Bad News About The Price Of Gold

Key Concepts

• Gold Price Euphoria: The current state of the gold market, characterized by extreme enthusiasm and rapid price increases, reminiscent of the late 1970s.
• Profit Taking: The strategic act of selling assets that have significantly increased in value to lock in gains.
• Diversification: Maintaining a balanced portfolio across various asset classes to mitigate risk.
• Contrarian Investing: Buying assets when they are out of favor and selling when they are popular.
• Human Perception of Value: The psychological tendency to assign greater importance to round numbers and widely publicized price milestones.
• 200-Day Moving Average: A technical indicator used to assess the long-term trend of an asset's price.
• Fibonacci Retracement: A technical analysis tool used to identify potential support and resistance levels.
• Derivatives: Financial instruments whose value is derived from an underlying asset, used to manage risk and speculate.
• Bag Holders: Investors who are left holding assets that have significantly depreciated in value.
• Tax Avoidance/Minimization: Strategies employed to reduce tax liabilities, such as moving to tax-free states or utilizing legal tax loopholes.

Gold Price and Market Sentiment

The speaker, Economic Ninja, discusses the current "fever pitch" and "euphoria" surrounding the price of gold, comparing it to the late 1970s. He notes that while gold prices continued to rise into the early 1980s, they eventually experienced a significant decline. This historical parallel serves as a cautionary tale, emphasizing the importance of taking profits when an asset reaches extreme highs.

Key Points:

• Euphoria vs. Prudence: The current market sentiment for gold is described as euphoric, a state that often precedes a downturn.
• Historical Precedent: The late 1970s gold market serves as a historical example of a similar euphoric period followed by a crash.
• Personal Strategy: The speaker reiterates his personal investment strategy of maintaining diversified "bags of investments" and rebalancing by taking profits from overperforming assets to reinvest in underperforming ones. This strategy has been successful for over 20 years.

Investment Strategy and Risk Management

A core theme of the video is the importance of strategic profit-taking and avoiding overexposure to any single asset class. The speaker strongly advises against holding onto assets indefinitely, especially when they have experienced substantial gains.

Key Points:

• Taking Profits: The speaker advocates for taking profits when an asset, such as gold or cryptocurrency, becomes "super heavy" in a portfolio. This is crucial to avoid being caught in a subsequent price decline.
• Avoiding Losses: The fundamental principle is to avoid selling at a loss, emphasizing a "mentality of winning."
• Diversification as a Buffer: Having a diversified portfolio allows for the reallocation of funds from assets that have risen significantly to those that are undervalued, thereby locking in gains and mitigating risk.
• Millennial Investment Trend: The speaker observes a trend of millennials rushing into gold at its all-time highs, which he views as a negative indicator, suggesting they are buying at the peak.

Market Predictions and Technical Analysis

The speaker shares his belief that gold could potentially reach $5,000 this year but expresses caution due to the current market conditions. He also touches upon potential future market corrections.

Key Points:

• Gold's Potential Upside: Despite warnings, the speaker believes gold could still reach $5,000 this year.
• Current Investment Focus: He is currently investing in specific crypto projects that are "in the dumps," anticipating their next upward move.
• Gold and Crypto Correlation: He notes that gold and Bitcoin/crypto sometimes move together and sometimes diverge, and he believes they are currently diverging.
• Predicted Market Correction: The speaker has previously predicted market crashes (crypto, banking, stock market) and suggests a significant correction is imminent, though he clarifies that "crash" does not mean a move to zero.
• Zero Hedge Report: A story from Zero Hedge is cited, indicating that gold is showing increased volatility at current high prices, which is often a sign of short-term exhaustion.
• Technical Indicators:
  • Overshooting Trend Line: Gold has overshot its upper trend line but has since returned.
  • Dislocation from 200-Day Moving Average: Gold's current price is as far from its 200-day moving average as it was in May, suggesting a potential reversion to the mean.
  • 21-Day Moving Average and Fibonacci: The speaker suggests gold could test the 21-day moving average, which aligns with the 38.2% Fibonacci retracement level, around the $4,000 mark. This would not significantly damage the overall chart structure.

Human Perception and Psychological Factors

The video delves into the psychological aspects of investing, particularly how human perception influences market behavior, especially around round numbers.

Key Points:

• Round Numbers and Perception: Human perception of value is heavily influenced by round numbers. Retail traders often focus on these milestones.
• Bitcoin Example: The speaker recalls advising his family and friends about Bitcoin at $500 and $1,000, predicting that people would "lose their minds" at $10,000, which they did. The rapid move from $10,000 to $19,000+ is cited as an example.
• Gold's $4,000 Mark: The psychological impact of gold hitting $4,000 is discussed. The speaker argues that reaching $2,000, $3,000, or $4,000 is more impressive than simply hitting a new all-time high.
• Buying Low, Selling High: The speaker's core philosophy is to buy assets when they are disliked and sell them to those who are "freaking out" at the highs.

Tax Implications and Financial Savvy

The speaker addresses the common fear of paying taxes and how it can lead investors to hold onto assets too long, ultimately resulting in losses. He also contrasts genuine financial success with superficial displays of wealth.

Key Points:

• Fear of Taxes: Many people are more afraid of taxes than of losing money, leading them to hold onto assets too long.
• Strategic Tax Management: The speaker advocates for legal tax write-offs and loopholes and has moved to a tax-free state to minimize tax liabilities.
• Reinvesting Gains: Even after paying taxes, the remaining profit can be reinvested, leading to further growth.
• Genuine Financial Savvy: The speaker argues that truly financially savvy and successful individuals do not have a mentality of "I will never sell this." They understand the need to take profits.
• Government Intervention: The speaker believes the US government will actively work to prevent gold from rising excessively, especially through complex financial instruments like derivatives.
• Skepticism of Revaluation Claims: He dismisses claims by some YouTubers about the government revaluing gold, stating that derivatives make such a scenario unlikely without a major tragedy.
• Critique of "Gold Backs" and Similar Assets: The speaker is critical of assets like "gold backs" and Iraqi dinars, suggesting they are illiquid and difficult to sell at fair market value, unlike more traditional investments.

Conclusion and Call to Action

The video concludes with a summary of the speaker's contrarian approach to investing and a call for viewers to engage with his message.

Key Points:

• Contrarian Approach: The speaker identifies as a contrarian investor, buying gold when it's cheap and disliked, and becoming nervous when everyone is buying at all-time highs.
• "Mania" Indicator: High demand and lines out the door to buy an asset at its peak are seen as indicators of a "mania."
• Call for Engagement: Viewers are encouraged to type "one" if they agree with his strategy or "two" if they believe in never selling gold, to gauge the audience's sentiment.
• Experience-Based Advice: The speaker emphasizes that his advice stems from extensive experience, despite his unconventional presentation style.
• Warning Against Fake Accounts: He warns viewers against fake "Economic Ninja" accounts.
• Empowerment Through Strategy: The ultimate goal is for people to be in positions of power and authority with their money, rather than chasing the next trend.