The Dawn of Gold

The Dawn of Gold by Marin Katusa for Gold Seek

Many believe July 2020 was one for the gold history books, but it wasn’t even a top 10 move in gains for gold historically.

In fact, last month’s big move in gold to all-time U.S. Dollar highs was the 23rd best spot monthly return.

Let that sink in.

A new all-time high was hit, and yet the “big” monthly move that’s drawn a generation of new investors and captured the imagination of a whole new set of investors… isn’t even a top 20 monthly gain percentage wise for gold historically.

We are far from the top in gold.

Top Gold Spot Monthly ReturnGold and silver stocks have responded, catching a tailwind not seen in a decade.

As I showed in my premium newsletter to subscribers this week, institutional money hasn’t even entered the sector in a big way.

We published very detailed analysis of the flow of funds from institutions (for paid subscribers only) and we shared our unique conclusions based on the proprietary data.

A Path to Profit – The Fed Can’t Print Gold

In the 12 years since the Great Financial Crisis (GFC), the U.S. Fed, European Central Bank, Bank of England and Bank of Japan have invented new ways of printing money and keeping the financial markets afloat.

Below is a chart showing how much the total assets (balance sheets) of central banks have ballooned during the Crisis.

Central Banks Ballooning Balancing SheetsExpansionary monetary policy is beneficial to gold.

Now, there are two primary schools of thought on this:

  1. Inflationary
  2. Deflationary

Regardless of which scenario plays out, gold will benefit because that is its primary draw as an investment: a hedge against fluctuations in the real value of money.

The pandemic and lockdown produced record inflows into:

  • Safe-haven investments like AAA-rated government bonds (often with negative real and nominal yields),
  • Large Tech stocks with solid balance sheets (Think paying for financial safety in the FANG stocks)
  • Currencies like the USD and JPY, and
  • Gold and silver.

Gold Goes Mainstream

The once “pet rock” and “barbarous relic” is now on the lips of every talking head.

Flip on the financial news nowadays and every trader and portfolio manager seems to be extolling the virtues of gold and silver.

Now you’ll hear guys like Jim Cramer talk about how gold miners like Barrick, Newmont and Agnico Eagle are some of the better buys right now.

Looking at the YTD returns below, it’s hard to argue that gold and silver aren’t the clear winners in this bull market rally.

Comparative Investment ReturnsEconomists like Nouriel Roubini and Mohamed El-Arian are talking more about gold and the benefits of the safe haven metal in these uncertain times.

Even Goldman Sachs is changing their tune. They once mocked gold as an investment that’s nearly always beaten by the market.

They’ve since joined the chorus of major financial institutions like Bank of America and Citigroup ringing the alarm on currency-debasement.

In the next chart, you can look at how gold prices have surged, with a Relative Strength Index (RSI) showing how prices are reaching an overbought level not seen since mid-2011.

Gold Price AnalysisBut that is one indicator.

Things have changed so much over the last decade and we are just starting to see the impacts of MMT on the price of gold.

Is There Enough Gold to Meet Demand?

This year, as many as 119 producing gold mines in 18 different countries have either been offline at some point. Or operating at reduced capacity due to COVID-19.

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Gold Seek

Various authors presenting analysis and commentary on the precious metals, economy and precious metals mining markets.