Back to gold


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Natasha Poole

24 June 2022

With the ASX having hit its lowest point since December 2020 earlier this week, and housing prices in major cities taking a turn, experts have stated that we may have entered a period of stagflation. This is often a good indication that a recession is on the cards.

America has officially entered a bear market and we will most likely follow suit, especially under the current government?s economic approach of either cancelling everything (even, electricity!) or spending everything?

The RBA, along with all of Australia?s major banks, have increased interest rates more than they have in over 20 years. Given this, is likely we will see a significant drop in the housing market. This ought to have been anticipated after over 30 per cent increases in house prices in some areas last year and a virtually interest-free period which had to come to a close.

The cryptocurrency market has taken a huge downturn too, as has the S&P 500. Investors, in many cases, are being forced to withdraw their funds from Bitcoin, altcoins, or shares to repay their mortgages or meet living costs.

As inflation is predicted to reach 7 per cent in Australia by the end of the year, the contingent of investors who previously had the disposable income to invest in cryptocurrency, property, or the stock market, is likely to shrink.

The minimum wage has been increased by the ALP ? placing an enormous strain on business owners and employers ? meaning the cost of living is very much at the forefront of people?s minds.

Energy prices have already increased and are set to continue to do so as the ALP hastily attempts to transition to renewables without any justification or rationale behind such precarious plans.

The stock market is ultimately about one underlying principle, ?confidence?. When people are panicking about food prices, mortgage repayments, and a predicted energy crisis, most investors who may have felt that their savings were better in shares than in the bank, and who may have doubts that they will be able to outlast a bear market, will sell, driving prices down lower.

Share trading (and in particular, alternative currency trading), has become increasingly popular amongst recreational traders over the last 10 years. However, these investors will also be likely to withdraw from the activity due to having a lower disposable income, to quite literally, dispose of.

Cryptocurrency trading and its counterparts will no longer be a frivolous luxury people can afford.

We can see this occurring as the cryptocurrency. Meta-currency markets currently sit at their lowest points since 2018, with some previously considered relatively stable coins down by over 75 per cent since last year. The trend of buying crypto no longer appears financially viable, nor profitable, when there are actual concerns within society that ought to be addressed. Only those who have invested for the long term can afford to stay in this type of market and these individuals tend to be educated investors, who most likely would have anticipated an economic crisis, given the global events of the past two and a half years to three years, as well as the current geopolitical climate.

So, what options do investors currently have when the housing market is likely to take a significant downturn, when share markets are heading towards two-quarters of negative growth, and when alternative or digital currencies are at their lowest point in almost 5 years?

One might argue that currency trading is always an option. However, would you risk your savings on currency investing during a time that is as uncertain and unprecedented as this? The idea sounds rather like ?potluck? to me, or, indeed, a stab in the dark given the number of ?Woke? totalitarians around who seem quite perplexingly intent on crippling economies left, right, and centre of them.

Regardless of the surrounding lunacy being displayed, perhaps we ought to go back to the basics of investing and to what we have seen has been proven to have the ability to outlast a major fall in the stock market on many an occasion throughout history ? gold.

Gold is one of the only investments that have consistently displayed a negative correlation between its growth and a fall in stocks over 50 years.

During almost all stock market crashes over the last 50 years, gold has either negated the negative growth or significantly buffered it.

How can we combat inflation? Perhaps, instead of playing the stock market for lucrative profit, which only contributed to inflation in the first place, we ought to consider sticking to the simplest option and investing in the concept of consolidation, which in this case, presents itself as an investment in gold?

There is nothing quite like going back to traditional values in life and adopting an originalist approach.

As Marcus Tullius Cicero pointed out in the 1st century BC, ?If you have a garden and a library, you have everything you need.?

Thankfully for the West?s integrity, the greedy gains from crypto may no longer be an option.

Nevertheless, my words for those who wish to beat the bank and have worked hard for their savings are, as the Judgement of Paris also highlighted: nothing has the potential to deliver during a recession or a fear of deprivation more than gold.

It is about time all these meta-currency maniacs of late came down from their high horses and put their feet firmly on the ground?

I have no doubts that the same people who have been spending benefits on bikinis and Botox, handouts on hangovers from Bourbon and coke, and the taxpayer?s money on marijuana, are also the ones who have been buying Bitcoin when they don?t even know what Warren Buffett?s stance on it is, (which, I might add, is also mine on cryptocurrency in its present state).

?Qu?ils mangent de la brioche.? ? Let them eat cake.

