Why The Gold Market Looks Poised For Reversal

August 29, 2018

This week, we welcome back to the podcast Brien Lundin, publisher of Gold Newsletter and producer of the New Orleans Investment Conference (Nov 1-4, 2018). FYI: both Chris and I will be speaking there again this year.

Brien predicts that the brutal period for precious metals may soon be over. In fact, he now seeing a bullish alignment of factors he's seen before, which precursored a sharp move upwards in the prices of gold and silver:

The paper-gold market is divided by the Commodity Futures Trading Commission into four or five large groups. The big players are, on one side, the large speculators. On the other side the large commercials.

The large commercials historically have been the people involved in the market and the agricultural commodities -- a good example being the big farmers and farming cooperatives. In the metals industry typically it's the jewelers and people who use metals in their everyday business, so they have to hedge the price.

However, a lot of these people in the metals business have turned to the big bullion banks like JP Morgan, etc, to do their hedging for them. So now you have these big bullion banks on the commercial side, who also have proprietary trading desks. So the picture gets a little fuzzy. It gets a little murky in that the large commercials are not just the industry companies -- the groups that are involved in the business that need precious metals as a part of the fashioning of their products, etc -- but also these big, bullion banks that have trading desks.

On the other side, you have large speculators -- hedge funds, institutions and the like that get involved in trading the metals, basically just placing bets one way or the other.

What we find over time is that the large speculators typically get the direction of the market wrong. It's the commercials, whether because they're smarter or because they can manipulate the market to their wishes, are typically right on the direction of the market.

We've seen the large speculators, over time, get very long in which case the commercials dump shorts on the market and swamp the large speculators on that end of the market. Or we see the large speculators get much less long, or even short, and, at that point, the commercials come in, they buy, and they send the gold price up. When that happens, large speculators have to cover their shorts desperately. And when that happens, you see really steep, very aggressive moves upward in the precious metals, particularly gold and silver.

So you want to look at the extremes when the large speculators are historically long or when they're historically short -- which has happened very recently. Today we see the large speculators, for the first time since 2001, have actually gone net short. And that's important because in 2001, the last time this happened, we saw the gold market turn around and embark on a multi-year bull run that made absolute fortunes for people who were positioned not only in the metals, but in the right mining stocks.

I can tell you that, during that period, there were companies that we recommended in Gold Newsletter that went up four, five, ten, even twenty and more times in value. It was just an incredible time to make money. And, if past form holds true, we may be seeing the market turning toward that kind of a long run once again.

Click the play button below to listen to Chris' interview with Brien Lundin (44m:40s). 

Chris: Welcome, everyone, to this Peak Prosperity podcast. I am your host, Chris Martenson, and it is August 21, 2018. Welcome to the dog days of summer. You’ve heard me say this before – we are living through the most extraordinary period of monetary printing in all of human history. It's widespread; it's delusional, and, yet, one of the most enduring mysteries of this period, of money printing is that every single asset, except commodities, has been raging higher in price. Stocks, bonds, real estate, high-end art, rare jewels, vehicles, as well as private jets all ridiculously expensive which is maybe not a surprise given that, in 2006, before the ill-advised money printing spree by Central Banks, there were 793 billionaires in the world worth $2.6 trillion. Today, there are 2,206 billionaires with a combined net worth of $9.1 trillion.

Okay, that explains the pricey art, the rare cars, the jets, trophy properties, but it doesn't help us understand the seven-year long bear market in commodities which, coincidently, began almost to the week, I should say, that the U.S. Federal Reserve embarked on the historically monstrous QE3 program amounting to an astonishing $85 billion of thin air money per month injected directly into the markets, and, maybe, not entirely indirectly, into the billionaire bank accounts.

So how do we make sense of gold and silver and other key commodities languishing and suffering during the most extreme period of money printing and negative real interest rates in history, which have both traditionally been associated with rising, not falling, but rising commodity and gold prices? All right. That's why we brought a very special guest back today to this program. He's got a career spanning four decades in the investment markets.

