Owning Gold in the Digital Age: Use New Technology to Keep What’s Yours

Gold should be considered a foundational asset in any long-term savings account or investment portfolio. We recommend a 10% allocation to physical gold in our Modern Asset Portfolio. 

For centuries, investors have sought to protect their capital with assets that offer safety. That age-old rule still applies today. Particularly during times of geopolitical or financial stress and the “flight to quality” that results, gold’s stability is extremely compelling. 

Today, the world is awash in risk. Globally, we’re still dealing with the aftermath of the COVID-19 pandemic, not to mention the first major war in Europe since 1945 and growing geopolitical tensions in the Middle East and Asia. 

Meanwhile, in the U.S., we’re facing a dysfunctional Congress and a huge government debt load. There are also a handful of wild cards out there: North Korea, Iran, Russia and China come to mind. 

There are many underlying forces creating economic uncertainty, market volatility and geopolitical risk. These forces are working to push gold prices higher. 

And there’s another catalyst on its way, courtesy of the “Biden Shock” that you – and the vast majority of folks – probably don’t see coming. 

We’ll get to the ways you can invest in gold in a moment. 

But first, let us give you some of the underlying “big picture” fundamentals that explain why we’re bullish on gold…  

• There have been fewer and fewer gold discoveries in the past 20 years. Supply is tightening.
• Around the world, government spending policies are becoming more expansionary and inflationary, which tends to help gold prices.
• Several key global players – with China and Russia leading the pack – are seeking an alternative to the dollar and/or the petrodollar. Gold is clearly part of that scenario.
• Geopolitics are flaring up, with situations like hyperinflation and chaos in Venezuela and rising tensions with North Korea, Russia, Iran, and China, to name a few. This kind of risk favors gold. 

Overall, the current climate is positive for gold and, by extension, gold miners. We could soon see another round of soaring prices for gold bullion and mining shares. 

During the stock market’s long bull run, gold’s capacity to act as a safe haven was ignored because there were more attractive opportunities. But now, with the market rocked by geopolitics, staggering debt levels and other factors, investors need a safe haven more than ever. As a result, precious metals are looking like attractive alternatives. 

Another important development is China’s ambition to make the yuan THE world reserve currency – replacing the U.S. dollar in all sorts of international transactions. 

As it stands, the U.S. dollar makes up the overwhelming majority of world central bank holdings. China would love to snag a big piece of that action. 

Plus, central banks still have the floodgates open for easy money. Japan, Switzerland and the European Union, among others, had long-term interest rates at historically low – in some cases even negative – levels until very recently. 

Even still, it’s unlikely interest rates will rise extraordinarily fast. They’re relatively low for the time being and may be going back down again soon. Lower interest rates allow gold to better compete with other safe assets. 

A Green Light for Gold

Like most commodities, gold is cyclical. If you catch a boom, you can make a lot of money. So why should you invest in gold now? 

Chinese demand. China has been aggressively buying gold. Our research indicates that the country’s current gold stockpile is much higher than reported and that the People’s Bank of China is still buying more. 

Plus, China is actively moving toward a workable system for buying and selling oil with gold-convertible yuan. 

Emerging market demand. It’s not just China that has gold fever. Demand for physical gold is expected to rise in many emerging markets, including Dubai (which services most of the Middle East), India, Vietnam and Indonesia. 

The demand for jewelry, gold bars and coins in these countries already constitutes more than half of worldwide demand. 

And these are countries where millions of people are joining the middle class. That means they’ll have more money to buy more gold. 

Tightening supply. Over the past several years, the average grade of the 10 largest gold mines has declined from about 4.5 grams per metric ton to an average of barely 1 gram per metric ton, which means less metal is coming to market. 

Miners have to move more dirt to get the same amount of gold. This raises costs, but the price of gold is on the rise, which should alleviate that problem for miners. 

If you see news about gold miners cutting production, there’s a good chance it’s because of this issue. Add in decreasing production in troubled countries like South Africa, and there is probably a gold supply squeeze around the corner. 

Potential for inflation. The monetary base exploded worldwide in a way we’d never seen before. We recently saw the highest inflation in four decades. History shows us that when the money supply grows faster than the economy, it creates inflation. 

According to the World Bank, the U.S. has averaged around 2% GDP growth over the last 10 years. Compare that with the more than 140% growth in the money supply since 2009, and then decide whether you should be concerned about inflation. 

Things only accelerated with the response to the COVID-19 pandemic and the Fed’s efforts to support a faltering economy with purchases of Treasury- and mortgage-backed securities. Between December 2019 and August 2021, the U.S. money supply, as measured by M2, grew by $5.5 trillion, a stunning 35.7% increase in only a year and a half. 

Leaner producers and less competition. The unintended benefit of the collapse in gold prices from late 2012 to late 2018 is that it forced many inefficient operators out of business. The better producers had to become much leaner in terms of cost structures. Producers are having to make tough calls in terms of costs, which projects to pursue and the scope of their overall operations. 

