The Gold Market and Economic Manipulation
According to Michael Lee, Founder of Michael Lee Strategy, the gold market is currently lacking direction due to the strength of the U.S. dollar and market interest rate expectations. However, Lee believes that prices will eventually make a move and reach $5,000 an ounce within the next three years.
Lee argues that the macro data the market is basing its estimates on appears to be manipulated or flawed by design. He suggests that the United States is already experiencing a recession, despite it not being reported that way. Lee points to the labor market, where there has been a significant deterioration.
Questioning the Accuracy of U.S. Jobs Data
Lee highlights a concerning trend in the U.S. jobs data releases from this year. He notes that every time a report was released, it was later revised lower. Lee describes this as a 12 standard deviation event, meaning it is an extreme statistical outlier. He questions whether this is a result of government bureaucracy, a flawed model, or if the Bureau of Labor Statistics is manipulating the data to favor the Biden administration.
Inflation Spike and Potential Fed Response
Lee also suggests that there may be a late-year inflation spike due to higher oil prices, which could lead to the Federal Reserve introducing another interest rate hike. However, he believes that this would be a mistake.
The Impending U.S. Recession and Default Wave
According to Lee, a U.S. recession is unavoidable, and one of the first consequences will be a wave of defaults. He predicts that lending will become tighter and capital will be restricted in the economy, leading to increased defaults. Lee notes that typically, around 18 months into a yield curve inversion, the economy starts to experience significant employment issues. The economic fallout will resemble the 2001 recession rather than the 2008 financial crisis.
The Role of the Federal Reserve
Lee criticizes the Federal Reserve’s willingness to bail out troubled banks, stating that it prevents the necessary cleansing of bad companies. As the labor market deteriorates and spending declines, more defaults occur until the Federal Reserve finally cuts interest rates, leading to another cycle.
The Price of Gold and Market Manipulation
Lee questions why gold has not broken out significantly above the $2,000 level, considering the amount of buying by BRICS nations. He draws parallels to reports of price suppression in the silver market and wonders if similar manipulation is occurring in the gold market. Lee predicts that gold will break out to higher levels due to the looming recession and identifies China and Europe as potential triggers.
Stocks and the U.S. Dollar
Lee mentions one specific stock that he believes will more than double in value over the next two years. He also discusses the BRICS summit, expansion announcements, and the weaponization of the U.S. dollar.