Brien Lundin serves as President and CEO of Jefferson Financial, a highly regarded publisher of market analyses and producer of Investment Oriented Events which we will get into in a minute. Under the Jefferson Financial umbrella, Brien publishes and edits Gold Newsletter, a cornerstone of precious metals advisory since 1971. Hey, there's that date again. Who can tell me what 1971 is? Pop quiz. And, hey, he's one of the most respected newsletter writers in the business. Brien also hosts the New Orleans Investment Conference, one the most well-attended and one of my favorite and dynamic investment conferences, that's been running for over 40 years now. So, without further ado, let's welcome Brien to the show. Brien, great to have you back.

Brien Lundin: Great to be with you, Chris. What a wonderful introduction. I was dying to chime in over and over again. You're making so many great points.

Chris: Well, which one caught you? Was it the fact that we have nearly 1,500 more billionaires in just the past ten years? That's a pretty astonishing thing to achieve.

Brien Lundin: Well, that's one of them, yes. You know, down here in New Orleans we have this great flood protection that we built up against hurricanes, which was much needed, by the way, so there's great protection. And it reminds me of Wall Street and what happened after 2008. They built a great big protection for Wall Street from all of this market volatility, all the problems that the Central Banks and Federal Reserve had created. As long as you're within that levy system you're fine. If you're outside of that levy system, if you're outside of Wall Street, you're out of luck.

And that's exactly what happened. Wall Street, all the money, all the wealth effect that they generated by pumping out all of this liquidity, all this money, five thousand-year lows on interest rates, everything that they did pumped up financial assets and made winners out of the people that could afford to position themselves. At the same time, you have earnings for regular Joe's out there actually went down. And, you know, they got the short end of the stick. And Wall Street, again, and Federal Reserve, once again, protected the wealthy. It's just crony capitalism on steroids.

Chris: Well, you know, Brien, in that line of thinking, and I get accused of being perhaps reading to much into things, and sometimes people say, Chris, just lick your wounds, markets are markets, maybe you guessed wrong. But to me it was entirely too convenient for the Central Banks, particularly the U.S. Federal Reserve, in 2011 – remember we were just coming off – we had Arab Spring riots, the world wheat prices were up, there was a lot of political pressure over the fact that money printing was creating a lot of political strife in the form of inflation, particularly food inflation, around the world. And it was in that same year the New York Federal Reserve moved its traded desks to co-locate them over in Aurora, Illinois, which happens to be where the Chicago Mercantile Exchange runs all of the futures options trading for most of the key commodities in the world.

It just struck me as coincidental and rather fortunate for the Central Bank that during the time that they started their largest money printing ever that that marked nearly to the week the exact moment that commodities began a very long, slow, languishing decline. It struck me as odd at best. But, you know, knowing what I know now, watching the political cycle happen, watching how corruption has really pervaded the whole system, it would not surprise me in the slightest, Brien, to discover that Central Banks and their proxies have an interest in trying to nudge the right prices in the right direction and the wrong prices in the wrong direction to serve a policy aim. Is that unthinkable here in 2018? Am I still just a cranky guy?

Brien Lundin: You probably are. You probably are a bit of a curmudgeon, but I plead guilty to that, as well, after all of these years in the business. But, you know, Chris, when people ask is the government involved in manipulating the gold price to some extent – and I'm not a big believer that they do it on a daily basis – I just don’t think they have the capability or the expertise – that they're just too ham-handed to manage the price on a daily basis, although they probably have – or the market is set up for certain surrogates to be able to do that.

But I think the burden of proof for anyone who wants to say that the gold market isn't manipulated, the burden of proof is on them because the government manipulates other markets. It manipulates the stock market – we know that for sure. It manipulates interest rates, which is the price of money, and therefore, is the price of everything. The government has also manipulated gold both overtly and covertly three times in American history. It did so in 1933 when it devalued the dollar against gold by 69 percent in one day. It did so in the 1960s with the London Gold Pool when it tried to manage the gold price down during the time of guns to butter. And it did so at treasury gold auctions in the 1970s, which was another blatant attempt to drive the gold price down and get people out of the gold market. So they’ve done it three times so far.

They manipulate every other market. So I think, again, the burden of proof is on anybody who wants to say the government doesn't manipulate the gold price. I think they do at key junctures in the markets, just as they do for every other market. I don’t think gold is necessarily special in that regard; I just think the government does that.