In addition, governments around the globe are making it more difficult for mining companies to put deposits into production. Ultimately, this will lead to higher prices. 

The declining dollar. Since the elimination of the gold standard by Richard Nixon, the dollar has been in a confirmed downtrend. The dollar has had some brief moments of strength but has generally trended lower. The inflation we’ve seen since the abolition of the gold standard is just mind-boggling. Cumulative inflation since 1970 is 733%. In 1970, $1 had the buying power of $8.33today. Every tick upward in inflation makes the dollar weaker and weaker.

Huge budget deficits. And most telling of all for those of us in the U.S. – and those in many other countries, for that matter – are the consequences of trillion-dollar deficits as far as the eye can see. 

We see the tide turning and massive forces lining up to push gold higher. The better days for gold are just getting started. It’s a great time to look for value. 

Put Some Gold in Your Portfolio

The bottom line is that, looking ahead, we see many potential catalysts for gold. Here are four ways to take advantage…  

No. 1: Pick Up the Best Gold Miner on the Planet 

When it comes to gold mining, there is no doubt that Barrick Gold (GOLD) is the best in the business. 

In January 2019, Barrick completed its transformational merger with U.K.-based Randgold Resources. The merger converted Barrick from a major player into, potentially, an industry-dominating juggernaut. Randgold gave Barrick access to huge mineral wealth across Africa. 

With more than 77 million ounces in proven and probable reserves stashed in mines around the planet, the company does not represent a high-risk, “let’s hope there’s gold in that hill” investment. Barrick has an ownership interest in five of the top 10 gold-producing mines in the world. 

An investment in Barrick is an investment in math… proven, reliable math. 

For gold miners, the profit equation is quite simple. The company’s profit is equal to the difference between the price of gold and the cost of getting it out of the ground. If the company’s costs rise and the price of gold falls… profits shrink. But if the rare metal’s price moves higher and costs sink… profits surge. 

Simple and predictable. Just the way we like it. 

In 2023, the company extracted 4.05 million ounces of gold. Each ounce cost the company less than $1,500 to pull out of the ground and get to market. The company has maintained that cost into 2024 as of the most recently reported quarter, Q2 2024.  

With gold currently selling for about $2,600 an ounce, each ounce sold represents a profit of about $1100. The faster investors shun risk and the higher gold climbs… the bigger that number will become. It’s no wonder Barrick saw its revenue hit $11.39 billion in 2023 and its net income exceed $1.27 billion. In Q2 2024 that growth continued, topping $3.16 billion in revenue (up 11.6% over Q2 2023) and $370 million in net income (up 21.3% over Q2 2023.) 

The higher gold prices we see coming will balloon those numbers even higher. 

Most of the company’s gold is pulled from five core mines in North and South America. With an average reserve grade of 1.65 grams per metric ton, these are some of the richest and most reliable mines on the planet. 

But the company isn’t operating in only the Western Hemisphere. Barrick has smaller operations in Australia, Zambia and even Saudi Arabia, in addition to assets across Africa from the Randgold merger. It’s these mines – and similar small mines around the globe – that offer the highest upside. Think of them as potential kickers on top of the company’s ultrareliable cash flows. 

Betting on the Front-Runner 

Barrick has transformed itself through acquisitions and joint ventures. It now has the third-largest gold reserves and the strongest management team in the gold sector. 

 The company is very sound financially. Earnings came in at $0.79 per share for 2023, and cash and cash equivalents total $4 billion at present. 

Barrick is focused mainly on assets with favorable costs, long mine lives and high grades. It’s also in the process of identifying noncore assets to dispose of, which will allow management to focus on mines and projects that are delivering the most value to the company and its shareholders. 

A Balanced Approach 

Barrick has been smartly investing in mining operations the world over. 

Thanks to joint venture deals, Barrick has a low-risk, high-reward way to enter mining agreements in the gold-rich regions of Chile, Argentina, the Dominican Republic, French Guiana and Guyana. Best of all, if market conditions are favorable, the company has the opportunity to significantly boost its stake. 

Think of it as the ideal way for Barrick to use its size, industry expertise and balance sheet to create low-risk growth opportunities. It’s the equivalent of renting a home’s living room and having the option, if things work out, to buy the entire house at a discount. 

It is smart deals like this that have allowed Barrick to spend the past year or so focusing on creating a world-class balance sheet. 

With the sale of some noncritical assets, the employment of cost controls and the aggressive use of cash, the company reduced its debt dramatically, achieving zero net debt in 2021. And while debt has grown since then, it remains within manageable levels for a company with Barrick’s revenue and earnings standing at just $688 million at present. 

The company is already the biggest and most efficient gold producer on the planet. Now it’s set to become one of the most financially healthy miners as well. 

