Some scenarios for the next 12-24 months

[Bumble]

1. Most optimistic. The economies of the developed countries show some real growth; inflation remains close to target at 2%; interest rates are allowed to rise, albeit slowly and probably not more than 0.5%. Gold and gold miners can expect to fall under this scenario, since they are being held up by negative real interest rates and safe haven demand.

2. Less optimistic. The economies of the developed countries tick along with little improvement; interest rates stay put or maybe rise 0.25%; inflation starts to creep up. Gold's current price (close to $1300) seems fully justified under this scenario, and may rise a little more.

3. Moderately pessimistic. The economies of the developed countries start to turn down. Interest rates stay low or move even lower. Stimulus measures provide temporary bubbles but lead to even more debt and rising inflation. Gold is undervalued on this scenario and will likely rise further, maybe to $1400-1500. Investors may well rotate out of growth stocks and into gold miners, so this is strongly positive for mining shares.

4. More pessimistic. A substantial downturn occurs, including a major fall on the stock market. Nominal interest rates go to zero or negative. Stagflation arrives. The opportunity cost of carrying physical gold goes negative, so this is highly positive for gold, sending it up towards previous highs of $1900. The gold miners crash along with other stocks (as they did in the 2001 tech bust and the 2008 subprime bust) but recover.

5. Most pessimistic. A major event occurs, such as a debt default by Japan, or by an EU country, or a new or escalated conflict in the middle east or elsewhere. This could cause a deflationary bust that might see gold and stocks fall in price along with everything else. Governments might effectively nationalise everything in order to try to achieve stability,  and this might involve capital controls, bail-ins, confiscation of precious metals and bans on crypto-currencies.

Depending on how optimistic/pessimistic you are, you will want to own
1. No gold or miners.
2. A modest amount of gold and miners.
3. Some gold and lots of miners
4. A lot of gold and cash to buy miners when they fall.
5. Weapons and canned food.

[BaldyBob]

I shall hope for 1, but prepare for 3-5. PM's have always been about insurance for me.

The reality is that the markets will be volatile, with the media only reporting the 'down' days, whilst the FTSE goes sideways for several more years.

 

[sovereignsteve]

We need a good sharp meltdown to clear out all the deadwood and teach the Governments/central banks/economists/bankers etc the error of their ways. Then we need to get back to some sort of "normality".

[HawkHybrid]

I'm guessing 3 with maybe leading to 4... did I mention that I'm a pessimist?

 

american nf payrolls are starting to look ugly.(130k and then 73k)

 

HH

[sovereignsteve]

Something akin to 4 will have to happen sooner or later although I'm not quite sure it would pan our exactly as the OP suggests. Lots of uncertainty in this kind of scenario.

[Chugnstack]

2 hours ago, HawkHybrid said:

I'm guessing 3 with maybe leading to 4... did I mention that I'm a pessimist?

 

american nf payrolls are starting to look ugly.(130k and then 73k)

 

HH

There was an interesting article in Bloomberg yesterday about unemployment coming down far enough that the disappointing jobs figures for May maybe a result of lack of workers, not an indication of economic troubles.   http://www.bloomberg.com/news/articles/2016-06-14/yellen-faces-rate-dilemma-as-u-s-economy-runs-short-of-workers

[HawkHybrid]

excuses from mass media with a bias?

the figures are down quite a bit = something isn't working.

what they need to tell people is what is the fix and how

will it be implemented.

 

HH