Chris: I would agree with that. And I like that you used the word surrogates because there are certainly are surrogates perhaps, I don't know Ben Bernanke left the chairmanship of the Federal Reserve – great Freudian slip on that, so I'll leave that one in – and joined Citadel which is a company that does high-frequency trading and is responsible for up to 20 percent of the daily U.S. NYSE trading volume. It's just a monster of a company. Optically, a horrible move, but we know that behind the optics there's probably some real fire with that smoke.

And so, let me five you maybe a forth event to throw in there – Brexit. Brexit happens, right. Surprise vote. Nobody expecting it. Really sort of a black swan event. Gold starts to spike, and Dave Fairtex, who writes this amazing Gold and Silver precious metals commentary and generalized market commentary, as well, for out site, he and I have been going back and forth, and he had sort of been saying oh, Chris, you know, a little bit too curmudgeonly, it's not possible for somebody to really influence the trend long term; maybe they step in now and then.

But Brexit happens. He's following this like a hawk and notices that the slamming of gold that happened after that initial spike was accomplished with fifty thousand contracts pushed into the market to sell. Fifty thousand on the dot. Not 50,128. It was like this round number. And then there were two other events that sort of come along with that. Again, maybe not daily, but there are these round number events which just mysteriously show up at the right moment to calm the markets. Would you maybe consider those as sort of somebody with an official interest, surrogate or otherwise, that might be stepping in at key times?

Brien Lundin: Well, perhaps an official interest, perhaps a profit interest because they certainly make money on trades. In April 2013, we saw a tax in the gold market on two successive trading dates, a Friday and a Monday. In the first attack, it took 140 tons of gold, contracts, nominal gold contracts traded within, I believe, less than ten minutes. I believe it might have been eight minutes. And to do that you would have to have eleven actors, eleven traders, each with a max three thousand contracts, deciding at the exact same moment to do precisely the same trade.

Now, you can ask the CFTC what the results of their investigation of that episode were because they investigate a lot of curious trading phenomenon here and there. So if you ask them what the result was of their investigation of that event, which obviously needed investigation, their response would be what investigation? Because they didn't even look at it. They didn't even bat an eye because it was gold, and that took the gold price down, I believe, $200 over a couple of days. And that was the big smash that we saw in the gold price after it had peaked in 2011. So it happens all the time.

And the high frequency trading that you had mentioned is another aspect of it. I think that's typically done for profit. But it's an amazing thing that yet a large deep-pocketed trader with the right algorithms, the right black boxes, if they pick the right time in the market and the right market – gold happens to be, pardon the pun, Goldilocks market – it's just the right size to be able to move, with the right shoving, a significant degree.

But we've seen, over and over again, that the gold market has been targeted by high frequency traders and in a thinly traded time window, they'll dump about a hundred million dollars' worth of shorts onto the market, completely overwhelm it, drive it down about twenty dollars, then reverse course, go long and ride it right back up. And in the course of about ten minutes, we've seen episodes where high frequency traders who can put a hundred or a hundred twenty million dollars to work can make a half a billion or a billion dollars in trading. And this has happened over and over again in the gold market.

Chris: And, to be fair, I've seen it happen in other markets as well outside of precious metals. I've watched it happen in oil; I've watched it happen in grains; I've seen it in other metals that are non precious. I mean, would you agree it's sort of like a market structure issue now that the computers kind of own the price of things now?

LBB Yeah. It absolutely is. And there's a guy, Eric Hunseder, I believe it's H-U-N-S-E-D-E-R who runs Nanex, N-A-N-E-X, which is a supplier of data streams to the investment industry, and they track these tip by tip by tip. And Eric has done a great job of forensic analysis of these episodes. And he'll go in and figure out that the exact lot sizes that have been traded put stress on the circuit breakers but never really trip them. And the algorithms go in, and they test it, and they find what their limits are. And it may be some random number, say 916 contracts or something like that that's traded in succession that puts enough pressure on the system but doesn't trigger the circuit breakers. So they maximize their profits.

And you're right, it's done in market after market, and I think it's just a sign of this day and age and the information flow and how the real fundamentals are no longer at play in these markets, at least over the short term.

Chris: That's really the crux of this. So the opposite side of this is that – so these are people who are trading; they do it because they make money at it. And I would submit to you, and I would like your opinion in this, but, again, just an opinion, if we had seen the opposite, if we had seen, in that April 2013 event where some crew came in and all of the sudden just did the opposite of the short event – went long, spiked gold up by $200, I happen to think there would have been an investigation. Would you agree with that?

