Barron's on gold's limited value in a portfolio

Our top tip on how gold behaves is this: It doesn't.  People do the behaving, and they are appallingly unreliable.  Use bonds as a stock market hedge.  If they don't work, fall back to patience.  For inflation protection, think of assets that are a better match than gold for the goods and services that you buy every week.  A diversified commodities fund has precious metals but also industrial ones, along with energy and grains.  Treasury-inflation-protected securities are explicitly linked to the consumer price index, which measures inflation for a theoretical individual whose buying patterns differ from your own, but are close enough.  Own a house.

~ Jack Hough, "Stash Some Gold in Your Portfolio - But Not Too Much," Barron's, April 26, 2025

Steve Forbes after 9/11: "The Fed should keep this money hose on"

The Federal Reserve has admirably pumped significant liquidity into the economy, thereby easing the increasingly deadly deflation that we've been undergoing for at least three years.  But the benefits of this, other than avoiding immediate panic, won't be fully felt until the Fed publicly announces that this reliquidity is permanent, not temporary.  The dollar gold price, the most sensitive measure of monetary stability or instability, has moved from roughly $270 to $290 an ounce.  The Fed should keep this money hose on until the yellow metal reaches $300 to $325 an ounce.  Don't stop now, Alan.  You're almost there.

~ Steve Forbes, "Not There Yet," Forbes, October 15, 2001

Catherine LeGraw on the recent gold breakout

Gold I would be a definite "no" on at all-time highs.  That stock price looks like it's gone parabolic so far this year.  So as a valuation-based investor you're more inclined to be short than long.

~ Catherine LeGraw, interview with Meb Faber, The Meb Faber Show, 31:20 mark, April 26, 2024

Fred Hickey on the factors driving the gold bull market

There are several factors driving today's gold bull market including: a loss of faith in central bankers worldwide following their coordinated money printing (currency debasement) programs in recent years to fund massive government deficit spending; U.S. actions to "weaponize" the dollar (the global reserve currency) against their enemies; the collapse of investing alternatives (real estate, stocks) in China and the revival of inflation.

~ Fred Hickey, The High-Tech Strategist, May 4, 2024

Fred Hickey begins buying gold stocks

I bought a slug of Newmont Mining shares at $23.60 that I still happily hold today.  The antithesis of a tech stock, this giant gold mining company is a bet on the end of the 20-year bear market in gold.  It is a bet on an anticipated plunge in the dollar.  It is a bet against Greenspan and the Fed, who I fear will flood the system with money as the stock market and economy continues to contract.  It is a bet against undisciplined fiscal spending and budget deficits.

~ Fred Hickey, The High-Tech Strategist, August 3, 2002

Kevin Duffy on gold

“Gold,” says Jim Grant, “is not so much an inflation hedge as an investment in monetary disorder.”  Havoc is the unfortunate consequence of creating money out of thin air in a desperate attempt to let governments spend more than they take in.  Expenditures on war and luxury, and popular support for their continuance, are the genesis of all fiat money experiments, past and present. 

The tidal wave of extravagant spending in response to Covid got its start under the Trump administration and continued under Biden.  That both men, well over the retirement age, are vying this November to influence the federal purse strings is not lost on goldbugs.  Frugality is not on the ballot.

~ Kevin Duffy, "Gold's Epic Breakout," The Coffee Can Portfolio, April 15, 2024

Alasdair Macleod on BRICS (China's Plan B)

Anyone who's got debt is in trouble.  Anyone who hasn't has counterparties who have debt and they're in trouble.  It also means that the valuation of credit is going to suffer hugely.  If you look at the collateral side of things, collateral for the whole system is basically property and financial assets.  And if they go down in value, commercial banks are going to go out of business, they're going to have nonperforming loans as the euphemism is.

