Gold's bull run is just starting

Mainstream media has once again this week been gold-struck - the price shot past $3,500/ounce, a gain of more than 42% in the last 12 months. Compare that to the S&P 500 index, which is up by almost 17% in the same period. Over the last decade the gold price has gone up by some 140% and the S&P's total return before inflation has been around 200%. This last decade has been characterized by great uncertainty, perhaps the greatest since the end of the Second World War.

Uncertainty, whether economic or political, is what really drives the gold price. When the world looks and feels more stable then investors don't feel the need to seek the protection gold gives, against the collapse of governments, economies, social systems. If we look back at the last ten years we see fragmentation on many fronts. In 2020 we had scarcely emerged from the Great Financial Crisis of 2008 before the world went into lockdown hysteria over Covid-19.

Globalization ground to a halt as supply chains choked up; central banks aggressively cut interest rates and governments inundated their citizens with newly created money. Result? Inflation hitting its highest in 40 years and now, like a devil who has escaped his bottle, proving difficult to bring under control. President Trump's upsetting the apple cart with his tariff war will inevitably stoke inflation for Americans.

America's humiliation in Afghanistan was confirmed in 2021 when with tail between its legs it withdrew from its longest war. As if sensing American military reticence Russia invaded Ukraine the following year. In the Middle East the running sore of Gaza drags on.

And this week there has been a highly visible demonstration of the nascent new world order in Beijing, as the trickster triumvirate of Putin, Kim Jong Un and Xi Jinping link arms and swap jokes. It's enough to send shivers down the spine.

The traditional norms of government - carefully chosen words, policy consistency, conventional alliances, respect for the so-called 'rules of international law' have all been tossed into the garbage.

No prospect of certainty

As if all that is not enough to explain gold's remarkable bull run, there is the demise of the currency used as the international reserve. The Dollar's steady but relentless decline is a straw in the wind. A decade ago it briefly looked as though the Dollar's decline in the world's foreign exchange reserves might be reversed but no such luck.

Incoherent policies in the US and Europe, including the UK, are turning bad to worse. In the US the fiscal deficit this year is almost $2 trillion (£1.5 trillion) and its national debt is now $37 trillion (£27 trillion). This is clearly unsustainable but no politician, whose idea of long-term is the next four years, seems to be willing to admit this is a serious matter. Ernest Hemingway had a quip for this. How did he go bankrupt he was asked. "Two ways. Gradually, then suddenly."

In the UK the new government recognizes that it cannot afford its super-sized welfare bill but its hands are tied by a population unwilling to swallow budget cuts. Result? Taxes are going to rise to reach a new post-1945 high. That will be as popular as a bucket of vomit.

Efforts to get peace in Ukraine, Gaza, Sudan, are paralyzed. Sabre-rattling in Beijing, Moscow, and other capital cities goes unchallenged. Western Europe cannot afford (without much greater borrowing or some alternative) the higher defense spending now proposed. West Germany, once Europe's powerhouse, is barely above economic stagnation.

Don't panic!

The conjunction of events seems to be approaching meltdown. We are probably a long way from that. But it's only sensible to build defenses where we can.

Meltdowns impact in different ways - food, shelter, clothing, communication, transport; all can become threatened if government proves weaker than it appears. Persons who go into politics and rise to government power are no more clever than the run of average. They have the same weaknesses, the same desires, as the rest of society. How much do you trust your neighbor to run the economy, or to safeguard your hard-earned money?

It's a fiction to call the notes in your wallet money. That fiat money survives only because of government rules and social order. That fiction will be one of the first dominoes to tumble in any serious crisis. We had a taste of that in the 2008 Great Financial Crisis. That's why Glint was created, so that anyone can get an alternative to fiat money. With Glint you can hold gold as an asset and use it to pay your bills. Gold is like a monetary stockade, built to withstand any predator.

For UK clients: At Glint, we make every effort to demonstrate a balanced conversation between gold, silver, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

For US clients: Graphic representations of value are for illustrative purposes only. The Glint debt card is issued by Sutton Bank, member FDIC. The sale, purchase and storage of precious metals are offered by Glint and not Sutton Bank. Your investment in precious metals through Glint is

·        Not insured by the FDIC.

·        Not a deposit or other obligation of, or guaranteed by, Sutton Bank.

·        Subject to investment risks, including the possible risk of loss of the principal amount invested.

All investments involve risk, including possible loss of principal. The value of precious metals is affected by many economic factors, including but not limited to the current market price, demand, perceived scarcity, and quality of the precious metal. Precious metals can increase or decrease in value. Past performance is not a guarantee of future results. As such, investing in precious metals may not be suitable for everyone.