The “Dollar Milkshake Theory” predicts a US economic outperformance leading to a bubble in US dollars and assets, followed by a crash and monetary printing.
Despite the dollar’s 15% rise since 2018, central banks are reducing US dollar reserves from 65% in 2014 to 58% currently, while increasing gold and silver holdings.
During economic downturns like 2008 and 2020, the US dollar experiences a “flight to quality” due to decreased liquidity, even without a booming economy.
The dollar’s 10-year rally has been primarily driven by short-term futures trading, potentially masking a long-term reversal trend.
The decline in foreign exchange holdings of US dollars coincides with its strength since 2018, suggesting a potential shift in global reserve preferences.
From Q4 2019 to Q3 2024, federal spending increased by $2.26 trillion (47%) while GDP rose by $7.4 trillion (33.8%), with federal spending accounting for over 30% of the increased GDP.
Critics argue that policies like the infrastructure, CHIPS, and inflation reduction acts were unnecessary and ineffective, potentially harming the economy by directing large sums to politically favored constituencies without increasing productive capacity.
Austrian economists emphasize that government spending dollars added to GDP statistics are not equivalent to private sector production, often acting as drags on economic performance and standard of living.
The 2024 election had immediate positive effects on the economy, with stocks up, gold down, and small-cap stocks up significantly, likely due to the certainty of a winner and pro-business policies.
The 2024 unemployment report showed a good number of new job openings, suggesting that President Trump’s victory unleashed pent-up demand for business expansion over the past year.
Lower interest rates and global debt deficits are positive for gold and silver, while Trump’s unpredictability could lead to chaotic markets and increased demand for safe haven assets.
The valuation gap between gold and mining stocks is significant, with majors like Newmont and Barrick falling dramatically, while better-performing stocks like Agnico show potential.
Diversifying assets across multiple jurisdictions provides financial security and allows investors to be “ungovernable“, offering the ability to relocate if issues arise in one’s home country.
Silver is historically more volatile than gold but has outperformed it long-term, with potential to reach $60 per ounce, while gold could potentially hit $5,400.
Copper is a bullish bet for 2025, with supply falling and demand projected to increase dramatically over the next 10-15 years, driven by its status as an essential industrial metal.
Uranium is a contrarian play that has corrected to its long-term contract price, but may not double from current levels of $160 per pound.
Crypto has attracted younger investors who understand fiat money’s intrinsic valuelessness, but there’s a call for gold and crypto enthusiasts to stop infighting and focus on the common enemy of fiat currency.
The 2025 gold price increase is supported by rising producer margins, with Lobo believing the “fuse is lit” for mining stocks to respond to higher gold prices, potentially triggered by a market correction.
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