Eoin Treacy's view -
Gold is extremely under owned in Western investment portfolios. Because supplies of above ground stocks normally available to satisfy Western investment demand have been severely depleted by flows to Asian investors, the price dynamics could be explosive.
Gold has enjoyed a stealth bull market since the advent of radical monetary policies around 2000. As the chart below shows, gold has been the best performing asset class since then, a fact that is completely unrecognized by main stream media and conventional investors. The painful correction from 2011 to year end 2015 camouflaged gold’s strength and explains why most investors remain complacent as to systemic risk, intellectually understanding the unsustainability of radical monetary policy but unmotivated to seek gold’s protection.
It seems unlikely that the long term erosion of investment confidence, the onset of a secular bear market in financial assets, and further advances in the stealth bull market for gold will take place in a linear fashion. There are bound to be shakeouts and fake outs along the way to camouflage the underlying reality that the global financial system as we know it is in extremis. We also believe that the current sharp correction in the precious metals complex is a setup for another major advance toward new highs in metal and share prices. We therefore recommend taking advantage of current weakness to build or establish new positions.
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I often think that the role of gold as a hedge is misunderstood. It did well in the 1970s because investors were worried about inflation and outperformed from the early 2000’s because people were worried about deflation. Therefore it is probably best to think about gold as a hedge against the best efforts of the monetary authorities to debase the currency; regardless of what that currency might be.
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