Gold Spikes Yet Again, Silver Breaks Through $21, Italian Banks in Freefall

Our model portfolio (just a game for legal reasons) is flying high. We will exit leveraged positions some time tomorrow on what looks to be something like an 80% gain in 3 weeks. I plan to convert it to unleveraged metals positions to catch any additional move but I expect the metals to go down for a few days next week. If they don’t we’ll still have regular positions in this fictional game.

There may be a big spike tomorrow morning at the bell since US traders are out of the picture today and had to watch from the sidelines. Futures traders can trade metals wherever they want 24 hours a day, but US equities traders who focus on gold stocks and ETF’s will have their first say tomorrow morning. Judging by comments I’ve read and the fact that gold is now the Yahoo Finance front feature article, it looks like retail dumb-money traders will pile in on Tuesday morning.

We will be selling right to them (in our fictional game for legal reasons), and hopefully pick our (game) leveraged positions back up when the retailers get too scared of the temporary draw down.

This is what I’ll be doing personally. Anyone who wants to follow, I do not recommend it and you do it at your own risk.

Italian banks are crashing today. The rickety financial fiat superstructure of the planet is shaking under the weight of its own printed paper.

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Model Portfolio Home Run and Gold Update

I took the model portfolio to 10% leveraged positions on June 16 in gold and silver. They paid off this week. We will sell on the next big up day and put the money back into unleveraged positions and very battered very cheap post Brexit European bankster banks.

NUGT, the 3x leveraged gold miners fund, is up 31.5% since we bought it.

USLV, the 3x leveraged silver fund, is up 40%.

These funds are dangerous and shouldn’t be held for too long.

Disclosure for legal purposes: I own NUGT and USLV. And I am not recommending anyone do anything since the government says I am not a financial adviser.

As for gold, it has, for the first time since crashing in April 2013, broken through the 200 week moving average, and inflation isn’t even high yet. When inflation exceeds 5%, you will see the metals go up faster than you can imagine. Once inflation becomes obvious, we’ll see a quick trek to $5,000 or more, probably before 2020.

Model Portfolio Change, Watch CPI Numbers Today

The Fed is holding off on another rate hike, and that could be very embarrassing if the consumer price index rises faster than anticipated. The numbers will be released at 8:30am eastern, 3;30pm here. Analysts are anticipating a 0.2% rise in core CPI which is the index minus food and energy. If it rises by 0.4% or more, gold is going to go much higher quickly. I wrote about this at 247 Wall St. yesterday.

Here is the article.

I have always maintained that once inflation gets obvious, the Fed will have to start chasing inflation with higher and higher interest rates regardless of economic conditions. This is what happened in 1980 when Volcker jacked up the effective fed funds rate to 22%. That is impossible today because it would force a hard default on US Treasuries. That would be a bona fide bankruptcy. So instead the Fed will simply let inflation run away into hyperinflation because there is no other choice.

That is when gold will move higher than anyone has ever seen, faster than it did in 1980.

This will happen, guaranteed. Eventually. I don’t know if it will start tomorrow or 5 years from now, but I’m willing to risk 10% of the model portfolio on it. It’s time to use some leverage.

I’m adding a $5,000 position in the 3x leveraged gold miners fund NUGT, and $5,000 position in the 3x silver fund USLV.

I’m also adding another $500 on shorting the bond market with puts on TLT.

This is risky and could make me look like an idiot. We’ll see what happens. For legal reasons because Congress has made a law imposing on the freedom of speech, this is a game and I am not a financial adviser, and I am making no recommendations to anyone.

Check the model portfolio page at the menu bar for updated positions.

Gold Comes Alive

Something is brewing. I’ve been long gold since late 2012, gotten crushed, but held on to everything, totally white-knuckled and confident. Gold is up over $30 in the premarket this morning, this while equities are crashing and money supply is still expanding fast.

This tells me that rapid inflation is at the doorstep. I called a bottom earlier, and now I’m as close to 100% positive on the bottom as you can get in market prognostication.

If gold is moving higher with treasuries, just wait until treasury bonds start collapsing along with stocks.

When oil stops falling, gold will move higher even faster than it is now. There is quite a long way to go before getting back to 2011 highs. Plenty of time to get in here.