Hawaii Six O - Gary Wagner
It is not only Bitcoin that Elon Musk is looking at as an alternative reserve asset
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
In the last two trading days, we have seen a series of tweets by Elon Musk, CEO of Tesla, have a profound impact on the price of Bitcoin. In fact, on Monday, Bitcoin opened at $38,997 and closed over $44,000 per coin that same day. That momentum carried Bitcoin to an all-time record high today as it tested $48,885 and closed very well near the highs at $47,735. However, it was not only Bitcoin that Elon Musk is looking at to diversify the company’s cash holdings into.
In a filing to the Securities and Exchange Commission in January 2021. It included the following statement, “In January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity.”
In other words, the CEO of Tesla is looking into the future and believes that there are asset classes other than the U.S. dollar that would be appropriate for Tesla to move into.
One of those asset classes is gold. “As part of the policy, which was duly approved by the Audit Committee of our Board of Directors, we may invest a portion of such cash in certain alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds, and other assets as specified in the future,”
Although Elon musk has not tweeted about acquiring more gold holdings since last year, the filing of the statements above to the securities and exchange commission clearly lays out his intent to diversify out of the U.S. dollar with a portion of the free cash in the company into gold bullion, as well as the gold-related ETFs such as GLD. While we did not see the kind of dramatic rise in gold that was witnessed in Bitcoin, it is nonetheless a nod to the intrinsic value of gold as a hard asset and asset the company can use to diversify cash out of the U.S. dollar.
This is truly forward-thinking by the CEO of Tesla, as many analysts, including myself, believe that continued fiscal stimulus will increase our national debt and budget deficit and result in the U.S. dollar going lower. While we have not seen gold exhibit the kind of tremendous rally witness in Bitcoin over the last few days, the intent to diversify Tesla’s unused assets into alternative asset classes could be an extremely profitable move for the company. As such, it could certainly be a motivating undertone that is supportive of gold, whether it is in the form of hard assets such as bullion or gold-backed ETFs.
Gold basis, the most active April 2021 Comex contract, is currently fixed at $1838.80 after factoring in today’s gains of $4.60 (+0.25%). In fact, since Friday of last week, when gold opened just below $1800 per ounce at approximately $1795, we have seen the precious metal gain over $40 per ounce and hit an intraday high today of $1848.
While investors’ short-term attention has most definitely focused on Bitcoin, gold is not going anywhere, and as an asset class that has true intrinsic value, it will remain a steadfast investment by savvy investors if the dollar begins to trade under pressure as we believe it will.
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Wishing you as always, good trading and good health,