The Macro Moment: Is Gold Telling Us Anything?
Many look to the gold market as a reliable indicator of uncertainty as well as the future of inflation. If that is the case, why with 40 years highs in inflation has gold continued to trade sideways?
In this video I discuss how things might be changing with the gold market, longer term. Before that, the question is how reliable an indicator is it?
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I don't think it's as reliable as an indicator but I still like to trade around with it. If it pops, I take profits otherwise I just collect premiums from selling the options.
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Gold lost it's power back in 1971 it's become an increasingly manipulated market that doesn't follow what it's suppose to. Primarily because it doesn't have the gold standard anymore. Your FIAT money isn't backed by gold and silver anymore it's simply backed by the government and your faith in that government doesn't matter how much gold or silver they have. Instead what's going to matter is how much crypto you have ;)
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Actually the USD is backed by the productivity of the US economy (and in part the global economy since it is reserve currency). The idea that it is backed by faith in government is absurd.
As for the gold standard, that was done before it was actually done. The Eurodollar zapped that years before.
And it is a good thing. The fact that we left the fixed money standard allowed for the greatest expansion in human history.
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Summary:
In this video, Task discusses the current state of the gold market, highlighting that over the last decade, gold has provided zero returns. He emphasizes the difference between investing in gold and using it as a hedge against economic downturns. Task delves into the recent high inflation rates, the historical correlation between gold and inflation, and the potential future trends in the gold market. He also mentions the generational shift impacting gold ownership, with younger generations like millennials showing less interest in gold compared to baby boomers. Towards the end, Task touches on emerging technologies impacting the supply of metals and raises questions about the stagnant performance of gold despite economic uncertainties.
Detailed Article:
Task starts by addressing the lackluster performance of gold over the last 10 years, highlighting that holding gold since 2011 would have yielded no profits. He mentions that consistent buying could yield lower average purchase prices due to fluctuations in gold prices over the years. Task underlines the dual nature of gold as an investment and a hedge, suggesting that allocating a portion of a portfolio to gold as insurance against economic uncertainties is a prudent approach.
The discussion shifts towards the recent surge in inflation rates, with Task expressing skepticism about gold being the top indicator of inflation, attributing that role to the bond market. However, he acknowledges the historical strong correlation between gold and inflation, raising the possibility that the current dip in gold prices could indicate a future decrease in inflationary pressures.
Task delves into the idea of whether the gold market acts as a forward-looking indicator, referencing the market's reaction to events in the repo market and Deutsche Bank issues in September 2019. He suggests that the gold market, being valued in trillions, possesses a good sense of market sentiment despite price fluctuations affected by various variables.
The conversation then moves towards the generational shift affecting gold ownership, with baby boomers being traditional gold investors compared to millennials favoring alternatives like Bitcoin. Task predicts that as baby boomers transition out of the workforce and redistribute their wealth, there may be a decline in demand for gold as millennials prioritize different assets.
Moreover, Task mentions technological advancements, particularly in underwater mining, which could impact the future supply of precious metals, though the effects may not be realized for several years. He also ponders the lack of significant movement in gold prices despite prevailing economic uncertainties, suggesting that the market may be in a period of stagnation rather than signaling impending economic collapse or hyperinflation.
In conclusion, Task encourages viewers to share their thoughts on the gold market in the comments section, fostering a dialogue around the complexities of investing in gold and interpreting its signals amidst evolving economic landscapes.