If you have a home, you need good homeowners insurance or hazard insurance in case of a fire, flood, earthquake, or theft. A nice car requires significant insurance in case of an accident. A husband or wife requires a good life insurance policy to take care of a family unforeseen event. Health insurance is required to take care of a major medical situation. These are all necessary measures taken to prepare for a major accident or surprise. We hope we never need to use these policies, but they are there if we need them. The same is needed for our nest egg and savings. A proven asset that will be there when a major financial crisis occurs and has a proven track record of success. A major financial situation that will require a defense. Physical gold has always made the case to be a significant portion of an investor’s plan when market bubbles are created. We are in the mother of all debt bubbles that are getting bigger by the minute. The outcome is inevitable; it is just a matter of time. This will send gold prices higher. Physical gold will be there when we need it. We have seen recent news that will support the gold market that no one is talking about.
Covid variants are getting serious
The markets have been relying on stimulus and hope. As governments in the UK and other countries have started locking down their citizens again, the markets have seen little selloff as new lockdowns are bound to come with new rounds of free money and another stimulus. Instead of an end to the pandemic, we are seeing new lockdowns, new variants, and new vaccines. Instead of a market selloff, the markets are reaching new highs, not a fundamentals but on hopes of stimulus.
According to Yale Medicine,
A major concern right now is Delta, a highly contagious SARS-CoV-2 virus strain, which was first identified in India in December. It then swept rapidly through that country and Great Britain as well. The first Delta case in the United States was diagnosed in March and it is now the dominant strain in the U.S. The Pfizer vaccine is now 65% effective against the Delta variant. This is a far cry from the 95% effective plea from the vaccine. Dr. F Perry Wilson, a Yale epidemiologist, says,
Delta will certainly accelerate the pandemic. Delta, Gamma, Beta, and Alpha Covid variants are all out there. Yes, the vaccine will probably prevent serious illness in most cases, but what is the real game plan here? We know that trillions more are on the way. This recent variant news will send gold prices higher over time.
Central banks are buying gold again
According to the World Gold Council, central banks now hold more than 35,000 metric tons of the metal, about a fifth of all the gold ever mined.
Gold has been an essential component in the financial reserves of nations for centuries, and its appeal is showing no sign of diminishing, with central banks set to be net purchasers of gold once again this year. Gold’s primary roles for central banks are to diversify their reserves. The banks are responsible for their nations’ currencies, but these can be subject to swings in value depending on the perceived strength or weakness of the underlying economy.
“At times of need, banks may be forced to print more money, since interest rates, the traditional lever of monetary control, have been stuck near zero for over a decade. This increase in money supply may be necessary to stave off economic turmoil but at the cost of devaluing the currency. Gold, by contrast, is a finite physical commodity whose supply can’t easily be added to. As such, it is a natural hedge against inflation.”
Gold carries no credit or counterparty risks; it serves as a source of trust in a country, and in all economic environments, making it one of the most crucial reserve assets worldwide. Gold’s inverse relationship with the US dollar, another major reserve asset, is an added element to its appeal. When the dollar dips in value, gold typically rises, enabling central banks to protect their reserves at times of market volatility. Russia, China, Turkey, and India have all been purchasers of gold recently. These countries still lag behind Germany, France, Italy, and the US. Keep in mind the US gold reserves haven’t been audited for more than 60 years. A measure introduced by Alex Mooney, a US Representative from West Virginia, is calling for an audit of US gold reserves. Good luck with that one Alex.
Continued central bank accumulation of physical gold will send gold prices higher over time. At the same time, central banks will devalue currencies.
Pension funds are looking towards gold for safety
According to a report from Investment & Pensions Europe, a Dutch pension fund for specialty chemicals firm DSM is the latest firm to jump into the precious metal, allocating 5% of its portfolio to the precious metal. In a survey published by the World Gold Council on May 4, 2021, roughly 30% of UK pension funds said they were looking to increase their exposure to gold. The Ohio Police & Fire Pension Fund, currently with $15.7B in AUM, invested 5% of its assets in gold last year. This represents $800 million. Pension funds are severely underfunded. Some are in better shape than others. Longer bond yields are still very low and stocks take huge hits in times of market corrections. The Texas Teacher Retirement System also holds physical gold. It would make sense that many more pension funds will join the list. It won’t take many to push gold prices higher. The physical gold market is relatively very small compared to the bond and stock markets. Very few US states have physical gold as a major part of their pension system. As our Federal Reserve notes continue to be debased, increased pension fund demand will send the gold price higher over time.
We are experiencing the biggest real estate and stock joy ride of our lifetimes. Unfortunately, this is due to the biggest debt bubble being created in history. We are experiencing the final stages of the devaluation of our paper currency. This could take months, years, or can happen at any time. Insurance policies for our money need to be taken out now. The idea is to sell high and buy low. When the debasement finally happens, it will be too late to do anything. Preparations need to be made now. Investors need to be proactive, not reactive. If we look at the money supply created, gold today is as undervalued as it was in 1972 or 1999. When paper contracts are required to deliver actual metal and are not allowed to just roll over paper contracts to satisfy requirements, the gold price will skyrocket. We are getting closer to that day as each day passes. It doesn’t matter what the gold price does on a daily or weekly basis. There is a limited downside and great upside potential to the gold price as it will reflect many of the aspects covered above. A lower dollar is inevitable over time, as well as a higher gold price is inevitable over time. Your physical gold will be there when you need it, just like that insurance policy you pay for every month in case of an accident.