Gold bottomed in 2016 at about $1,053 an ounce. Since then, it has been a good investment as it is now priced at $2,526 an ounce, just a bit off its all-time high.
And yet it remains a fringe investment. Most people aren’t interested in gold. I’ve yet to hear an Uber driver or waitress talk about gold. The price of gold is rarely mentioned on investment news shows.
This wasn’t always the case. About fifteen years ago there were “buy gold” places in every strip mall. There were commercials on TV telling you to send in your old unused gold in return for very real cash. In the aftermath of the great financial crisis, gold was running hot.
The Dollar Hedge
You do hear about the BRIC countries buying gold. China and India have long histories of using gold as a storehouse of wealth. Russia is acutely aware of the U.S.-controlled international banking system and needs gold to bolster its own monetary system.
Kitco reports:
“Russia will spend 8.2 billion rubles ($92 million) each day on gold and foreign currency from September 6 through October 4 for a total of 172.9 billion rubles ($1.9 billion), the country’s Finance Ministry announced on Wednesday.”
Perhaps the biggest catalyst for gold prices moving higher is that the U.S. Federal Reserve is set to cut rates starting on September 18th. Some people think the Fed will cut 0.25% others think they will cut 0.50%.
The U.S. dollar is falling in anticipation of that. The greenback bottomed against the Euro last October and against the Yen last month.
I like gold and if the market sells off over the next nine months it should go up about 50% to $3,750 an ounce. Gold mining stocks won’t do well until all the margin calls are hit and the liquidity clears – and then they will make a moonshot.
Silver Half Dollars
That said, you can’t talk about gold without mentioning silver. Historically, silver is as cheap as it has ever been compared to gold.
This is the SPDR Gold Shares ETF (GLD) compared to the iShares Silver ETF (SLV).
As you can see both went up in late 2007 and early 2008. The big selloff started in March of 2008. Both gold and silver went down due to margin calls. Investors were selling everything. But once they bottomed both ETFs launched with silver overshooting gold.
We now have a large gap where silver is undervalued in relation to gold. The argument is that silver has more upside from here.
All the best,
Christian DeHaemer
Outsider Club
Russia’s Finance Ministry to boost currency/gold purchases 7-fold
https://interfax.com/newsroom/top-stories/105637/
Gold To Silver Ratio
https://goldprice.org/gold-silver-ratio.html
Remember… Keep It Simple
https://www.outsiderclub.com/keep-it-simple-stupid/
