Ditching your dollars for gold

Ditching your dollars for gold

I mean, you have the most spectacular property bubble in history. You must know that,’ said the gold guru.

I know of US hedge fund managers shorting the Australian banks,’ he added.

There I was, having a late-night chat with a European gold guru from the comfort of my lounge room.

This gold guru and I were preparing for an interview we will record later today. We were trying to decide how we could squeeze 30 years of knowledge into a 30-minute video.

What were the most important things Aussies needed to know?

I told the gold guru that it looks like the Aussie property bubble is rapidly turning into an international punchline.

Maybe, he said.

He quickly added that should that bubble burst, it could destroy the Aussie dollar…

…but those holding gold in Aussie dollars could do very well.

Another expert in the bag

Before I go any further, I should confess: I’ve been keeping secrets from you.

You see, in the next couple of months, I will be launching a brand-new service. I can’t give away too many details at this stage, but here’s what I can tell you.

This brand-new service is about all things precious metals — but with a twist.

Instead of just providing recommendations, I will be interviewing industry specialists from around the world.

I’m searching globally for the gurus that ordinary investors don’t have access to.

My latest guru was almost impossible to track down. He doesn’t want fame and has no interest in self-promotion. He’s just a multi-decade precious metals investor who likes his privacy.

In fact, he took a little coaxing to get on board.

Why would you want to hear from someone no one has ever heard of?

Simple.

He’s been investing in precious metals for over 30 years, riding out bull runs and bear traps. He brings a ‘boots on the ground’ point of view, having personally speculated on precious metals and precious metal companies since the 1987 market crash.

And he has unique views and insights, bringing up concepts I certainly hadn’t heard of before.

Trust me. Once you see hear what he has to say, you’ll understand why I sought him out.

A few more weeks, and I’ll be able to reveal all…

Now that’s a breakout

If you’ve been following the US dollar gold price, you probably know it’s been a miserable year for physical bullion holders.

In fact, since March the precious metal has traded down from US$1,340 to a low of US$1,270.

Check it out…

Gold in US dollars – daily chart

Source: TradingView

For four months, the physical price of gold bullion continued to fall.

However, it was only towards the end of May that I noticed a triple bottom had formed (marked by the three arrows).

A triple bottom — when the price falls to the same support line three times (as shown by the black horizontal line on the chart) — is often a very bullish signal that a ‘breakout’ is about to occur.

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And within one week of the triple bottom revealing itself, the US dollar gold price rallied 3.5% in a matter of days.

So, what does this sudden rally mean? Will the US gold price stay where it is and keep going higher?

Well, it’s important to remember that nothing goes up in a straight line. However, the recent move back to US$1,340 is a good sign.

It suggests that the yellow metal is challenging previous highs. When that happens, it often means that ‘higher highs’ are to come.

Right now, the US dollar gold price has a bunch of ‘mini trends’ in a big overall trend.

The big trend is that gold is in a bull market. Over the long term, the price is moving higher.

The shorter-term trend for US dollar gold is still unfolding.

The yellow metal must stay above US$1,340 for this breakout to be sustainable.

It might take a few more weeks of shuffling between US$1,320-1,340 before we know if this is the breakout that pushes gold to US$1,400.

Time to protect your wealth

People are rapidly losing faith in fiat currencies around the world.

How do we know this?

Because 72 currencies globally are at all-time highs when compared to gold.

Now, normally we expect to see emerging market currencies — like the peso, lira or real — at all-time highs to the gold price.

But now, developed economies are seeing their currencies reach new highs in gold.

The Canadian dollar is only a couple of bucks shy of its 2011 gold high.

And the Aussie dollar made a new high just last week…

Gold in Australian dollars – weekly chart

Source: TradingView

If you were to buy an ounce of gold in Australia now, it would set you back a little over AU$1,910.

Not only have we passed the Aussie dollar gold price highs set in 2011, 2016 and 2018…this year has seen the Aussie gold price continue to move higher and higher.

Given that the US dollar gold price has been falling, this seems a little odd, doesn’t it?

Well, not really.

You see, the Aussie dollar gold price is currently reflecting the value of the Aussie dollar.

In other words, as the Aussie dollar has gotten weaker and weaker, the value of gold in Aussie dollars has kept climbing.

And, more to the point, gold prices for Aussies are about to get a lot more expensive.

Us Aussies are not just dealing with a rising US dollar gold price. We are also combating currency weakness.

As Australian economic growth continues to slow — or, as I’ve been suggesting, we face a recession — this will weaken the value of the Aussie dollar.

Plus, we have the Reserve Bank of Australia lowering interest rates.

This is another factor that will contribute to the Aussie dollar falling.

Then, as my international gold expert pointed out last night, if Aussie house prices do pop, that could have disastrous consequences for the Aussie dollar.

According to the gold guru, this is a very bullish reason why Aussies should consider adding some gold to their portfolio.

Until next time,

Shae Russell Signature

Shae Russell,
Editor, The Daily Reckoning Australia