Source: https://www.spectator.com.au/2022/06/back-to-gold/

Von Greyerz: Concurrent Deflation & Hyperinflation Will Ravage The World https://www.zerohedge.com/markets/von-greyerz-concurrent-deflation-hyperinflation-will-ravage-world
Midas Bound
By Bill Bonner
Editor, The Daily Reckoning Australia

Dear Reader,
You can protect your wealth from inflation in many ways ? with land, art, housing, business investments, collectibles. But gold is the most ?liquid?. It?s bought and sold easily. And you don?t have to become an expert on anything?or pay attention to it. It?s like a pet dog who never needs to be fed or taken for a walk. 
Like a good watchdog, gold protects against thieves and natural calamities. It drives off consumer price inflation and barks when it sees your house on fire. Over the last year, consumer prices have gone up about 8%, some much more than that. And ? measured by the Dow ? about 10% of stock values have gone up in smoke. Gold has had its good and bad days but has generally kept investors from losing money.   
By long tradition, now almost an instinct, people buy gold when they fear that the paper currencies may not be as stable as they had thought. And by fairly recent innovation, they buy ?paper gold? because it is a lot easier than buying the real stuff.
One of the key qualities of gold, however, is that it?s very hard to add to the supply. In this regard, it is the very opposite of cryptocurrencies. You can create quadrillions of new cryptos before teatime?at minimal cost. But every new ounce of gold takes time and money. It has to be found, mined, minted, hauled, stored, and protected. It requires engineers, capital, machines, and know-how; it can?t be done by some skinny kid in his mum?s basement. 
Sleeping Beauty
In the hundred years before the creation of the Fed, for example, prices in the US went up and down?but came to rest in 1913 about where they had been in 1813. Nobody lost money by keeping his money in gold. (By contrast, the saver who put a dollar bill in his safe in 1913 now has only 3 cents worth of its former purchasing power.)
Lately, however, many commentators have complained that gold is taking a snooze. Consumer price inflation has become headline news. But gold stays in the doghouse, unconcerned, almost nonchalant in the face of the worst inflation in 41 years. Why so?
Part of the answer may be simply that gold had already anticipated today?s inflation. From December 2015 and September 2020, the gold price almost doubled ? running far ahead of price increases. By this logic, gold won?t have to go up for years.
Another part of the answer may be that the ?gold supply? is not as tight as we think. The supply of ?paper gold? ? like paper money ? is boundless. 
Paper gold glitters, but it is not gold. Gold certificates, pool accounts, gold futures accounts, and ETFs ? are ways to gain ?exposure? to the price of gold without the muss and fuss of owning lumps of heavy metal. No need to bite into the coins to see if they are real. No need to go to the coin dealer?no need to put the coins in a bank lockbox or bury them in the backyard. 
Paper gold is much easier to deal with than real gold, so why not? Paper gold is ?backed? by real gold. It?s linked ? by contract ? to solid metal, Au, atomic number 79. What could go wrong? 
What could go wrong? What always goes wrong! Iron links, binding contracts, unbreakable promises ? all give way, sooner or later. Were it not, the divorce courts would be empty, contract lawyers would be out of work, and politics would be as honest as prostitution.     
Gold?10 times
There are said to be 10 times as many ounces of gold represented in ?paper gold? contracts than actually exist in above-ground metal. Investors didn?t have to buy gold. They could buy paper. And since the market could add paper easily, the price of gold didn?t rise.
Investors don?t really want gold anyway. They just want the stability and security of the yellow metal. And in normal circumstances, some buy and some sell. Prices go up and down. Paper gold purveyors can make their margins, take their commissions, and honour their obligations. All is well.
But what about when markets begin to go haywire, and investors want their money? As the price of gold shoots up, where do the paper gold companies get the cash to settle their claims? In other words, what happens when there is a ?run? on paper gold?
Of course, paper gold is ?stable?. It?s backed by more paper! Contracts, insurance, reserves. And it all works beautifully?until it doesn?t work. Links are broken. Promises are forgotten. Money disappears. 
?So, sue me!? say the promoters.
Paper gold is a good way to bet on the price of gold. It is not a good way to ?hold? wealth.
The way you make money over the long haul is by buying low and selling high (we?re not giving away any Wall Street secrets here). And the way you do that is by getting out of stocks when they become overpriced?and waiting (in gold) for them to become bargains again.
But don?t expect paper gold to save you in a real crisis. When the going gets tough, physical, tangible gold is the only real gold. Paper is just paper.
Bill Bonner,
For The Daily Reckoning Australia
Isn't also true that many sellers of paper metals have the option to redeem the paper in more paper AKA FIAT instead of handing back physical metal on demand?
I do know they have the option to offer a fiat to settle for contracts that stand for delivery. I remember a fella on YouTube stood for delivery and waited over 6 months before he could collect it. He mentioned that his request wasn't received well either.



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