Our Chinese friends are looking at this.  Now they do have a Plan B.  We don't.  Our Plan A stopped at getting rid of gold back in 1971.  But the Chinese have a Plan B.  They have been accumulating, off balance sheet as it were, hidden in various national accounts like the youth wing of the Communist Party, the PLA and so on and so forth.  I reckon that by 2002, when they set up Shanghai Gold Exchange and allowed people - ordinary Chinese people - to buy gold, that they'd already accumulated some 20,000 tonnes.  Remember, there's a big bear market, which allowed them to do that.  From 1983, when the legislation in appointing the People's Bank of China to manage the government's monopoly on this - and not only that, they became invested in becoming the largest gold miners in the world - Russia didn't do this until fairly recently.  But they've now accelerated.  My sources tell me that there are two other funds - call them sovereign wealth funds if you like - that hold precious metals, and the Russians have probably got in the region of 12,000 tonnes.

Their Plan B is quite simple and that is to cut themselves off from all the risks in the West.  What they are doing is quite simple: They are building a trans-Asia industrial revolution based on communications, silk roads, electrification, bringing in the energy providers.  These people aren't woke.  They know what they're doing and they are after developing their economies and improving the conditions for all their population...

It's about 60% of the world's population and 30% of GDP are tied up in Asia, BRICS, Shanghai Corporation Organization and those who have applied to join BRICS.  This is a global anti-Western assembly of nations escaping from the problems we have created for ourselves.

~ Alasdair Macleod, "Ready for the Gold Roller Coaster?," Gold Forum Europe, April 9, 2024

Jim Grant on Asian central bank buying of gold

Not everyone cheered when Western authorities immobilized some $350 billion of Russian foreign-currency reserves following the Putin-ordered invasion of Ukraine.  Nor does everyone agree with recent Western proposals to commandeer that cash to shore up Ukraine's defenses.  China, in particular, has withheld its applause, and it may not be coincidental that March marked the 17th consecutive month of Chinese gold purchases.  [The People's Bank of China bought a record 735 tonnes of gold in 2023 according to The Gold Observer.]  Even such central banks as Singapore and Poland, the governments of which harbor no known extraterritorial ambitions, have been stocking up on the legacy monetary asset, the World Gold Council reports.

"The U.S. is essentially throwing its weight around, maybe a little too much," Pierre Lassonde, a cofounder of Franco-Nevada Corp. and a dean of the Canadian mining community, opines to deputy editor Evan Lorenz.  "Looking at the finances of the United States and the enormous budget deficits, just interest on the debt is more than the defense budget.  The dollar used to be called TINA, i.e., There is No Alternative.  Gold is the new alternative.  I call here GINA."

~ Jim Grant, "Gold rush," Grant's Interest Rate Observer, April 11, 2024

John Hathaway on central banks replacing U.S. dollars with gold

At this point, one can only speculate on the reasons for the behavior of gold bullion.  There are many interrelated forces at work to explain the slump in the U.S. dollar (USD) relative to the gold price.  However, in our opinion, the most obvious is a general loss of trust in the USD as a store of value and U.S. Treasury bonds as a safe asset. 

Widespread evidence includes record purchases of gold by central banks replacing U.S. dollars and other paper currencies for bullion at a record level in 2023 (1,037 tonnes).  For central banks, unlike mainstream investors, the math on the U.S. fiscal situation dictates immediate action.  The $168 billion increase in U.S. government debt over the last 20 days equals the entire U.S. deficit in 2002, as noted by Fred Hickey in the 4/02/2024 High-Tech Strategist.  By year-end, interest on the national debt is likely to be the largest single U.S. government outlay, according to Bank of America chief market strategist Michael Hartnett (FFFT, The Forest for the Trees, 4/06/2024).  Non-U.S. investors have been voting with their feet, as the steady decline in the USD as a share of global foreign exchange reserves illustrates (see Figure 5).

~ John Hathaway, "What Does the Gold Price Breakout Mean?," Sprott Gold Report, April 10, 2024

What

John Hathaway on the recent gold breakout

The breakout in gold prices since February has been largely ignored by mainstream investors.  Over the past few weeks, gold has moved swiftly from a year-to-date low of $1,993 per ounce on February 13 to $2,230 at the end of Q1 to $2,350 at this writing — a nearly 18% move from its February low.  Continued outflows from gold-backed ETFs attest to the disinterest.  For the 12 months ending 3/31/2024, holdings of global gold-backed ETFs declined nearly 12%.  In addition, 75% of investment advisors have less than 1% exposure to gold, the highest percentage of aversion since 2019, as shown in Figure 1.  

