Run the gamut: reversing reopening!
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
When you finish reading today's letter, you should have an idea of why Ray Dalio, Goldman Sachs, Bank of America, Paul Singer, Paul Tudor Jones and central banks themselves believe that gold's price is WORTH NORTH of $2,184, our 2021 PRICE TARGET for the metal.
In fact, according to the Bank of International Settlements (BIS), as of April 2019, gold is a tier-1 asset, inked by its status change in Basel III regulation.
The day they announced that, they EFFECTIVELY broadcasted to the world that gold is PRESENTLY DISCOUNTED by roughly 30%-50%. On that day (April 2nd 2019), it was trading for $1,291, so in their BEST SCENARIO, gold might as well be priced for $2,584/ounce, double what it was selling for. The Basel III regulation makes gold the world's safest asset to own, according to bankers.
Look at this beautiful chart:
Courtesy: U.S. Global Investors
We can clearly see a SUBSTANTIAL BASE formed between 2014 and 2018, which then accelerated upwards once the markets realized that TIGHTENING WAS OVER in December 2018 and NEVER LOOKED BACK after the April 2019 status upgrade!
The first response to any monetary problem in our era of pure fiat currencies is to lower rates. They've done that. The second measure is QE, which was reintroduced in 2008 and has not left us SINCE THEN.
Both of these policies are now part of the way INVESTORS VIEW RISK. They assume that rates are zero-bound and that bonds will remain zero-bound in terms of yields since the central bank will intervene in the process.
Now, capitalists are bracing for the NEW ERA upon us. Many in the gold community (the sound money advocates) are saying that we don't live in a capitalistic society, but what they are really saying is that we don't live in a capitalistic society that resembles the one they grew up reading about and experiencing.
Capitalism is definitely still the American way of life, but we have STATE CAPITALISM, which means that the government: (1) gets to decide on directed capital infusions; (2) stops certain companies that are, IN THEIR EYES, too important to be allowed to fail from doing so, thus avoiding the requirement of restructuring it by doing so; (3) pays certain groups of individuals and businesses in a way that ISN'T EQUAL with other companies (one person gets aid while another doesn't and so forth). All of these measures "DISTORT CAPITALISM" in the eyes of many.
They don't want the government to direct funds and distribute wealth. They prefer the purest form of capitalism: one party has money while the other has value. One receives the added value while the other receives the currency.
Whether it's because the global economy has gotten SO COMPLEX or whether it's because of DEMOGRAPHIC SHIFTS is not the point since it's a fact that state capitalism exists – throughout history, governments have always GOTTEN WHAT THEY WANT and we can shout into the wind or ADAPT.
While distinguished and respectful politicians and entrepreneurs can SHOUT FROM THE ROOFTOPS that the Constitution is not part of the America we live in today and THEY'D BE RIGHT, these same sound-money advocates would also protest that the GOLD STANDARD is no longer the leading theory, and THEY'D BE RIGHT again, but they'd also be WASTING THEIR BREATH.
When you're clearly in the minority, don't fight reality with your BROKERAGE ACCOUNT, but with the right of free speech. Be smart with your money; your voice will IMPACT MORE PEOPLE if you're rich.