The US economy just posted its largest fiscal deficit on record according to Bloomberg. The budget shortfall more than tripled to $3.1 trillion, swelling the national debt to exceed the entire US economy. The deficit as a share of the economy surged to 16%, the largest since 1945. Gold hit an all-time high in August. Over the past two months, gold is getting the rest and pullback necessary to power the next move up. The next move way up over the next few years. While the gold price has been quiet, there have been important new developments in gold behind the scenes.
Buffett puts 600 billion into Barrick Gold
We spoke last week about Warren Buffett investing in gold for the first time and exiting many bank stocks. This was an unusual move considering Buffett, a long-time value investor has long professed a dislike for gold, and preferring assets that have cash flows or pay dividends. This move is very positive for gold but very negative for banks, the economy, and the US dollar. We all know the price of gold reflects the loss in the dollar’s purchasing power. We are not in the camp that central banks can print unlimited amounts of money without many bad consequences down the road. Since 1971, the dollar has lost 97% of its purchasing power compared to gold. Since 2000, the US dollar has lost over 80% of its buying power against the only form of real money, physical gold. Mr. Buffett possibly sees the role of central banks as being reckless and out of control. Mr. Buffett is playing a little defense in this market and simply looking to diversify his holdings. The cash flow and safety of dividends could be shifting to different sorts of companies. Companies that were looked at as safe the last couple of decades could be changing. The old saying is to always follow the big money.
Ohio Police & Fire Pension Fund puts 800 million into gold 5% of 16 billion
Ohio’s Police & Fire Pension Fund recently approved a 5% allocation to gold. The Ohio announcement is significant because pension funds could be looking for different ways to diversify. The Texas Teacher Retirement System also feels the same way. Treasury bonds have long served the purpose of a steady reliable form of yield. Since interest rates are close to zero, Treasury Bonds are not possibly what they used to be. For some investors, the swings of an all-equity portfolio aren’t acceptable. Many of these pension funds have advisors. Advisors typically favor investments that pay fees. Physical gold is owned and could collect dust for years. The 60% equity 40% bonds allocation has worked for a long time. With central banks promising to keep interest rates low for the foreseeable future, large institutions and pension funds need to look for different ways to generate safe returns. Toxic low-yielding bonds and a stock market that has benefited from unlimited money-printing may not be the safe plan it used to be. Precious metal assets represent only about 0.5% of all savings and investments in the United States. Gold is still a relatively small part of the overall investment plan to most. Pensions and retirement funds are vulnerable to inflation and a falling US dollar. A small change in thinking and allocation into gold could lead to much higher demand and prices for the yellow metal.
Goldman Sachs asset management invests in Perth ETF
Goldman Sachs Asset Management (GSAM) recently acquired the sponsorship of the Perth Mint Physical Gold ETF. GSAM investors will now be able to access gold exposure at a competitive fee of 18 basis points. According to Goldman Sachs, this response is due to customer demand to diversify their assets. When one of the world’s premier investment banks makes a statement like this with their wallet, investors need to take notice. The central bank stimulus and money printing are not likely to end any time soon, and the need to have products to diversify becomes even more important. Investors simply may have all the equity ETFs and bond ETFs that they can stomach. Exponential risk in the markets and exponential leverage and money printing is not for all. Not every investor has twenty years to go through the peaks and valleys of the next cycle. Not every investor can stomach the next 50% fall in the paper markets. Trees don’t grow to the sky. Stocks, bonds, and real estate have made many people rich over the last few decades. It makes sense that some investors need more products to preserve that wealth. A paper ETF or an investment bank still may not be the answer for all. Some investors still believe to preserve wealth if you don’t hold it, you don’t own it.
The Goldman Sachs acquisition of the Perth Mint Gold ETF for their platform definitely should make investors think. Possibly things financially are changing.
Ronald-Peter Stoeferle of Incrementum AG and co-author In Gold We Trust recently talked about the Federal Reserve. Since the Fed’s birth in 1913, it took 80 years to produce the first trillion dollars from 1913 to 1993. The second trillion was produced in 18 years from 1994 to 2011. The third trillion took 5 years from 2012 to 2016. The fourth trillion produced took 4 years from 2017 to 2020. The fifth trillion produced took 4 months from February to May of 2020. The fiat currency experiment since 1971 is on fumes. It is taking more money printing in a shorter amount of time to get some results. This can’t go on forever. Unlimited money printing will have some sort of catastrophic effect on the monetary system. At Midas Gold Group we see physical gold as wealth preservation. Wealth preservation over the next decade is extremely important and relevant in today’s market considering how high paper assets are. Central banks are holding the markets up until the election possibly. Investors still have time to get money out of the banking system and financial markets. If you feel holding some physical gold in your possession is possibly the way to go call us today. You can reach a trader at Midas Gold Group today at 480-360-3000 or 805-601-6000 to discuss what your options are and what a possible plan would look like for you. Run for cover, let the dust settle, keep your powder dry, and then see where we are! The nation’s #1 veteran-owned gold dealer has fought for your freedom. Allow us now to fight for your financial survival. Call Midas Gold Group today at 480-360-3000 or 805-601-6000. We fight for every investor daily. Protect your retirement account and savings before the market takes it away. The worst-case scenario is you are holding some of your wealth. Gold and silver have always been worth something.
