In Gold We Still Trust: It’s a Marathon, Not a Sprint

With the gold price settling at its lowest level since March, there’s little appetite on Wall Street for hard assets lately. Indeed, we’re seeing the opposite of FOMO – you might even call it “SLOW-MO” or “NO-MO.”

It’s a dramatic shift in sentiment compared to April and May, when gold peeked its head above $2,000 a couple of times and all of a sudden, the mainstream press starting putting articles about precious metals on page one instead of page 20.

Now, gold is back on page 20, if it’s even mentioned at all in the mainstream media. Granted, it’s difficult to concentrate on precious metals when financial pundits can’t stop talking about government bonds.

2023 has been a strange year in which AI was all the rage during the first half, and now people are buzzing about the most boring investment of all, government bonds. Many new financial traders have never seen 4% to 5% yields before, so they’re piling into these so-called “risk-free” assets.

Of course, there’s nothing “risk-free” about government debt instruments. Anytime you buy a U.S. Treasury bond and the Federal Reserve continues to jack up interest rates, the bonds you’re currently holding will lose value. If you try to sell them on the open market, you’ll end up incurring a loss.

However, short-term traders can be like children sometimes. Their primary drivers are fear and greed, and their traders are often irrational because they’re just knee-jerk responses. Plus, it’s not helping the situation when financial advisors tout the traditional portfolio mix of 60% large-cap stocks and 40% – which, by the way, has performed poorly over the past two years.

Then, there’s the other elephant in the room besides government bonds: the U.S. dollar. As you can see in the chart shown above, the dollar appears to be a strong performer, especially when compared to the Japanese yen.

Charts like this, while important to be aware of, can be misleading. The media will generally depict the government and its currency in a favorable light, touting America’s fiat money as “strong.” Is this really what’s going on, though?

The numbers might not lie, but some career politicians and press agents will. In reality, the U.S. dollar is just the dirtiest shirt in a hamper full of dirty shirts: high inflation has destroyed the dollar’s purchasing power, but it’s holding up better than some other fast-deteriorating world currencies.

Thus, the self-appointed experts can trick unsuspecting investors into believing that cash is king, even though the reality is that cash is trash (to quote Ray Dalio). Anyone who tells you that cash is king is basically telling you that the grass is blue and the sky is green. Just look at your grocery, rent/mortgage, and utility bills to see how the U.S. dollar is really doing.

These are the same people who told you that they don’t see a recession (that’s what Janet Yellen claims), or that there’s enough oil to go around (even while gasoline prices surge and the Strategic Petroleum Reserve gets rapidly depleted). As always, believe what you see, not what you’re told.

And what we’re seeing is an economy that’s completely wrecked under the hood. Critical worker shortages in multiple sectors, homeownership has become entirely unaffordable with nearly 8% 30-year mortgage interest rates, and small businesses (which are the backbone of the economy) are going bankrupt at an alarming rate.

None of this, by the way, is a call to dump all of your stock and real estate holdings, or to go all-in on cash. Again, cash is losing value quickly and while it’s fine to hold some dry powder, relying entirely on government money is a surefire way to de-value your stored wealth over time.

The answer to all of these stated and implied questions is gold. Forget the FOMO fantasies and get real: What will your dollars be actually worth in the coming years? Can you trust government debt instruments to retain their value in the long run?

Short-term traders will continue to think and behave like juveniles. They’re trying their hardest to shake you out of gold and force you into unsafe investments. Just remember, you control your wealth and your investment decisions – and as long as you have gold, you’ll be fully in control of your financial future.