Gold bullion's breakout is significant in that it represents the positive resolution of a three-year standoff, consolidation, or tug of war between bulls and bears.

~ John Hathaway, "What Does the Gold Price Breakout Mean?," Sprott Gold Report, April 10, 2024

Henry Hazlitt on how FDR suspended gold conversion for Americans in April 1933

The possibility of a discriminatory capital-gains tax on gold ‘profits,’ or even of outright confiscation, cannot be wholly dismissed.  We must remember that in 1933, when private citizens began to exercise their clear legal right to convert their Federal Reserve notes and gold certificates into gold, President Franklin D. Roosevelt suspended the conversion, ordered the citizens to exchange their gold for paper money, and made it illegal for private citizens to hold or own gold.  In other words, the government not only broke its solemn and explicit pledge to convert its notes into gold on demand, but treated the holder (and dupe) who had taken the pledge seriously as the real culprit.  And the Supreme Court later upheld the president’s act and the new law. 

~ Henry Hazlitt

1933 St. Gaudens $20, world's most valuable coin,
sold at auction for $18.9 million in 2021

Jim Grant on when gold shines

Gold, say we, is not so much an inflation hedge as an investment in monetary disorder.

~ Jim Grant, "Apathy in a panic," Grant's Interest Rate Observer, March 24, 2023

Kevin Duffy on the bull case for gold

Gold can be seen as an insurance policy against macro risks: inflation, hyperinflation, recession, depression, taxation and confiscation.  It competes with other perceived safe haven assets: fiat currencies, government bonds, consumer staples stocks and, some might argue, bitcoin.  The bull case is straightforward: black swans are lurking, gold’s competitors are lacking and sentiment is bearish.

~ Kevin Duffy, The Coffee Can Portfolio, p. 21, January 24, 2023

WSJ: "Gold bugs could be in for a long wait"

After a big rally early in the year, gold has lost much of its shiny appeal.  To regain that luster it will need to win against a formidable opponent—King Dollar. But with economists and business leaders still sending contradictory messages on the economy and the Federal Reserve still firmly focused on clipping inflation’s wings, gold bugs could be in for a long wait.

~ Megha Mandavia "Only the Fed Can Return Gold's Luster," The Wall Street Journal, October 18, 2022

E.B Tucker on economic stimulus vs. gold

I want to give people something they can disrupt every dinner party they go to this weekend.  There's twelve trillion dollars worth of gold in the entire world, according to Pierre Lassonde's World Gold Council.  That's all the gold ever mined in history.  The U.S. spent over six trillion dollars this year and all we heard about was "We need more.  We're going to starve without the stimulus.  We need more."  And what did we spend all that money on?  Dental shields, plastic coverings, airline bailouts, checks to people so that they could put the money into Robinhood accounts.  Ok, that money's all gone.  Forget about it.  It's not coming back.

~ E.B. Tucker, interview with Daniela Cambone, Stansberry Research, 2:25 mark, November 5, 2020

Doug Pollitt on gold, Powell and Pacino

We didn’t go to Denver this year, which was apparently all about copper anyway.  That and battery metals.  Gold’s not selling, so dance as dance can. 

Turns out, nothing is selling, not copper nor battery metals nor any other commodity.  Nor, for that matter, equities in general.  Critically, even “risk-off” assets also look askance for bids.  The mood in Denver was grim but if you really wanted to feel what it was like to have your face ripped off you might have attended a convention of UK 2-yr gilt holders.  The WSJ front page thundered: “Gold losing its safe haven status”; it could have been far more broad-minded without any loss of accuracy. 

The driver in all this is a Fed trying to fix four decades of monetary profligacy within a forecastable time frame, presumably before the Chairman’s tenure is up.  Listening to Powell last week you got the sense that he feels that he and only he can solve this problem and that if he doesn’t, our economic future totters on the wrong side of the abyss.  Accordingly, “[W]e shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air, we shall defend our island, whatever the cost may be.”

