Gold as an investment and part of a portfolio
John Rubino joins us today to discuss the changes in the gold market and where gold fits in a portfolio. Throughout the year we have been discussing the COT reports and the short position of the commercials. John thinks with this recent sell off in gold the commercial short positions should decline.
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Wow….John Rubino, I could not disagree with you more. I don’t mean just s small part of that interview either. Most of it was wrong as you offered up the Mothers Milk that the gold bugs just never seem to get enough of.
I will refer you to my comments this morning on the Daily Wrap thread though. Gold has been a TERRIBLE investment for almost 40 years running. You were far better off just collecting simple compound interest in all the years since the bubble top in 1981 than you were in holding ounces of gold during those years.
You are assuming far too much in my opinion and first among these is that a debt implosion (which is the hallmark of a deflation) is going to benefit precious metals. Instead, you have concluded that a debt implosion will result in the collapse of the US dollar and that is patently incorrect.
During the default stage that is still coming the dollar will soar and by extension, gold prices will decline. Any inflation we see will have to be ginned up and articficial giving us a sickening period of stagflation should it happen that way.
But metals will not likely appreciate.
The second thing you asserted was that we have embarked on a new secular gold bull market. Again, I wholeheartedly disagree. We have not even managed to break above the highs of last year so its premature to claim any kind of bull at all is in progress.
Maybe just wait a bit longer. If gold stages a breakout there will be plenty of time for us to discuss this again but I really don’t think that breakout will happen. The Euro is doomed by the looks of it as Brexit approaches and with interest rate intentions on the rise we should be anticipating a much higher dollar in the months and years ahead.
That makes gold a potentially very bad investment choice until we have information that indicates otherwise. This dead cat bounce since January was fantastic.
But now it is done and prices will begin to fall back down.
Gold is slightly undervalued, but generally fairly valued.
Don’t forget that it is a currency. Debt is the real reason gold is up from $250 in 2001.
All else is noise.
Debt is up 5 times since 2001, from 4T to 20T
Gold is up 5 times since 2001, from $250 to $1250.
Do the simple math in other currencies, it is quite accurate.
Gold is factually over valued on the long term charts based on inflation rates. You need to look at its median value and forget your US centric view of what the Fed does.
We live in an interconnected world now Dave and the US is just one country. By your own reasoning I suppose gold should be 10 or 20 thousands dollars an ounce when you take into account all the related money printing of Europe, Japan and China.
But it is not 20,000 dollars an ounce.
That should indicate to you that there is trouble in your math and that gold is not valued simply based upon what the money supply comes in at. If it was that easy there would never be any debate about the value of gold from day to day.
I appreciate you want to simplify the idea although I don’t recommend that approach. What we are about to experience is no ordinary part of the economic cycle. It is a very exceptional time that is coming for a number of reasons not least of which is the demographic headwind I have alluded too.
But also because the globe is awash in terrifying and unprecedented levels of unrepayable debt that ordinary inflation will be unable to wash clean. In fact the medicine of the cleansing process will actually bring on the dreaded defaults as interest rates rise with an inflation cycle.
All of it is being avoided just to preserve the system as it is. But there are no answers at this stage of the game. And there will be precious few places people can hide to avoid the catastrophe that is coming.
Gold will not be one of them no matter how much the bugs pray it to happen. What you probably need is an deflation proof business.
It is that simple. Seriously it is.
At 1900 it was overvalued, people thought the end was near
At 1050 it was $200 undervalued.
Markets are doing what they do, overshoot and undershoot real value.
It is all about debt, nothing else.
My worry is the complete repudiation of debt by foreign countries.
Right now it is in their interest to use the usd, so therefore, hyperinflation not a threat.
Gold is up 41x since 1970. Nothing compares.
Show me a single investment that has outperformed that.
Gold and silver shares, well good luck with that
Sorry Dave, gold is right back to where it started in the 1970’s in inflation adjusted terms as I have already demonstrated. In other words it has made zero progress and was quite frankly a terrible investment for the last few decades. Now, it may be at a low in inflation terms although that is not guaranteed since we don’t have adequate records for comparison during all the years gold was fixed in price. I happen to think it will fall lower yet before this cycle is all over and it is because of the specter of a global deflation that will happen. So there must be another reason for it to rise if it does but it won’t be because of the money supply.
Here is an article and chart from Casey Research for you. The article will no doubt make you happy but its the chart I want you to focus on. Notice how close we are to seeing 1000 dollar gold again?
Do you really doubt we will get there. And secondly, notice how this does not support your thesis of the money supply in evaluating gold for the past 50 years for if it did gold would be trading at many thousands of dollars to the ounce in those intervening years.
