As a traditional “finance” investor, I tend to side with traditional finance views on many things – this led me to miss out on Bitcoin (“it is not a real thing), and big run-up in technology stocks (“they are too expensive).
As investing landscape evolves particularly under current regime of “easy money” by central banks (particularly Federal Reserve and European Central Bank), I find it more important than ever to be creative with investing – beyond traditional investing.
Traditional investing would tell me continue to invest in stocks because after 10-20 years, the sweet 8-10% compounded annual return will make me rich! However, many people forget about the occasional massive drawdown – including Global Financial Crisis in 2009 and Covid19 drawdown in 2020. There are a lot of people that lost money during covid19 drawdown in April 2020.
A lot of media will tell you about how central banks’ balance sheet is so stretched and therefore the stock should continue to rise.
Total assets of the federal reserve are a great proxy for the money that federal reserve has pumped into the financial market. Obviously then financial institutions do their magic and expand the total money supply.
What kept the Fed to keep pumping the stock? They were trying to save the economy, but it probably helped that they HAD ALL THEIR FINANCIAL INCENTIVES aligned with sustaining upward trend of the stock market. It just does not look right.
With two board members essentially being forced to leave because of trading disclosures, Federal reserve board member is likely to be a lot more cautious with pumping more money to save the market – they will now need to be more conscious with optics – something that probably acts more to restrain acting quickly next time there is a big drawdown.
Now – we should look at what central banks are doing – I am a big believer of “do as they do, not as they say”
Overall, it appears that central banks as a group are net-buyers of the gold this year. Bloomberg put out this suspicion in May 2021.
Also – government is trying very hard to track every single transaction of every citizen – with legislation that is looking to monitor accounts with $600. To me, this feels like a big infringement of privacy. There will be premium for currencies that afford privacy of transactions and I believe that physical gold will be one of the key currencies.
American privacy is becoming more scarce every day – the price for privacy is likely to increase. This is something that is uncorrelated to the money supply.
Just for reference, I share recent and historical gold price trend –
Spot price has been all over the place year – moving between ~$1,700 to $1,950.
Overall, it has been upward trend – expressed in terms of US $.
As the dollar strengthens again, gold is likely to come down, but financial market/stock market is likely to see much greater drawdown.
If that day comes, I will sell my gold to deploy back into financial market. If the day does not come, I hope to sell gold who will value the privacy of transaction more than I do.
As for where you can buy the gold, you can buy online! Just make sure you buy from authorized purchaser of the US Mint – just a way to minimize the risk.
*not investment advice