Brien Lundin: Oh, absolutely. And I think that's important that there wasn't such an event. So if you look at key times in the market where you may look to see if there has been some type of an official manipulation, that is one that really pops out because there wasn't – they didn't turn the trade around immediately and go long after they created the big waterfall pattern. They left the market back where it was, so that seemed to be somewhat of their intent. And, if fact, selling gold so quickly, at such levels, is not a profit maximizing exercise. So their intent was not to maximize profits; their intent was to basically drop the gold market down.

Chris: And so, again, if somebody had come along and attempted to do that in the reverse direction, I think there would have been an official response; hey, you can't do that. Again, when people say to me, hey, Chris, maybe they can do little manipulations now and then, but they can't change the direction of a market. Now, I disagree, because markets are composed of sentiment as much as supply and demand.

And so if this happened to me, Brien, imagine that randomly, three times last year, somebody had put clear stretch plastic fabric across my front door, and I trip and fell painfully down my front stairs three separate days as I was going to my car, it's true, they can't change my behavior long-term. But guess what? I'm going to step very carefully over my front door every time going forward because I've been trained. I think market sentiment can be clubbed into submission.

And I actually think that's what we're talking about here is that market sentiment really has been harmed. And I know that more anecdotally by talking to the people, like myself, that said precious metals is an important part of your portfolio, and they’ve been in it, but it's been a painful seven to eight years now. So, would you agree with the idea that sentiment itself can be damaged over time if the markets are operating in, say, random, if not unfair, ways?

Brien Lundin: Absolutely. And I think mainstream investment analysis, the mainstream research, that you get out of Wall Street is typically that gold is not where you want to be. They jumped on cryptos so quickly, and all you saw was analysis saying crypto was the new gold, and now gold actually is the barbarous relic because it's been supplanted by technology. I absolutely do believe that. And I believe that everything has its turn, and at some point, we're going to see the gold market turn again, and we're going to see an appreciation for gold as insurance and really as a tool for protection from governments' inevitable mismanagement of the currency. We're going to see that at some point. It could be very soon, actually.

Chris: I would agree with very soon. Let's talk about some of the reasons why. First, before we get into maybe the big picture, which is official mismanagement, let's talk market structure for a moment. I know that you follow this very, very carefully. I really admire and respect your long-term insights into this. Let's talk about the actual structure of what's going on with the paper-gold market right now as it stands. That's where the price is set for better or worse. Hey, maybe there's people running the stops for their own private gain or whatnot. Be that as it may, that market consists of a number of big players you have to pay attention to. Who are those big players in gold-paper market right now and how are they positioned?

Brien Lundin: Well, in the broadest sense, the paper-gold market is divided by the Commodity Futures Trading Commission into two, actually four, large groups, four or five large groups, but the big players are, on one side, the large speculators, on the other side the large commercials. Now, the large commercials historically have been the people involved in the market and the agricultural commodities, it would be, for instance, the big farmers or farming cooperatives. In the metals typically it's the jewelers and people who use metals in their everyday business, so they have to hedge the price.

However, a lot of these people in the business, in the metals business, have turned to the big buoyant banks like JP Morgan, etcetera, to do their hedging for them. So now you have these big buoyant banks on the commercial side who also have proprietary trading desks. So the picture gets a little fuzzy, it gets a little murky in that the large commercials are not just the companies, the groups that are involved in the business that need precious metals as a part of the fashioning of their products, etcetera, but also these big, buoyant banks that have trading desks. On the other side, you have large speculators that are hedge funds, institutions and the like that get involved in the metals, basically just placing bets one way or the other.

What we found over time is that the large speculators typically get the direction of the market wrong. It's the commercials, whether because they're smarter or because they manipulate the market to their wishes, are typically right on the direction of the market. And we've seen the large speculators, over time, get very long, in which case the commercials dumps shorts on the market and swamp the large speculators on that end of the market. Or we see the large speculators get much less long, or even short, and, at that point, the commercials come in, they buy, and they send the gold price up. When that happens, large speculators have to cover their shorts desperately. And when you have really steep, very aggressive moves upward in the precious metals, particularly gold and silver.

