Here’s one of the best lessons I learned as a hedge fund manager…
It’s helpful to know what investors are buying. But it’s even more important to know who is doing the buying!
Case in point: I was intrigued when meme stocks traded higher. But just because these unprofitable (and often silly) stocks were on a tear, that didn’t make me want to buy.
I knew that these fickle investors would eventually lose interest and move on to the next shiny object.
Today I want to tell you about an area of the market that’s moving higher — one that has serious buyers behind it.
As I learned at the hedge fund, the key is to invest alongside the most powerful investors in the world. That way as their buy orders send prices higher, you’ll be in a perfect position to profit.
Let’s take a look at one of the biggest opportunities I’m watching in today’s market.
Gold Ignores Inflation Pressures
We’ve been watching gold carefully here at Rich Retirement Letter, but not yet buying aggressively.
Gold is supposed to be a great hedge against inflation because its price tends to move higher when inflation rises.
It’s a natural part of the inflation cycle. After all, if it takes more dollars to buy the stuff we need, then it should also take more dollars to buy an ounce of gold.
But you already know this has yet to be the case in 2022. Gold has edged lower throughout this year thanks in part to the strong U.S. dollar.
Even though inflation in America is extremely high, the U.S. dollar has been outperforming other currencies.
A big part of this is because the U.S. dollar is a source of strength and stability. So international investors want to own dollar-denominated assets during this turbulent time.
The U.S. has also been hiking interest rates more aggressively, giving international investors more incentive to invest here in the states.
But today there are signs that the dollar’s strength is overdone.
We could be due for a material pullback for the greenback. And if that happens, you can expect gold to quickly play “catch up” following record inflation levels.
That’s the backstory for gold. Now, let’s circle back to those deep-pocketed buyers…
Central Banks Are Stocking Up on Gold
This week, The Wall Street Journal posted a chart that caught my eye.
The chart below shows how much gold central banks and other big institutions like sovereign wealth funds are buying. Take a look for yourself!
Talk about a surge in buying!
In the last quarter, these deep-pocketed institutions bought almost 400 metric tons of gold to take advantage of low prices.
Buying gold is a good way for these government entities to protect the value of their own currencies.
And with the global economy (along with political events) creating a lot of uncertainty, I expect these deep-pocketed buyers to keep it up.
Meanwhile, private investors like pension plans, endowments and even high-net-worth individuals are starting to jump back in to gold.
Tuesday’s jobs report gave gold bugs another reason to be optimistic.
A jump in the U.S. unemployment rate signaled that the job market may not be quite as high as the Fed thought. That means the Fed may not have to hike interest rates quite as aggressively.
And this perspective helped to push the U.S. dollar lower, which means there’s less pressure on gold.
As I watch these events unfold, I’m getting a lot more excited about the prospect for precious metals. So make sure you’re using some of your retirement savings to invest in gold.
After all, it looks like gold is finally stepping up as an inflation hedge for your long-term wealth.