One of our favourite subjects is gold.
(Our other favourite subject is small-cap stocks. But we’ll leave that for another day.)
We like gold, not because we’re a modern-day Scrooge, but because we believe gold is money.
But as much as we like gold, we don’t pretend to be an expert.
There are plenty of those in the world.
But given a choice of expert opinions we value, it’s hard to look past one gentleman, Jim Rickards.
And whatever your view on gold, it’s worth paying attention to Jim’s latest shocking statement on where the gold price is going next…
If you want to know what’s happening to gold now, and what will happen to gold in the future, listen to Jim.
Few others in the world know gold like economist, intelligence expert and author Jim Rickards.
So where is it going? To US$10,000 an ounce, says Jim.
Sound crazy? Sure it does. Until you remember that until the early 1970s, gold had a fixed price of…US$35 per ounce.
Today it’s US$1,352 per ounce — a 3,762% gain. So by comparison, in order to get to US$10,000 per ounce, gold ‘only’ has to rise by 640% from here. Put that way, it doesn’t sound so crazy after all.
They won’t rest until they get it
So, why does Rickards believe gold is going higher…much higher?
Here’s what he told CNBC this week:
‘Every central bank in the world says they want inflation…they’ve come nowhere close…but that just means they are going to keep on trying; central banks cannot allow deflation because it increases the real value of debt…they are not going to rest until they get it.’
By ‘it’, Rickards means inflation.
And as inflation rises, so will gold.
Sure, it won’t happen in lockstep. You often see either a delayed reaction by gold, or gold moving in anticipation of inflation.
But what we do know is that as inflation has persisted over the past 45 years, since the end of Bretton Woods, gold has soared.
As we mentioned above, it’s up 3,762%.
By contrast, the US Dow Jones Industrial Average is only up 1,960% since 1971.
OK, it’s not a competition between gold and stocks over which is best to beat inflation. If you added in dividends, stocks would beat gold.
The point is, if you’re looking for real and tangible wealth, something you can hold in your hands and do with as you wish, it’s hard to beat gold.
Even more so if Jim’s right about the US$10,000 price target.
Cash yields nothing too
But what about the idea that gold is a relic of the past, with no place in a modern monetary system?
Hold that thought. Now read this from Bloomberg:
‘The Federal Reserve is back to providing a tailwind for gold and copper, and most of the other industrial metals are coming along for the ride.
‘Minutes of the Fed’s meeting in July released Wednesday damped prospects for a U.S. rate hike this year, weakening the dollar and boosting the appeal of raw materials priced in the greenback, both to investors and physical buyers. Gold, which doesn’t offer yields, becomes more competitive in a low-interest-rate environment.’
The last point is important. For years, the mainstream scoffed at gold, saying that it’s useless. One of its criticisms was that it doesn’t pay a yield.
And furthermore, you have to pay in order to store it. How archaic.
Except, now the mainstream are suddenly realising that in a low interest rate and negative interest rate world, cash in the bank doesn’t pay much or any yield either.
And once you factor in inflation, cash in the bank also has a holding cost — quite possibly a higher cost than storing gold.
Not surprisingly, the mainstream have gone a little quiet on the non-yielding limitation of gold.
Perhaps it’s because they’re now starting to see that gold actually does have value…whereas electronic and paper money only have as much value as the central banks allow them to have.
In short, more than ever, we see now as a great time to buy and own gold. Is Rickards right about his US$10,000 target? We’ll see. We certainly don’t know when it could happen. But if we had to bet on gold being either US$1,000 an ounce or US$10,000 an ounce five years from now, we would have no problem betting on the latter.
From the Port Phillip Publishing Library
Special Report: Central banks are losing control. Their efforts to prop up asset markets are failing. We’re now entering the endgame. What will the endgame look like? What are the short and long term investment implications? And how can you navigate this period of hyper central banking intervention…and emerge from the other side with a healthy portfolio? Vern Gowdie is one of the few minds in Australia with clear answers to these questions…[more]