So if you're one of the beautifully naive who take at face value covert market interventions like those of the last week that delivered a happy smiley "nothing to see here" finish to the week by photoshopping out the market crash post-Brexit, please stick your head back into the sand. Reality evidently need not interfere with your delusion.
If however, you are well acquainted with the persistent reality of central bank interventions in markets to prop up major indices in times of real trouble, then pay close attention, as the power of the global market is now about to demonstrate how futile, ultimately, market interventions (I prefer "manipulations") are.
As I write this, the pound is in a state of free fall. Bank of England governor Mark Carney has miraculously reduced capital requirements for U.K. banks - a shocking pre-emptive intervention tactic that smacks awfully of desperation - and U.S. markets are also teetering on the edge of an abyss. Cue more surreptitious intervention.
Gold and silver, on the other hand, appear to have wings for once. Here's a quick thought exercise: Remember while Greece was on the point of catalyzing Grexit in 2012? Did gold respond by skyrocketing? No. Why not? Because at that point, the illusion of USD as ultimate safe haven was intact, as a result of massive quantitative easing operations.
You will notice that hopelessly fleeting mainstream media is now proclaiming that gold is performing in a manner consistent with its "safe haven" status. So which is it? Gold is a safe haven, or USD and Treasuries are? Thus ends the thought exercise.
Listen to Peter Schiff explain how Brexit is "good for gold":
Gold will continue to outperform
Gold will exhibit safe haven characteristics exactly when the ability of fiat currencies derived from sovereign debt fail to retain the universal confidence required for fiat currencies and debt levels at 100 per cent + of GDP to continue to be viable. The fact that is breaking out with such conviction now is testimony to the crumbling of that confidence.
With the imminent volatility ahead, there will be overt interventions by central banks in, let's see… Germany, China and Japan in the form of stimulus, and covert ones in the U.S., Britain and China in the form of undisclosed asset buying and selling… likely mostly in futures.
Investors who buy into the concurrent media platitudes seeking to justify market positivity where none should exist will suffer. Those who recognize the opportunity inherent in such volatility in precious metals, lithium and secondarily copper and zinc are in for a wild ride.
James West is an investor and the author of the Midas Letter, an investing research report focused on Canadian markets.The views expressed on this podcast - edited for clarity, brevity and compliance with securities laws - are his own and are presented for general informational purposes only. They should not be construed as advice to invest in any securities mentioned.
James West and/or associated funds do not own shares in any securities mentioned in this article. For the full Midas Letter disclosure policy, click here. Postmedia and Midas Letter have a revenue sharing arrangement.