The problem is that Powell has neither air force nor army. Instead, he has a single policy tool, a blunt instrument that, historically, has been effective only in places. For example, it is easy to see that Europe could raise rates to 20% and the price of gas still would not be affordable. Higher rates are also likely to increase the cost of some things. It’s not straightforward. Powell may fancy himself a Churchillian figure but a better image may be Al Pacino in the final scene of Scarface, spraying his machine gun in front of a giant pile of cocaine.

~ Doug Pollitt, "Powell's quick fix," September 27, 2022

Pierre Lassonde: "Mr. Powell has to feel like a porcupine in a balloon factory"

The Fed is in a box.  They have $20 trillion of debt.  They cannot raise interest rates more than 1% or 1 1/2% without putting the economy back in the toilet.  They have nowhere to go.  Mr. Powell has to feel like a porcupine in a balloon factory.  He cannot move.  It doesn't matter because the real rate of interest, which is really what matters to gold, is going to stay deeply negative for the next four years which is exactly what happened in the 1970s...  Gold is going to fly. 

~ Pierre Lassonde, "Pierre Lassonde predicts $200 oil and $2,400 gold in a month as Putin’s war drags out," Kitco News interview, 8:40 mark, February 28, 2022

Peter Boockvar on gold vs. Bitcoin

Ferris: The narrative right now is that Bitcoin replaces gold. That's why gold has basically sucked wind for most of the last year here.  What do you think of that idea?

Boockvar: I've been hearing obviously the same thing for a while and I think it's complete nonsense that something that's been around for 13 years is going to replace something that's been around for 5,000 years.  When you've been around for 5,000 years, you've been through a lot.  You've been through depressions and droughts and hyperinflation and deflation and world wars and so on and so on.  When you've been around for 13 years, particularly the last 13 years, all you really know is zero rates, negative rates and QE [quantitative easing].  That's pretty much all you know.  Now I do think that there's potentially going to be a place for crypto and that it can complement gold and silver in one's portfolio, but it has to prove itself.  It has to prove itself in an era of inflation that we are currently in.  It has to prove itself when there is global synchronized monetary tightening that is now in place.  It has to prove itself.  And like I said, 5,000 years of existence, you've sort of proved yourself in many different ways.

~ Peter Boockvar, interview with Dan Ferris, Stansberry Investor Hour, 40:45 mark, February 21, 2022

Kevin Duffy makes the case for gold and gold stocks

Q: What’s your case for gold? 

A: No one can predict the future with certainty.  That’s why I look at multiple paths, different scenarios with multiple twists and turns.  I think there's at least a 10% chance that we could ultimately have a hyperinflation over the next ten years.  So we have to be prepared for that possibility.  But what happens if we get a scenario with a global recession first? In this case, it’s highly likely that commodity and energy prices decline.  If gold stays flat or even down slightly, the miners should benefit as their cost structure falls more than the price of gold.  They already generate strong free cash flows, and the industry is much more conservative than it was ten or twenty years ago, much more focused on profitability.  So we have the best of both worlds: Not only do we have a cash flow generative business and a disciplined industry that’s not destroying capital, but we also have an option value if something were to go badly wrong with the great monetary experiment.

~ Kevin Duffy, "The Next Bear Market Has Already Started," The Market, July 1, 2021

Ronald Stöferle compares gold with bitcoin

Gold is like a solid, stable, reliable SUV while bitcoin is like a Ducati Panigale, like a really, really strong motorcycle.  Once it starts raining it's getting a bit dangerous and slippery on your motorcycle.  However, I think this whole competition between gold and bitcoin is ridiculous.  In our funds we combine both.  But of course the volatility of bitcoin is tremendously higher as the track record is not 5,000 years.  So we have to manage expecations when it comes to gold.  Gold's job is not to make you rich.  I think mining stocks can make you rich, silver can perhaps make you rich, cryptos and so on.  The job of gold is to preserve your purchasing power, to protect your savings.  And I think gold is doing that job pretty well. 

~ Ronald Stöferle, "Is inflation transitory or not?," interview with Daniela Cambone of Stansberry Research, 11:10 mark, June 16, 2021