I’ve never been a fan of gold.
This metal of yellow color does not produce cash, not to grow the crops, does not provide a safe haven and does not provide useful services. For the past several decades, it is not an official currency. It is not a “safe haven” because it always falls, then rises, falls again. And it is not an effective way to check payment after Samuel Morse invented the Telegraph.
But here’s the funny thing: gold is rising in price. And very much. And without any of the usual reasons for the growth.
There is no inflation. Prices are currently growing at about 1.6% per year.
There is no perceptible economic downturn. U.S. economic growth is about 2.1% per year.
And there is no financial panic. Stock markets are rising. Wall street sets new records. The yield spreads of junk bonds — additional interest who are willing to risk, companies are forced to pay for loans are low.
Despite all this, the price of gold over the past two months increased by 11%. And last year — 15%. This is more than the stock index “s & P 500” (S&P 500) or “NASDAQ composite” (Nasdaq Composite). And it’s more than the growth rate of the five largest tech companies (Facebook, Apple, Amazon, Netflix and Google), which are very popular on wall street.
“Something’s happening here”
What’s happening? But even more interesting is this question — “it May be wise to make a deal?”
Crispin Odie (Crispin Odey), managing a hedge Fund “Odie asset management” (Odey Asset Management), believes that this precious metal had attracted his attention during the decline of the stock market last fall. “Gold was supposed to go down last year, he says, sitting in his posh office in London’s Mayfair. — It was supposed to finish last year at the level of $ 1,000 (per ounce). Instead, it stopped at around $ 1,200. Then I thought: something’s happening here”.
Is there an explanation? Some of the biggest geopolitical rivals of America are buying gold. Especially China and Russia.
And continue to do so. Recently, the people’s Bank of China released data which suggests that it increased gold reserves by 74 tons for the six months (through may). Russian Central Bank acquired approximately 96 tonnes of gold in the first half of this year.
The dollar hegemony of the United States
And yet there is an objective reason for China buying gold. He wants to end the hegemony of the us dollar hegemony, which the former French President Charles de Gaulle called the “exorbitant privilege” of America. Beijing wants to make its currency the yuan a global player. And Odie consider buying gold bullion is a natural step. The gold reserves should increase the confidence of the world to Chinese currency.
In other words, the US President with his slogan “Make America great again” might makes gold once again great.
Do China and Russia really large reserves of this mysterious yellow metal in order to break the stranglehold of the us dollar on the neck of the global financial system?
Couldn’t you just issue a new currency that is supported by the volume of its economy, as did Europe when it launched the Euro 20 years ago?
Maybe Yes and maybe no. But, apparently, China is betting on the already chosen path.
We are at a very rare inflection point in history: the shift of economic hegemony. The Chinese economy has already surpassed the U.S. in one key parameter, as it once made America against Britain. Similar kind of transitional periods throughout history was a turbulent times.
Don’t try to compete with the Central banks
Odie, who previously were skeptical about the gold, now pay special attention to this metal, and he does it in a characteristic way. His flagship hedge funds “Odie European” (Odey European) and “Ooh-and-Ah Uh-Hey-si” (OEI MAC) at the end of June around 40% invested their funds in gold.
“There is a desire to do what Central banks,” he says with a smile.
Where can move the gold? No one knows, and Odie makes no predictions. In theory, according to some fans of gold, the destruction of the dollar hegemony may lead to skyrocketing gold spiral several hundred percent. Let’s wait and see.
The fall in interest rates in the developed world also provides gold the wind. People are concerned that it will not ensure getting a percentage? Trillions of dollars in bonds in Europe today have in reality negative interest rates. Against this background, the cynics may say, 0% on the coupon may seem like a good deal.
The easiest way for a small investor to make a bet on gold is Gold traded index Fund (SPDR Gold Shares). And who wants to make a sharp step without too much risk to your capital can always acquire freely traded options, the Fund.
We can say that Odie is something of a mad genius. He was right in one notable case, for example, predicted the financial crisis of 2008 and 2009, and thoroughly bought at bargain prices. But he’s also doing big bets in the other direction. Overall he gets a good margin on market indices in the long term, even after the payment of all fees. But if you want to follow his example and invest in gold, you should keep in mind that its rates are not for the faint of heart.
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