As all the cash that chased speculative assets over the past few years flees toward safety, much of it will flow into what has historically been the safest asset during a downturn… gold. 

Even better, that money will flow into the biggest and safest companies in the gold industry. 

Barrick will benefit from both of these trends. It’s one of the biggest and best gold miners on the planet. 

No. 2: How to Use Gold for Every Purchase You Make 

We’re quite excited about this next opportunity. It brings the world’s oldest (and safest) currency into the digital age. 

But first, a little backstory… 

In 2016, one of the world’s most influential and powerful financial institutions made a stunning move. 

It announced it was stockpiling gold and cash in an effort to fight off the nasty effects of negative interest rates. 

That’s right. Munich Re – the insurer for insurers – fought the European Central Bank’s negative rates by doing everything it could to keep its cash from losing value. 

“What we are seeing right now is exceptional, and I’d say that it’s horror,” the company’s CEO said at the time. “You can see some of the markets already being emptied.” 

It was a huge move with some sharp political undertones. 

For Munich Re, getting out of the banking system was hard – but not impossible. Its immense size and power opened a lot of doors. 

The average American doesn’t have such options. 

There are, however, some fresh technological advancements that let us remain in the system while quietly going “off the grid” with our money. 

Let us explain. We’ll keep it simple. 

Gold = Safety  

Gold bugs have historically fought the Fed’s steady devaluation of the dollar by owning a precious metal that maintains its value. 

The government fought the trend by unhitching gold from the dollar and making it virtually impossible to easily make a trade with gold. 

Now, thanks to 21st-century technology, the government is going after cash hoards in much the same way. More and more places – including many government-run facilities – are refusing to accept our dollar bills. 

It makes it quite hard to stay out of the system. 

But there’s a solution… and it’s a good one. 

Founded in 2018, Kinesis is a small fintech startup that lets you buy and spend physical gold with ease and convenience. 

Kinesis allows you to buy and hold gold or silver and then spend it via a debit card. So instead of dollars, your purchasing power is based on gold or silver. 

Even better, Kinesis offers a program that pays a yield on the physical metal you store with it. 

What if we told you that you could have earned a 6.99% annual return on fully allocated gold between 2020 and 2021? 

We know that sounds too good to be true… but it is true! 

This revolutionary gold investment and trading service pays back 57.5% of all transaction fee revenue to its clients as yields. 

For the first time in a long time, you can buy groceries with gold… pay for a cab with gold… and fill up your gas tank with gold. 

In the meantime, the gold in your account is earning a high rate of return. 

What’s more, you hold the full legal title of any fully allocated, audited and redeemable metals at all times, and your metals are held in world-class vaulting facilities. 

We’re quite excited about it. 

To use the company’s system, simply go to Kinesis’ website, download the app and buy some gold.

It’s no harder than using your credit card. 

Gold has long been the best form of money. And it’s once again becoming the best form of currency. Now you can use it to pay for everything you buy. 

We urge you to check Kinesis out. 

(And no, Kinesis has no idea we’re recommending its products, and Manward is not being compensated in any way. We simply like what the company is doing.) 

No. 3: Pocket Some Gold Coins 

Now we’re going to take gold out of the electronic realm and put it into your pocket. Physical gold is produced in several forms, but we’re most interested in gold coins and bars. 

Deciding which is the best way for you to buy gold coins depends on several things, including where you live and how much money you want to invest. 

But one thing always holds true when buying them: Buy the most gold you can get for your money.  

This means buying gold with the lowest premium over the spot price (aka melt value, when pertaining to coins).  

As a safety precaution, whenever you call a dealer, always have a calculator in your hands and check the math yourself after you ask what percentage premium over spot, or actual metal value, you are being charged. 

For those of you who don’t want to spend a lot of money, consider the Austrian or Hungarian 100-corona coins or the large 1.2-ounce Mexican 50-peso coins. 

Depending on the seller, these coins generally have low premiums and are good choices for purchasing gold at a low entry cost. 

No. 4: The Best Way to Buy Gold 

Of course, the best way to buy gold – if you have the money – is to buy bullion bars, which have hardly any premium at all. 

For instance, a 1-kilogram bar weighs a little more than 2.2 pounds and contains 32.15 ounces. 

You shouldn’t pay more than 1% above the value of the gold content – and you usually want to aim for less. But remember that it will cost you tens of thousands of dollars to acquire that much gold. 

And let’s face it… Most people don’t have that kind of money lying around. 

If that is indeed too much money, you can purchase miniature gold bars of various weights for much less. 

If you are interested in buying gold coins or gold bars, we suggest contacting Asset Strategies International, Hard Assets Alliance or Goldco.

The investing method you choose is up to you. But we highly recommend making sure you have some exposure to gold. 

It’s still early on in the transition to a cashless society. Most people still own little or no gold. As it becomes clearer what’s happening, they will buy more. That means the time to act is now.