The Four-Letter Word Behind All of This

Written by Gerardo Del Real
Posted March 16, 2020

Last night the Fed announced another emergency action as it cut rates 100 basis points.

It simultaneously launched a $700 billion quantitative easing program.

The Dow and S&P 500 both fell more than 8% last week despite a nearly 2,000-point surge in the Dow last Friday.

The $50-$100 daily swings in the gold price are here to stay.

Doesn’t feel great right now but there are important technical levels to watch that will dictate the next move.

Gold has fallen to the mid $1,400s. As long as that holds on a monthly level — and I believe it will — then we are in position for a rapid rebound.

Silver and copper have been absolutely clobbered and both are being sold off as funds are selling whatever they can to raise cash before the end of the quarter.

The real issue at hand behind the scenes is the four-letter word I told you would dominate the headlines this year — REPO.

Put simply, as I’ve been saying for years, I believe the European banking system is on the verge of a blowup and that is being demonstrated by European banks unwilling to lend to each other, hence the Fed pulling out the bazooka in an attempt to provide liquidity to the bond markets here in the U.S. and banks with exposure to Europe.

The sell-off in everything but the dollar shows this is a flight to quality and liquidity.

Rates are rising and this is what the Fed and all central banks really fear.

Despite record amounts of liquidity announced by the Fed, interest rates trickled higher, which shows the dislocations in the market are serious.

The market is now pricing in a 67% chance of a recession in the U.S.

Expect a massive wave of fiscal stimulus packages.

Expect a host of measures designed to stabilize and appease.

When everyone connects the dots and sees what is what, the dollar, the major U.S. indices, and gold will be the go-to vehicles for capital looking for a safe home.

Eventually, the dollar will reach its intrinsic value but that day is years away.

I told you months/years ago that I saw geopolitical tremors everywhere. This is the quake that forces individuals, companies, and governments to get their houses in order. COVID-19 just put a light on the fragility of the structural imbalances underlying the system.

This is also the crisis that exposes central banks around the world, which will eventually lead to a monetary reset I’ve warned about in the past.

To your wealth,

gerardo-sig

Gerardo Del Real
Editor, Junior Mining Monthly and Junior Mining Trader.

For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.

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