Gold breakout!
Gold seems to have broken out of its descending pattern started in August 2020. While the movement could be ascribed to geopolitical instability, the simpler and more compelling narrative is that the investment case for storeholds of value keeps getting stronger as inflation and debt debasement takes center stage.
Gold seems to have broken out of its descending pattern started in August 2020 (see chart). While the movement could be easily ascribed to geopolitical instability, the simpler and more compelling narrative is that the investment case for storeholds of value keeps getting stronger as the theme of inflation and debt debasement takes the center stage in the macro narrative. Over the last few years Bitcoin (“BTC”) has been legitimately stealing the limelight from the yellow metal as the new and, in many ways, more effective store of value option. Yet there is no reason why allocation to BTC and gold should be mutually exclusive. In fact the opposite is true as the precious metal may be a valid back up plan to BTC given its physical finality vs BTC’s digital dependency. “Plan B’s Plan B” if you wish. That is provided the allocation is to physical gold, rather than “paper”, stored in a safe jurisdiction and shielded from any custodian and counterparty risk associated with the fiat financial system. The precious metal has been confounding investors for the last year and half; first declining in spite of rising inflation and ever more negative real rates and then, to the opposite, staying surprisingly buoyant in spite of a rising US dollar and rising real rates. According to UBS, family offices’ allocation to gold among is still in the bottom single digit. The inevitable weight of macro fundamentals should eventually prevail and bring gold back in favor.
Disclosure: Hold all assets mentioned. Not investment advice. Do your own research