Oh boy … the last few years have been a whirlwind when it comes to investing. With crashes, extreme levels of uncertainty and roaring upswings in traditional markets, many investors had it tough. Unfortunately, the reality is things may not get easier anytime soon.
Of course I could be wrong … I’m the first to admit that. However, too many statistics are telling me to invest at my own risk.
With a combination of first-time occurrences like the COVID-19 pandemic, mass money printing for stimulus checks, the Russia-Ukraine war and Greenies clamping down on fossil fuel use … most mum and dad (retail) investors were left watching their balances dwindle, specifically during 2022.
On the other side of this, just like every major recession we also saw a great transfer of wealth from the poor to the rich. Whether we like it or not, the rich get richer and the poor get poorer.
If that’s the way the system is set up, why not position yourself on the right side? Atleast that’s what we teach at the Global Wealth Club.
Anyways, that’s beside the point of this article.
With many of the above situations still looming … many are left wondering what’s the best asset to keep their money safe moving forward.
Is it to hold cash which continues to devalue with inflation? Crypto which is down nearly 80% from its 2021 highs? Traditional stocks which have taken a beating? Or is it time to look towards the “less sexy” investments that have stood the test of time … something like gold?
Let me share my thoughts with you on gold…
Gold Historically
Gold historically has been the safe haven asset during many of the unprecedented events we’ve seen and experienced over the last 100 years. Historically, it’s always returned well during unnerving times.
(To some, it’s been surprising we haven’t seen the same appreciation of gold since the start of the crazy decade of the 2020’s).
Before we get into the price of gold, how it’s trended recently and from my personal perspective where I see it heading across 2023 … let’s first recognise why some believe gold SHOULD HAVE performed well over the last few years.
1. Gold has been known to be a hedge against inflation and currency fluctuations.
Often its value tends to increase when the value of paper money decreases. Look at the image below of the M2 money supply (an indicator of total money supply) to see its drastic rise during the pandemic in 2020. With such a rapid increase in total money supply during these recent years (a devaluing of the dollar) some would have expected to see an appreciation in the price of gold as a response.
2. Gold is often referred to as a safe haven asset, the type of asset often sought after during uncertain and unpredictable times.
It’s fair to say we’ve experienced a roller coaster of events since 2020. Although we saw two peaks in prices of gold (shown below) at the height of the pandemic and the Russian invasion of Ukraine … its price movements still felt underwhelming given the severity of these situations. In the end, the majority of those gains were completely retraced (and more) within the same year.
Source: Gold Chart on Trading View
3. The relationship between rising interest rates and the price gold.
Historically when we see an increase in interest rates this correlates to two things. (1) lower prices for risk on assets, think stocks & cryptos during 2022, and (2) money flow towards risk off assets, such as gold. The two charts below highlight this point. Every time we see a steep increase in interest rates (Figure 1. Red Lines) you can also see a correlation to rising gold prices (Figure 2. Blue Lines).
Figure 1.Interest Rates
Figure 2.Gold Price in USD (Logarithmic Scale)
By now, you may start seeing why the last few years have delivered prime conditions for a good run on the price of gold and why many investors have felt underwhelmed by the results.
Where is Gold Heading 2023?
At the time of writing this gold is currently trading at $1907 USD/Ounce which is still a whopping $160 away from its all-time highs.
If you refer back to figure 1 and figure 2 you’ll also notice that despite the fastest rising of interest rates we’ve seen to date in modern history … it’s also one of the first times the price of gold hasn’t rallied in response.
While this may worry some investors about the future outlook of gold I’d like to remind you that while I don’t necessarily believe history repeats itself perfectly … it seems to always leave clues for future events.
For this reason, my OPINION is it’s likely gold may move upwards in 2023.
There’s too many reasons why I believe this. To name a few, the devaluing of the dollar, unpredictable world events still looming, open interest in gold moving from lows toward the end of 2022 to now seeing some investors piling back in the early months of 2023, and finally high interest rates which probably aren’t going anywhere, anytime soon.
I’m not going to throw out fancy target numbers because no one knows the exact figures gold will go to. But the reality is it’s bounced off its all-time high price twice in the past few years.
Like hitting glass in the same spot repeatedly … sooner or later it’s likely to break.
Personally, I’d be surprised to not see a similar scenario play out over the next few years which could eventually lead to a breaking of this ceiling and pushing to new all-time highs.
For these reasons, I’ve decided to allocate some of my capital to gold for the foreseeable future.
However, one of the lessons we teach is the balanced (permanent) portfolio. This is just a PORTION of my overall strategy and portfolio. I’m prepared for things to not play out how I’m writing but I’d much prefer to bet on the side of history than against it.
To finish off, I heavily stress THIS IS NOT FINANCIAL ADVICE (see more in the disclaimer below). I’m not just writing this to cover my ass … I seriously mean it. Please don’t base your entire decision off my research as that’s not the point of sovereignty.
This is strictly my opinion and it’s critical to always do your own due diligence. Past returns are never indicative of future returns so please only see this is information, and information only.
Happy investing.
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DISCLAIMER:
GWC Advice is Limited to Educational Advice.
The information provided by Global Wealth Club is provided for educational purposes only. It should not be relied upon as financial product, tax, asset protection or legal advice. None of the information provided by Global Wealth Club takes into account your personal objectives, financial situation or needs. You must make your own decision how to proceed.
If you want financial product advice that takes account of your particular objectives, financial situation or needs, please seek advice from an Australian Financial Services licensee before making any financial decision.
If you want tax, asset protection or legal advice that takes account of your particular objectives, financial situation or needs, please seek advice from a licensed professional in the area such as an accountant, lawyer or similar professional.
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