So, you want to look at the extremes when the large speculators are historically long or when they're historically short, which happened very recently. You see the large speculators, for the first time since 2001, have actually gone net short. And that's important because in 2001, the last time this happened, we saw the gold market turn around and embark on a multiyear full run that made absolute fortunes for people who are positioned not only in the metals but in the right junior mining stocks.

I can tell you that during that period there were companies that we recommended in Gold Newsletter that went up four, five, ten, even twenty and more times in value. It was just an incredible time to make money. And, if past form holds true, we may be seeing the market turning toward that kind of a long run once again.

Chris: So that's interesting. 2001, coincidently, that was the first year that I really started investing in precious metals myself, and I didn't know anything about the commitment of traders report at that time and which traders were positioned or how or what – I might have gotten lucky. But what I was really doing was I was looking at what was happening monetarily. So if we look at this bigger picture now, and I add up some of the features that I think are really important for the price of precious metals and things like that, one of them that comes up consistently for me, besides negative real interest rates, which is for sure a deal, is a pretty good correlation with deficit spending by the U.S. government. We're just in a sea of red ink now, aren't we, Brien?

Brien Lundin: We really are. We're getting to the point now where we're having trillion-dollar deficits once again. And that's the big issue. Debt is money. The problem that we're facing today is that the debt is so large that we can no longer have so-called normal interest rates. We can never again get to five or six percent interest rate levels because at those levels just the interest on our debt would amount to between eight hundred fifty and one trillion dollars a year. And that's politically impossible. It's fiscally impossible. We cannot pay that much in interest alone, especially with most of that, or at least much of it, going to China.

So, we will never have four, five, six percent interest rates again. Right now, the Federal Reserve is desperately trying to get rates up to the 2.5 to 3.0 percent level just so they have enough room to cut them in the next inevitable recession. And that's where they're going to stop. They’ve even admitted that. Two and a half to three percent is their terminal rate. That's where they're going. And what people don’t realize is that we're getting maybe one rate hike a quarter, that means that we may be done, or the Fed may be done with these rate hikes by the end of this year or by midyear next year. It's that close, and the market is going to start looking ahead for that point very soon.

Chris: Now, as far as I'm concerned just a sea of red ink, it has been gold friendly in the past and for pretty good obvious reasons. But we're looking now at a world where Turkey is falling apart, Argentina, Lord only knows what's about to happen there, but last I saw the Argentinian peso hit thirty to the dollar; it was sixteen was I was just there last year. So just really astonishing things happening in emerging markets. So it really feels like there's enough uncertainty, because gold is, to me, more than anything, Brien, a hedge against financial uncertainty and systemic issues as much as it is anything.

Inflation, not as much. You won't find me asking a lot of question about how's inflation doing because gold is an inflation hedge. I don’t have it in my data series where it says that's a great correlation. But it does correlate pretty well with negative real interest rates and deficit spending and, as well, financial accidents and things like that. As you look across the world, with your experience, where are we in this story of financial expansion versus risk and all that other stuff.?

Brien Lundin: Well, let's look at a couple of things. You know, the old adage that the stock market isn't the economy, that's no longer true. The stated goal of the Federal Reserve since 2008 was to create a wealth effect, where they pumped up financial assets and tried to create this wealth effect that would lift household wealth out of the doldrums. Well, they did that. They pumped up financial assets in the midst of the expansion of monetary supply, or actually the Federal Reserve balance sheet.

The correlation with the S&P 500 was on the order of 97 percent. Now, the Fed is talking the punch bowl away. It's actually shrinking its balance sheet. So, the question now is are we going to see the same kind of correlation on the downside as it withdraws this liquidity from the market? Is the stock market, is this U.S. economy that has been built upon the foundation of easy money, is it going to collapse? Now, I don't know and I don’t predict that we're going to have a collapse in the stock market anytime soon. I think we're probably going to have a recession in the next few years; it's just time. It's the nature of the business cycle. But I know that if either of those events occur, and when either one occurs, the Federal Reserve will have to come back in and re-liquify the markets and, therefore, the economy that it has built up. It's going to have to do that. It's going to have to do that to a greater degree than it ever did before.

