Hard Assets Alliance was created as a cooperative of investment professionals who believe there’s a better way to invest in precious metals. This is a guest perspective on the markets from one of these partners; we hope you enjoy it.
“There’s a lot of pressure into gold, and we’ve just barely begun this cycle,” says Dan Oliver, founder of Myrmikan Capital. In an interview at Kitco, Mr. Oliver doubled down on his expectations for gold.
“Oliver noted that once gold had broken above $1,350 an ounce, institutional investors started to pay more attention, especially once heavyweight fund managers like Ray Dalio of Bridgewater Associates started publicly advocating for gold.”
Something The 5 highlighted over a month ago when we picked up on something Dalio said in a rather long-winded essay at LinkedIn: “It would be both risk-reducing and return-enhancing to consider adding gold to one’s portfolio.”
In the aftermath of Dalio’s pronouncement, gold notched its highest finish since May 14, 2013. (As Dave so elegantly said at the time: “[Dalio’s] reasoning doesn’t matter as much as the fact it’s Ray Freakin’ Dalio who’s saying it.”)
“None of these institutional guys want to be heroes,” says Oliver. “Once a guy like [Dalio] says it’s OK, then they can all do it…
“What’s interesting is that all the institutional money is trying to squeeze into a market that is very small,” Oliver continues, “and it’s hard to figure out how to do it, and that’s what they’re scrambling to figure out.
“So I think there’s a lot of momentum behind this move,” he says.
Just how much momentum? Well, gold sits at $1,503.00 at the time of writing… and when we say Oliver doubled down, we mean that literally. He forecasts gold $3,000.
Another advocate for owning gold — perhaps before Dalio — is Robert Kiyosaki, best-selling author of Rich Dad Poor Dad.
Like it or not, Robert says, “Recession fears are spreading. Meanwhile, gold has risen nearly 20% since… December when Trump warned: ‘I am a Tariff Man.’”
According to MarketWatch, “During that time, [gold’s] left a lot of other popular investments trailing in the dust. It’s beaten the S&P 500 stock index by a hefty 15 percentage points… It’s crushed popular investments like Apple, Alphabet and Netflix. It’s beaten Tesla by 53 percentage points.”
From Tariff Man to Tariff Heaven
Robert goes on to say the escalating trade war’s played no small role in gold’s recent breakout:
“President Donald Trump announced 10% tariffs on the remaining $300 billion of Chinese imports [and] China let the yuan weaken and rise above seven against the U.S. dollar for the first time in more than a decade.
“Trump eased tensions… after announcing he’d delay at least some of the tariffs. But the trade war is still very much alive. Now we have the currency wars to deal with too.
“Gold is up because no one knows if the U.S. currency is going to follow in the yuan’s footsteps,” says Robert.
“People are concerned,” says RJO Futures senior market strategist Phillip Streible. “If I had money in the bank, I [would] sell the dollars and use that money to buy gold. You are divesting yourself from your currency by selling it and buying a hard asset.”
Why divest dollars?
“Most people think of dollars as money,” Robert says, “but the reality is that the dollar is not. An amusing way of looking at this is to realize you can buy $10,000 in cash from the U.S. Bureau of Engraving and Printing for only $45. The catch is that they’re shredded.”
More to the point: “Since Nixon took the dollar off the gold standard in 1971, it is no longer money.
“Before 1971, there was a relationship between a dollar and how much gold was backing that dollar in the U.S. Treasury,” Robert says. “After 1971, that dollar was not backed by anything other than the full faith and credit of the United States government.
“[The dollar] can go up and down in value depending on how other currencies are performing and based on many economic conditions. It is tied to nothing and can move in either direction very quickly.
“The good news is you can [use] fake money to buy real money and real assets,” says Robert.
And here’s the thing: “When I purchase gold,” says Robert, “I do not expect an ROI because I am not taking a risk.
“When I purchase real gold… I purchase [it] forever. I never plan on selling. Just as Warren Buﬀett holds stocks forever, I will purchase gold… forever.
“I use [gold] not as an investment but as a hedge,” Robert says, “and [now] you can easily get started building your wealth through gold…”
As for oil, it’s up 75 for a barrel of WTI at $54.39. And, well, we already mentioned the price of gold above…
“While other parts of the economy may show some weakening, consumers have remained confident and willing to spend,” says Lynn Franco of the Conference Board that surveys 3,000 U.S. families to track the consumer confidence index.
While expectations for the next six months cooled marginally from July, the survey’s results show consumers are as optimistic about the overall current economy as they’ve been since 2000.
The Case-Shiller home price index stayed static in June, below consensus, making year-over-year growth now the slowest since 2012. A separate home-price measure from the Federal Housing Finance Agency also clocked in below expectations. Perhaps a sharp decline in mortgage interest rates will put a floor under the housing market…
“President Trump has repeatedly claimed that the United States does not bear the costs of [trade war] tariffs,” says an article at The Hill.
But according to the Congressional Budget Office, trade tariffs enacted by Trump’s administration will cost each U.S. family $580 by 2020.
Doesn’t sound like much? (Although we’re pretty definite you could think of other ways to spend $580.)
“That figure — which does not include new tariffs scheduled to go into effect in September and December — amounts to a significant chunk of economic growth. It is the equivalent of roughly $60 billion in lost economic activity,” The Hill reports.
Not only that: “Higher trade barriers — in particular, increases in tariffs — implemented by the United States and other countries since January 2018 are expected to make U.S. GDP about 0.3% smaller than it would have been otherwise by 2020,” says CBO Director Phillip Swagel.
But hey, look on the bright side — the CBO calculates trade war tariffs will add $33 billion to the U.S. Treasury.
But… that’s a net loss of $27 billion, right?