Update - October 11, 2022
Do You Own Gold?
The idea of money is in flux.
Even more so… the value of money is under intense scrutiny.
As the Federal Reserve forces rates higher and higher, our global brethren are pushing back. All around the planet, countries are fighting the increasing strength of the world’s reserve currency.
The stronger the dollar gets… the tougher their lives get.
The EU… the IMF… and even the U.N. are letting their angst be known. They blame Washington for their economic calamities. Meanwhile, Russia, China and their increasingly friendly pals at OPEC are pointing a finger and saying, “We told you so.”
It’s not great news… not at all. It creates an economic tension that is surely not needed these days – the sort of tension we’ve seen right before big changes in the system.
While it’s painful for most assets, it’s good news for an old friend of ours.
Without a doubt, the least modern asset in our Modern Asset Portfolio is gold. We call for a 10% allocation to the precious metal.
The textbook writers would tell you that’s too much. They call for a smaller stake in the currency of currencies.
But if you’ve followed our advice, you’re likely quite glad you did.
Job Well Done
Gold has done exactly what it is supposed to do as ultra-hawkish interest rate hikes put the value of our money in flux. It’s held its value.
Stocks are down nearly 25% this year. But gold… it’s down just 8%.
And here’s the thing… the thing that gets very little attention. When we price gold in the world’s other major currencies, its value has surged.
Here it is in British pounds… up 12%.
And here it is in Japanese yen… up 16%.
With just a bit of a change in perspective, we can see the true value of gold… including what it will look like for us Americans as the mighty dollar fatefully loses the luster it’s recently gained.
But we don’t hold physical gold just for its appreciation potential. That’s why we have an overweighted allocation to it, but our underlying thesis for holding it is one you’ve certainly heard before…
Gold is insurance.
When everything else goes away… gold remains.
The Next Chapter?
That’s why, when we look back on economic history, we see the chapters of time denoted by gold’s relationship to the dollar. On and off… on and off… we see the greenback either tied to gold or floating on its own.
Each period has its rationale and its motivations. But each ends the same way. We reach an extreme, and then a massive move pulls us back toward equilibrium.
More and more signs tell us we’re reaching the far ends of the spectrum once again… and getting closer to the sort of time that brings the president to the stage to announce a major shock.
While Biden may not pull off a “Nixon shock” with midterms on his mind, you can bet the idea of doing something drastic has run through the heads of many of the world’s economic leaders in recent weeks.
If things get worse before they get better, the odds of a move will increase exponentially.
If one happens… you’ll be glad to own gold.
We have a lot of resources on the subject on our website. I hope you take advantage of them.
You can start with the basics in this report and then learn about a unique way to own gold in this one.
Gold is insurance against economic calamity… an idea the market’s underwriters are having a tough time pricing in lately.
That’s our cue.
It’s always a good time to own gold. But now looks like a perfect time.