Quantitative easing was unprecedented. We'd never seen anything like it in the history of the U.S. economy, and, in fact, in the history of the global economy. In the history of the world, we'd never seen that kind of money creation and liquification of the economy. The next time they do it – you know, the patient has developed a tolerance to that drug to some degree. So, the next time they do it they're going to have to do it to a much greater degree than they did before. And even with quantitative easing version 3.0. they're going to have to come back in and really flood the markets. And when that happens, gold is going to soar. And, in fact, l believe that when the Federal Reserve indicates to the markets that it's just done raising rates, that's going to add a hundred or two hundred dollars to the gold price in very short order.

Chris: Well, let's talk about that price of gold then, just under $1,200 today as we're recording this. Four months ago, as I'm looking at my charts here, $1,350 an ounce. Hey, it's been just sort of an almost ruler straight march down. What are you attributing that to? Is that a – of all the things, people don’t like gold anymore? The dollar got stronger? What are you attributing to that particular decline?

Brien Lundin: I think, to a large degree, it's a typical summertime slump. We see this as a very common occurrence during the summer in the gold market. Since really about 2001, I've tracked every summertime market and looked at it very closely, and found that when we do have a slump in the summer, which is, again, quite frequent, the gold market typically bottoms somewhere between mid-July and mid-August. So we're overdue right now for a rebound, for a bottoming, in the metals.

I think this year it's been delayed and exacerbated at bit by both the trade war and this spat with Turkey, which has happened just over the last couple weeks. If you look back to as recently as last week, there were fears that the crash in the Turkish lira was going to spread to other emerging market economies, and we were going to have that kind of contagion that everybody's fearful of that would create a global recession. That hasn't happened. It still may, but those fears have been somewhat alleviated.

So, I think that combination of the trade war and, more recently, the issues of Turkey, have kind of extended this downturn in gold. But, again, we're looking a lot of technology indicators; we're looking at some fundamental indicators that seem to argue that if we're not bottoming at this very moment, as we're talking in gold, then within the next two or three weeks it's very likely to happen.

Chris: And would you apply any different analysis to silver, which I'm looking at has a very tight correlation with copper, both of them having been clubbed starting since mid-June, about a month later than when gold started to go down. What's your take on silver, and are we looking at this as more of an industrial metal than gold as a monetary metal?

Brien Lundin: I look at it as a monetary metal, much like gold. Silver is a smaller market, it's more volatile, so it's a little bit easier for people, for large players, to place some games in. But my feeling is you analyze gold first, if you think gold is going to go up, then you buy silver. In short, if you like gold, you have to love silver. It's basically an option play on gold. It moves further than gold and in the same direction as gold, both up and down.

Now, I think that the argument that silver is also an industrial metal is really irrelevant. If silver was valued purely on its industrial value it would be about five or six dollars an ounce. Everything above that is purely monetary, and that's where the vast majority of the demand comes from or will come from. It's always at the margins, and at the margins it's the monetary demands that drives the price for both metals.

Chris: Most silver is coming as a byproduct of base metal production. But I'm looking at here at the three big gold miners that I'm tracking here: Newmont, Barrick and Goldcorp. The saw production fall 15 percent in the first half of 2018 compared to a year earlier, and costs rose such that the combined free cash flow for these three entities fell from $718 million last year for six months to $38 million this year, and now gold and silver having gone down further here into the second half. It seems to me the mining industry is also getting clubbed here pretty hard. Give us your take on the miners, majors, juniors, and how are they really doing? Some of them seem to be – if these big guys are having so much trouble with free cash flow, the little guys must just be really having trouble, I would think.

Brien Lundin: Well, yes, they are. But the big guys have not been able to replace reserves. They're not able to replace even production by building up their reserves. In fact, there's very clear evidence that we've reached peak gold. If we didn’t reach it last year, if we're not reaching it this year, then it's going to happen next year. We basically plateaued and are starting on the other side of the hill with global gold production actually declining. I think that's a very important, obviously, an important factor for the gold market going forward.

The other issue, though, that I believe is that when you invest in gold, you're investing in the certainty that – I mean, you don’t know if there's all the sudden going to be some big supply of gold or if somebody's going to dump gold on the market, maybe Turkey or Russia, for some reason decides to dump gold in the market. You don’t know if that's going to happen, but I think that's a moot point. The big point that you're looking for when you're investing in gold is that there will always be more fiat currencies and a greater increase in fiat currencies than there will be in the gold supply. You can bet on that; you can bank on that, and you need to be prepared for that. Because, over the long term, that's what drives gold prices much higher.