Gold is near an all time inflation-adjusted low. — Casey Research
https://www.caseyresearch.com/articles/gold-is-near-an-all-time-inflation-adjusted-low
you said “inflation adjusted terms as I have already demonstrated. In other words it has made zero progress and was quite frankly a terrible investment”
I am still waiting for your reply.
Since it si such a lousy investment as you purport, show me a single investment since that time, that has done better. You can even include dividends in your return analysis. Seriously, come up with one.
Show me a single investment that has outperformed gold since 1970. Up 41x.
You are talking about a once in a lifetime event, Dave. Gold that went from a fixed price in the 1960’s to a market price in the 1970’s is an exception, not the rule and it will never happen again.
So we don’t care that gold rose from 35 dollars to over 800 dollars between 1970 and 1980 as that was a period of severe speculation and excess. We know that to be a fact because the bear market that followed lasted for two decades.
You have got to stop using the government fixed price number as your starting point to show how impressive golds performance was. It ONLY performed because the price was suppressed for decades but that number is hardly representative of golds value.
But I suspect you don’t care for facts. What you are doing is adding to the propaganda cult that gold promoters pass off as knowledge. It is closer to fact manipulation though if not actual fraud in reporting because you are implying golds future performance will somehow mirror its past.
And that my friend is dead wrong. Gold in 1980 was selling for some 800 dollars. Thirty Seven years later and gold is selling for 1230 dollars US which is a mere 50 percent greater. Where was the follow through? How come gold could not jump 41X between 1980 and 2016?
So the ONLY period of time that gold posted good numbers was during the ten extremely speculative years between 1970 and 1980 and since then it has been a lost dog searching for a home and trying to sort out its own true value.
Apparently that value is only 1217 dollars as of this morning(and falling) so please don’t feed me anymore propaganda.
Gold has been a very poor investment and financial instrument. Here’s the only reason gold did well in the 1970’s.
https://en.wikipedia.org/wiki/Nixon_shock
Roosevelt since the 1930’s made it a law you could not own gold bullion. So, that whole time, that amounts to after 40 years gold started trading and could begin changing hands once again.
Our Founding Fathers who set up our Constitution and Bill Of Rights was for a very good reason. Now Washington is full of criminals who are bought off by foreign interests who are guilty of not only treason but major bloodshed around the world starting unnecessary wars for profiting the Industrial Military Complex.
What Americans can now expect is for the financial system to completely be destroyed and implode. It’s not only inevitable, it’s certain and assured. It’s completely unsustainable and an event is in our very near future.
If we were still on the gold standard, all of this could have been avoided. What we have is out of control corruption and gold has been set free but it’s not so. It’s highly controlled and manipulated to serve usury and banking for profit at the expense of the citizens. We have always had banking and loans etc. but never before on this scale. We are now faced with another world war because there will never be peace. Money and power rules the day and the very root of evil.
In conclusion, the whole financial system and society is on the verge of complete collapse and destruction. Everything is leveraged. Its a powder keg waiting, not for a match but just a spark to go off.
Our Founding Fathers warned us and we as a nation let the criminals start running things and now all our lives are at stake. Gold and silver as money could have avoided all the fatal perils we are now faced with. The gold standard was not a perfect system by no means but we would have never built up a gargantuan of debt levered to the next galaxy ringing in our demise either. You can thank the criminally installed Fed and the criminals now holding public offices.
YOU CAN TAKE THIS TO THE BANK !!! These are the truths and facts. I could fill the page over and over again. There’s much more.
Next week:
ISM Manufacturing: Wednesday, June 1 at 10am ET
ISM Services: Friday, June 3 at 10am ET
Matthew, do you feel like it is a buying opportunity in IPT.TO?
Right here at 0,59-0.60cad ? Or is it in a downtrend still?
Blue, I do consider it a buy for those who don’t already own a decent amount. It was as much as 31% cheaper this week than it was less than a month ago and still looks like it wants to go higher on the weekly chart.
Thanks a lot Matthew, your opinion I value a lot. I plan to go long IPT for the next move up into the second half of the year😉
Al, I’d like to learn more about what you mean by saying that gold is the asset of last resort. John called it a core position, but previously you didn’t call it core, you called it insurance. I’d just like to learn more about your thinking.
You know, from 1971 or so up until 2000, my pea brain says gold is like insurance. But now my own sense is that using the word core is better. Given the global debt, the global money printing, the cheating and lying. All the stuff the John and James Turk have taught us. Core for me is a better description. But you say asset of last resort. Would like to learn more please. Thanks!