The Gold Bull Market — Big Money Backs Old Money

The Gold Bull Market — Big Money Backs Old Money

The last time I set a pre-dawn alarm, it was to shuffle off to Melbourne Airport. However, this morning’s 3.48am alarm was only to make sure I shuffled off to the lounge room.

That’s the COVID world we live in now. Disgracefully early dawn flights to get to a conference on the other side of the world have made way for disgracefully early alarms that lead me a mere five metres from where the alarm went off.

Not being able to leave the country — or for those in Melbourne still trapped within our 5km radius — there was a virtual gold conference on in New Orleans with one helleva a line-up that I wanted to watch. Plus, it’s probably the closest I’ll get to Bourbon Street for a while.

Bleary-eyed, I tripped over the dog and by 4.02am I was there in my seat. Kettle boiling in the background for some much-needed caffeine, headphones on, and off we went…

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Big money makes it way to gold

Talk about jumping out of the gates. This gig started strong. I’ve never been to the New Orleans conference in person, but I quickly noticed it had a real international flavour among the presenters.

One thing you pick up on in US-based conferences, is that they tend to lean on local US talent. Not this one. Good start.

So, four hours in, and even more coffees, what can I tell you?

Early on there were common themes. Some of the speakers were saying the same things but in different ways.

The elephant in the room was the US election. There’s nothing like talking to Americans about the election versus the rest of the world.

One thing that was unanimously agreed on, was that this is the most divisive US election in recent memory.

But that’s where the agreement ended. From there it was a ‘let’s agree to disagree’ take on the outcome.

A couple of the American panellists emphasised that it most certainly matters whether a Democrat or a Republican gets in.

Pretty much everyone outside the US had a different view. Us outsiders looking into the US felt the winner of the Oval Office on the day (or weeks later) doesn’t really matter, because the structural economic issues won’t be turned around by either party.

Essentially, the new leader of the free world will have a different rational behind their economic decisions…but either leader will drive into the same ditch in the long run.

All of which is good for gold. And just like that, the agreement was back.

The US deficit continues to impact the value and the desirability of the US dollar to outsiders. Negative interest rates in Europe will likely spread to the West and catch on like COVID did in the US.

One thing the majority of the speakers were at pains to point out, is just how little of institutional money was ‘in’ gold compared to the 1980s. Jan Nieuwenhuijs noted that in the 1980s, 3% of ‘big money’ was in physical gold. Today, it’s a lowly 0.5%…

Small physical allocations aside, the first four presenters all said that ‘big money’ attitude to physical gold allocations was quickly changing.

It might be half a percent today, yet institutional money was flowing into physical gold faster than any period in the last two decades. Yes, that includes the gold bull market from 2002–11 as well.

Goldman Sachs, for example, has a stake in Perth Mint’s gold backed exchange traded fund. And the legendary Warren Buffett bought a large chunk of Barrick Gold just a few months ago.

Buffett is notorious for his dismissive attitude towards gold. But here is an example of big money chomping at the bit to get on this gold bull market…

The gold bull market we all have the chance to be part of.

Gold: Choose your own adventure

And then came Gwen Preston.

I can imagine if we were all inside a conference centre together, all you’d see while watching Gwen speak is nodding heads.

Of course, given I was staring at a screen I didn’t see the nodding of heads, but I did see the group chat light up. Comment after comment from viewers thanking Gwen for what she said…less than 10 minutes into her presentation.

What did she say that was so relatable?

She kept it simple. Ditched the jargon and honestly it felt like she was talking to only you.

Her points resonated with the audience.

After telling us the gold bull market strength had many happy years ahead, she put a label on it that I wish I’d come up with: ‘Choose your own adventure’.

That is, not everyone has to have the same gold bull market plan to ride this gold bull market.

It’s all about understanding your own levels of risk as to how you go about investing in this market.

Some of us like physical precious metals, and only that. Some people prefer exchange traded funds (ETFs) to trade the gold price. Others prefer the precious metals stocks, big or small or both.

The point she was at pains to make however, is work out what is important to your investment strategy and goals, and stick with it. Don’t feel like you’re missing out on ‘gains’ based on what other people are doing.

The ‘choose your own adventure’ method means you can pick and choose from the physical, the paper trades, and miners big and small, and come up with a portfolio that suits your risk tolerance.

Quite frankly, there’s something for everyone when it comes to investing in a gold bull market.

You don’t need to go outside your risk levels just to be part of it.

Similarly, don’t be disappointed if you see one or two exploration stocks explode on the back of news.

If you’ve decided that the junior gold sector isn’t for you, that is perfectly fine. Remember, odds are your investing interests happen later, your career and family come first. Your investment strategy needs to reflect that.

The gold bull market has years left to run. And I’ve got a few ideas on how you can be part of it.

Until next time,

Shae Russell Signature

Shae Russell,
Editor, The Daily Reckoning Australia

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