PROSPERITY PUB MARKET TALK
Why Everyone’s Rushing Back To Gold Now
Have you seen that rally in gold the last few days?
We sure did, and we wanted to find out what was going on.
So we reached out to the best commodity expert we know: Geof Smith.
And in a short 5 minute chat, he was able to give us the rundown on what’s happening and where things could be headed next.
Paper Gold
He opened the conversation with a line that instantly became a classic:
“A lot of traders are realizing they’ve been stupid.”
He clarified by stating that there’s a lot of “gold” trades out there that are just paper gold without any actual gold backing.
As an example, he called out gold miners: GDXJ for example, the Junior Gold Miners ETF.
When you buy GDXJ, at the end of the day, you’re investing in a company — not in actual gold.
As war, inflation and currency devaluation increase, more and more traders are coming to the realization that most — or even all — of their “gold” holdings aren’t actually gold.
And as more traders realize this, the flight to true gold will continue to accelerate.
Central Banks
Next up, Geof tells us that Central Banks around the world are buying up gold at unprecedented rates.
In fact, China’s central bank has bought more gold than any other country.
It seems this strategy may be part of a larger trend to diversify reserves away from traditional fiat currencies and towards what has traditionally been considered a more stable, tangible asset.
Dollar Past Its Prime?
This next one goes deep.
For the past 8 decades, the US has enjoyed the benefits of serving as the world’s reserve currency.
This means that most, if not all, international transactions had to be conducted in US dollars, enabling the US to influence global economic policies and maintaining significant leverage over international financial markets
Reflecting a broader shift towards diversifying economic alliances, Geof went on to mention that the BRICS countries — Brazil, Russia, India, China and South Africa — are starting to do a lot more commerce outside of the US dollar.
This shift suggests the US dollar may indeed be past its prime as the world's unchallenged reserve currency.
In response, countries are increasingly turning to gold, while the global economy awaits the rise of a new, robust reserve currency to take the dollar's place.
Good Old Advertising
Is it just us, or have you noticed a barrage of gold ads on the TV and radio?
A few months ago, we even saw gold bars available for purchase on the Costco website!
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