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EB Tucker: Gold to Maintain All-time Highs, Focus on the War (Not the Battle)

‘Every reason is out there for gold not to be doing great. The economy is very slow, real rates are acting in a way that would normally predict for gold to be struggling, the yield curve is no longer inverting … there’s a lot of heavy things happening, and you would think gold would be weak during that time,’ he noted. ‘But it’s very strong, and I think we’re going to move up to that US$2,150 to US$2,200 (per ounce) trading level by the middle of the year.’

Back in October, Tucker said he was anticipating a major reality check in the spring of this year, and he still sees that coming. Explaining why, he said watching interest rates is less important than people may think.

‘Does the rate really matter, is that really what’s going on here? What they’ve been doing is draining the system of liquidity — that’s what they’ve been doing. They use that rate to corral all that money that they’ve printed,’ he said.

‘And you see it in the reverse repo market — they’ve been pulling that out, it’s down to US$600 billion. It started at US$2.2 trillion … the balance sheet got to US$9 trillion, it’s US$7.5 trillion now, so it’s exactly the same number — that’s what’s happening, they’re going to pull it out. When are they going to do it? It’s very easy, it’s US$90 billion per month. So by the summer it’ll be out,’ he continued, adding that the system will start to rattle at that point.

‘This rattling is a problem because the system in the US is totally dependent on more money flowing in. And money is going out right now, US$90 billion a month out. And what I’m saying is that when you hit that floor … I bet you the (US Federal Reserve’s) balance sheet gets to US$7 trillion and there’s a turn. I bet you that’s their target. It went to US$9 (trillion) after the pandemic, and I bet you it goes back to US$7 trillion before it goes again,’ he commented.

In terms of what investors can do in these circumstances, Tucker said it’s important to be cautious.

‘I think people need to try to play the short term carefully, but also be playing the long term. You want to buy things that are going to go up,’ he said, noting that the gold market is currently smaller than it was 25 years ago. ‘Hershey (NYSE:HSY) is the size of Newmont (TSX:NGT,NYSE:NEM). I mean, think about that. It’s like a candy bar vs. a gold bar. Hershey and Newmont — which one would you rather have?’

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

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