A lot of people won’t like what I’m going to write next, but it occurred to me the scenario I’m about to describe might be true.
For the record, I buy gold or silver every month that is held in a vault in Switzerland. I really like gold as an object and an asset. I relate to the argument that gold is a true, pure and basic asset that has survived a long history and remains today one of the most solid and prized objects of wealth there is.
BUT gold is simply not doing the job as described on the can.
It is not protecting holders from inflation. Mining companies are not exploding in value as a leveraged play on the price of gold which is meant to transcend inflation.
Huh? The 101 investing manual says gold in inflationary times should perform amazingly and it is not.
Now the excuse for this is that gold is a rigged market and the patient investor will see that at some point its value will explode as the market corner is broken by the inescapable force of markets and economics.
I was reading this for the umpteenth time when suddenly it struck me. “If you cannot see the fool at the table it is you?”
Ah, that’s not good.
Trade what you see, not what you think. What you see is gold simply not reacting to inflation and global problems like it is “supposed” to.
So imagine this. “What they want to sell, they sell to you. What they want to buy they don’t sell to you, they stay silent and buy.” Wouldn’t you?
If it’s a dodgy crypto, a crummy real estate project or a junk asset, you know your phone is going to ring with people wanting to sell it to you. If there is a great IPO coming up, there is no offer in your email, no call from even your broker, let alone some Wall Street rodent. I hope you’ll agree.
So how about gold?
Everywhere you turn someone is peddling precious metals. The dollar is going to melt down any moment, buy gold. The Chinese are going to back their currency, buy gold. Inflation will wipe you out, buy gold. Investment gurus from all corners will try scare you to death into buying gold. From all angles ‘they’ are trying to sell you gold.
So let’s look at gold’s progress. Here it is:
While the central banks were debasing their fiat currencies gold did this:
…which I’d say was basically nothing.
So what to do?
Here are some points:
- If you can buy gold, store it and sell it “cheaply” then gold is a liquid asset and a solid investment diversifier. Whether you are an idiot or genius at investing, building a diversified portfolio is always a good idea and a little gold is not a bad thing.
- If you have swallowed the dollar Armageddon meme then you may as well wait for gold to make new highs before piling in. As people are predicting the demise of the dollar, time and time again you can look around the globe and there the dollar will be crushing all the other currencies.
- Bear in mind that investment gold supply is inflated about 5% every year and 1.5% if you include all the gold in the world, half of which is tied up in trinkets. So the world has to absorb a lot of new gold every year, just to stand still. Meanwhile every year the world gets better at extraction.
- Gold is not a stable holder of value over time. Gold’s value even when it was money has fluctuated all over the place throughout history and its supply and demand has caused all kinds of economic problems, including financial crisis, recessions, depressions and even inflations.
- There never was a time that money wasn’t mainly paper or some permutation of credit. Gold backing has always been an illusion, as all bankers to kings experienced.
- Because of its high value gold has never been practical money/currency. Copper was pocket money, silver purse money and gold a hoard asset.
- The purpose of gold is to pay for war. Which is one possible reason it has not been going up recently. A certain warmonger has been a forced seller of gold, through the Middle and Far East, and that has capped the price. If that is the case, that selling pressure is not going away anytime soon. However, if it does, that might be a time to buy, which many will consider completely the wrong way around.
For me gold is a classic, dollar cost average investment that while the promoters are telling you that the death of the dollar is on the way and you need to buy gold, is unlikely to behave like the text books suggest it should. There are a lot of stocks that are cheaper to own and liquidate than precious metals and that can and do move further and faster than gold.
However, many times it is said, gold is never going to be remonetized, the zombie apocalypse is not going to break out (except perhaps downtown) and the dollar is not going the way of the Turkish Lira.
That, however, is no reason not to stack gold and silver, but it is a reason to treat it like any other asset, an instrument amongst many others, to hedge and manage your wealth.
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