QE Bombs And Gold Price Crashing

Coming short-term strength in the dollar will lead to a pullback in gold as real yields rise. This will be a great buying opportunity for precious metals…

Steve Van Metre interviewed on Palisade Radio

Tom welcomes Steven Van Metre to the show. Steven is a macro money manager and financial planner.

Steve studies the Fed and their policies carefully. His macro thesis is that a complete replay of the great financial crisis is coming only this time it will be much worse.

The majority view is that QE is inflationary, but he disagrees with this position. Banks are currently buying bonds, and as a result, the dollar is going to have to rise. We should also see savings rates start to fall, which will bring back dollar demand as newly created debt will need to be repaid.

The Fed has been creating dollars for the banks but holding them in reserve. The commercial banks don’t have access to that money, so he argues that the Fed isn’t currently injecting liquidity.

The Fed’s goal with QE is to reduce the amount of treasuries on the market. Money velocity crashed in the second quarter, and he doesn’t expect a big surge any time soon. QE’s goal is to reduce the treasury supply, which will cause lower interest rates and higher bond prices. We are within weeks of the 30-year moving lower, and then the Fed will have to react.

The coming short-term strength in the dollar is going to lead to a pullback in gold as real yields rise. Steve believes this will be a great buying opportunity for precious metals.

“The last leg of this stool is the dollar and if we see the dollar rally from here than your going to see a replay of the last financial crisis only it’s going to be much much worse… last time we didn’t go into that crisis with 30 million unemployed.”

Time Stamp References:
1:20 – Steve’s macro thesis.
3:45 – 30-year short position
5:05 – Why the dollar could rise.
10:05 – Why the Fed is not creating liquidity.
14:15 – Money velocity direction
17:10 – Consumer prices and dollar movement.
18:40 – When will QE return.
20:20 – The trifecta of tightening.
21:55 – Dollar strength will result in a gold pullback.
25:20 – Gold pullback and last buying opportunity.
26:30 – GDX, GDXJ and possible lower resistance points.
29:55 – QE and what it does.