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posted on 25 May 2017

Gold: Still No Buy

Written by , Clarity Financial

Back in early 2013, I made a recommendation to sell gold entirely and move into stocks.

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The call was an easy one to make. Ben Bernanke had just kicked off QE3 in fear of the impact from the “fiscal cliff" and $85 Billion a month was pouring into the market from the Fed.

Importantly, QE IS NOT INFLATIONARY, because it is an asset swap and does not increase the money supply. This is why there has never been an inflationary push in the economy, nor much of an economic recovery either. This is because such monetary interventions remain primarily bottled up on Wall Street and acts as a “wealth transfer" mechanism between the bottom 80% of the population and the top 20%.

Currently, inflationary pressures have quickly subsided, as expected, due to the stabilization and fall in oil prices, despite the Fed’s belief the pickup was from economic resurgence. The problem with the pickup in inflation from oil prices is that it crimps consumer spending as we have seen as of late in weak retail and personal consumption expenditure reports.

With the inflationary backdrop fading, and gold prices still trapped within a major downtrend, there is NO REASON to own gold in portfolios as of yet. The recent trading opportunity, discussed several weeks ago in this missive, has been closed out due to the failure at resistance.

If, and when, gold breaks above $1300/oz, and confirms the breakout, we will add the metal to portfolio allocation models.

For now, the best return on gold is still coming from giving jewelry to your spouse simply “because."

Trust me, the return on THAT investment will far exceed any other.

“Gold Bugs" need to remain patient for now.

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