You know, Chris, you mentioned that there's not a clear correlation between the rate of inflation and gold, that gold doesn't perform very well as an inflation hedge. I think if you look at certain periods, starting and ending points, you can make that argument very clearly. But if you look at the very long sweep of history, for instance, if you look at 1965, when the U.S. took silver out of coinage, from that point to today, the U.S. dollar has lost 88 percent of its purchasing power by the governments own statistics.

Over that same point, you can see that the price of gold has gone up from $20 an ounce to as much as $1,900 an ounce. A lot of wiggles along the line, but the important point is the price of gold has gone from the lower left to the upper right while the purchasing power of the U.S. dollar has gone from the upper left to the lower right. And so, over the long sweep of history, that's why you buy gold, that's why you need physical metals, because these trends are inevitable. It's not just the United States, it's not just the U.S. economy and Federal Reserve, it's every Central Bank and, if fact, every civilization throughout history where the currency has eventually been debased.

Chris: And as we all know in our heart of hearts, given the choice between allowing everything to collapse into the deflationary hole it wants to fall into, or printing more, we all know that QE4, or 10, or whatever number we want to put on it is coming, right?

Brien Lundin: Oh, absolutely. Central Bankers are raised from pups to fear inflation. It's really, at a cellular level, they fear inflation, and they will open up the floodgates of liquidity. I don’t worry about a deflationary depression or deflationary breakdown because I know that Central Bankers will be able to just absolutely flood the economy with new currency. They’ve already done it, like we said, with QE1, 2, and 3. And QE4 is going to make QE3 pale by comparison. You can bet on that.

Chris: Absolutely. Absolutely. I'm going to call that one money for Main Street. Been waiting for it for a long time. My advice to people when, not if, but when that moment comes, is to run, not walk, to the nearest things you can spend your fiat currency on. And, of course, being prepositioned for that would be really important because another point I think that sort of got lost here is that the gold market for retail people is not very big, gold and silver. Meaning that if push comes to shove and five percent of the population wakes up and says I want to have gold or silver, I don’t think there's enough retail product out there for most people to get their hands on it. So, my advice to people has been be a year early rather than a day late to that story. If you want to have exposure to precious metals you got to get in on it early, otherwise you'll be left scrambling for paper representations of that – not what you want when that time comes.

Brien Lundin: We've seen many times where you cannot buy gold or silver. There's just no physical supply out there, and, if you can find it, you have to wait weeks or even months to get ahold of it. So it is important. And at low prices like we have today, the smart investors look at gold and silver as being on sale right now.

Chris: Well, absolutely. And if push came to shove and we had 2,206 billionaires out there and 15 of them decided they wanted to put their money in silver, well, there's not more left in the world. Obviously, price would rise before that, but there's only maybe $15 billion worth of silver floating around out there for investors. It's such a small number, it's just ridiculous in the context of trillions and trillions being out there looking for something to do.

Brien Lundin: Absolutely. Get it now while you can and while it takes less dollars to get it.

Chris: Absolutely. So hey, in the time that we've got left, I really need to turn, I want to turn, to the New Orleans Investor Conference and would that be all right with you?

Brien Lundin: I think so.

Chris: So tell us about the New Orleans investor conference this year? What's the theme? Who's coming? Adam and I will be there, obviously, but I'm just super excited for this years' conference.

Brien Lundin: Well, we're excited to have you and Adam. You’ve been such a tremendous addition to our event, and our attendees are so – we're just blown away by your presentations and your appearances last year and the value you bring to the event. And, you know, they're pretty good judges. This has been – this will be our 44th Annual event. It was actually started by my mentor, Jim Blanchard, who was connaturally known at the original gold bug. He stared it in 1974 after he was instrumental in getting gold legalized for U.S. citizens. Between 1971 and 1974 he advocated and organized a bunch of protests and some crazy events to try and get gold legalized. That happened in 1974.

Before it happened, he had an investment conference to teach investors how to invest in the metal. And he had hundreds more people than he expected. And since then, we've expanded the event to cover every asset sector, but we've stayed true to our legacy of covering geopolitics and economics with some of the biggest names out there, some of the smartest experts in the big picture, and then drilling down to gold, precious metals, mining stocks and the world's top experts in those sectors to give their hottest, top picks every year. They always give those at the New Orleans conference and it's been, as a result, very profitable for attendees.

