CLICK HERE OR ON THE IMAGE BELOW.
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