Written by: Jared Dillian
I like to look at technical — a lot at DeMark indicators — and gold recently put in a perfect DeMark 13 sell up around the highs, and it corrected down to $2,540-ish. It appears $2,530 is the support — that’s the level from where it broke out a couple of months ago.
So, it held its support, and it’s trading north of $2,600 at the time of this writing. Honestly, though, I think gold is in a bit of a bottoming process. It may have some more basing to do before it makes another run at the highs. I think it’s going to take a month or more to form that base, but I’m constructive on it.
Ultimately, I anticipate that we do make new highs, and gold goes to $3,000 next year. That’s all in the cards, but the next couple of weeks are going to be frustrating for the longs. I think we’re going to be hanging out in the $2,540 to $2,620 range for a while.
Debt Monetization
I recently got this question on a podcast:
Thinking about the bigger picture over the next four years with respect to gold, what do you think are the potential major catalysts? The last time we talked earlier this year, you talked about how gold could potentially go to $10,000. Do you think those things are still on the table, or could Trump and the administration bring in some new policies where they really cut spending and throw a monkey wrench into all that?
Well, earlier this year, there wasn’t even a twinkle in Trump’s eye with respect to the Department of Government Efficiency (DOGE)—nobody was even talking about that. Elon Musk has said that he could cut $2 trillion out of the budget, but we’ve had an enormous expansion of spending in the last six or seven years. Kind of tough to cut $2 trillion out of that. About 85% of the budget is Medicare, Social Security, defense, and interest.
Sure, you can cut a couple of million underperforming government employees and a couple of hundred billion dollars of expenses, but you really can’t make meaningful cuts into the deficit unless you touch Social Security and Medicare, which Trump has said he’s not going to do. There would be enormous backlash if there were any cuts to Social Security or Medicare, whether in the form of raising the retirement age or means testing Social Security or doing things like that. There would be an outcry.
So really, I think we’re stuck with this structural deficit problem that we can hack away at incrementally, but we can’t really make meaningful progress. From a deficit standpoint, things do look a little better than they did six months ago, but it’s still checkmate. We’re still going to get to the same place eventually where we’re going to have to monetize debt. Honestly, I think that could happen in Trump’s term. It absolutely could.
Tucker Carlson interviewed JD Vance back in September, and Vance was talking about the debt problem. He talked about it as a national security issue, and Tucker Carlson asked him what he would do about it. JD Vance was kind of coy and said, “Well, we’ll just hire some really smart people at the Treasury.”
I think what he’s hinting at here is debt monetization. I think he’s hinting at controlling the yield curve and keeping interest rates low. And like I said, that could happen in the next four years, which is when gold explodes higher.
Bullish for Commodities
The final thing I will say is that gold has been kind of an unusual commodity because we’ve had a bear market in most commodities, except for gold, and a couple of other ones like coffee and cocoa. But it’s been a pretty vicious bear market for commodities overall.
Back in July or August, we put in a panic capitulation low in commodities, and we’re forming a base. I believe the rest of the decade is going to be inflationary. I think it’s going to be bullish for commodities—the whole basket, and gold is a part of that.
Jared Dillian
Jared Dillian writes The Jared Dillian Letter, a free investment newsletter at JaredDillian Money.com. Subscribe here to receive a new issue in your inbox every Thursday.