Chris: Of course, the best part for me is meeting all of the other attendees out there. I mean, half the crowd you could put on the stage and learn something, maybe all of them. And in the past, you’ve had Alan Greenspan as keynote, Margaret Thatcher, Ayn Rand, Gerald Ford, Milton Friedman. Who's going to be there this year? Who have you got lined up?

Brien Lundin: Well, we have another blockbuster lineup this year that we've been able to put together. You know, we have your friend and mine, Robert Kiyosaki, who's making his appearance this year. He says he has a special treat for us this year that we're looking forward to. He's very excited about it. In fact, Robert sits in the front row with a notepad and fills it up taking notes. He's there every morning and stays late learning from our speakers as well as his presentations.

We also have Mark Stein. We have Jonah Goldberg. We have James Grant. We have Doug Casey. We have Peter Schiff we have Guy Adami from CNBC we just signed up. We have Dennis Gartman We have Rick Rule. We have you guys, you and Adam. And the list just goes on and on. We have literally dozens of the top experts in precious and mining stocks, as well. And a lot of really good, specific, actionable recommendations are going to be made this year, and I think at a critical point in the markets.

Chris: Now, you're actually running a little bit of a contest this year for whoever can drive the most registrants. Can I tell people about that?

Brien Lundin: Absolutely. For any publishers or market authorities like yourselves who get their readers and attendees and followers to come to the conference. Whoever brings the most people is going to get an ounce of gold. And, frankly, we're going to buy that gold now because I think the price is going to much higher by the time of the conference.

Chris: So people, if you're listening and you want to go, do Adam and I a favor and sign up by clicking the link below this podcast, mostly because we're competitive, folks, and we would love to drive more people and we would love to see you there at this amazing conference. Adam and I will be running some special events there, as well, as we did last year so that we can get our own tribe together and people who want to meet us and maybe spend a little more time with us. So, that would be something we would be interested in doing.

And, of course, it's an amazing conference, it really is. I met so many high-quality people there last year. And it was at your conference where I actually first meet the Real Estate Radio guys, and next thing I know I'm going on these cruises, which have just been absolutely fabulous and instrumental in meeting a whole other tribe of people. So, you've got some great tribes of people who show up and we get to rub elbows and meet each other. So, that's the real draw for me, just real high-quality people are coming.

Brien Lundin: You know, I tell people that every year in my opening remarks. I tell them that on the stage there's going to be some fantastic speakers, some really inspirational experts with remarkable insights, but that the real value of the conference is when they look to their left and their right and they see their fellow investors in the audience. These people have already identified themselves as being pretty smart just by coming to this event. They’ve identified themselves as being self-directed, information-hungry, active investors, people who know what they're talking about. And that's the real value and part of the real value.

And to really encourage that, we have a number of social events during the conference who bring out the best of New Orleans music and food and ambience for our attendees. It's just a wonderful experience. There's an intellectual energy that just sparks throughout the hallways and, as I'm sure you can testify, you can't really describe it, you have to experience it.

Chris: You absolutely do. And for everybody listening, this is the first four days on November 2018 in New Orleans, right in the French Quarter if it's the same place as last year. So, it's just going to a fabulous time. All right, Brien, please tell our listeners first how they can follow your work and then, second, the newsletters that you publish, how can people find those and follow your work more closely?

Brien Lundin: Well, Gold Newsletter, they can find everything they need to know about it at goldnewsletter.com. The New Orleans conference, they can click of that link that I'm sure you'll provide in the show notes, and that will get them a long way toward giving you some gold. So hopefully, they’ll go you a solid right there and click on that link and get you some gold. But, they can also find out some more information by going to neworleansconference.com, and they can always find me on Twitter as brien_lundin and underscore between that, actually, on Twitter. But they can just search and find me there. And I hope to see them all this fall, in a couple months, in New Orleans.

Chris: Well, fantastic. And thank you so much for that. Looking forward to seeing you this fall and thank you so much for your time today and sharing your extensive gold knowledge with all of our listeners.

Brien Lundin: Always great to be with you, Chris. Thank you.

https://www.peakprosperity.com/podcast/114306/brien-lundin-why-gold-market-looks-poised-reversal

In 1934 President Franklin Delano Roosevelt devalued the dollar by raising the price of gold to $35 per ounce.