Here’s why the price of Gold will NEVER go higher than it was in August 2020. Never.
Hey everyone! Happy Friday!
Want to finish up this week with a warning, and no, I’m not saying you shouldn’t buy gold JEWELRY.
That’s great, if your girl is into that…
Mine prefers ROSE Gold..
But I digress…
We’re talking about Gold as the ASSET!
Now, for many of my loyal readers, you know I’ve been cautioning you for nearly 8 months now to invest in ASSETS that have SCARCITY.
The reason for this is that money is being printed out of thin air by our Governments worldwide.
For instance, and you may want to be sitting down for this…
35% of all US dollars in existence have been printed in the past 10 months.
Wow, that’s insane, and it’s obviously not stopping anytime soon.
So, to prevent your dollars from inflating away to literally nothing….
You have to own assets!
I’ve been recommending on this letter
1) Your Own Business
2) Bitcoin
3) A basket of technology stocks
4) Gold, Silver
However, you may have noticed, I stopped recommending Gold and Silver about 5 months ago… and personally have zero dollars invested there.
Why is that?
Well, REALLY QUICK, I swear it’s important, let’s establish a brief history of Gold.
3600 BC: Gold is first smelted in ancient Egypt.
600 BC: The first gold coins are struck in Lydia, Asia Minor. These are a crude mix of gold and silver.
1717: The UK sets the gold standard. This means currency is linked to gold at a fixed rate.
1848: The California Gold Rush begins when gold is found at Sutter’s Mill in Coloma by James W Marshall.
1870-1900: The rest of the world apart from China adopts the gold standard.
1914: Many countries move to fractional gold standards, inflating their currencies to help pay for the First World War. They don’t return to the gold standard until 1925.
1944: After the Second World War the gold standard is replaced by a system of nominally convertible currencies related by fixed exchange rates called the Bretton Woods Agreement.
Although gold initially served as the base reserve currency, the US dollar gradually becomes the reserve currency which is linked to the price of gold. Central banks continue to keep a portion of their liquid reserves as gold in some form.
1971-73: US President Richard Nixon abandons the Bretton Woods Agreement. This means the dollar and other global currencies are no longer linked to the value of gold and the US can effectively print money at will.
Whew, you still with me??
Obviously, 1971 is where it all went haywire.
There’s even a website dedicated to this year.
We can trace back pretty much every problem we have in our current society to that pivotal moment in 1971.
Don’t believe me? Check it out after you finish this letter -> https://wtfhappenedin1971.com/
“But Kale, you’re saying DON’T buy Gold, Gold seems like the only good thing we had!”
Yep, you’re right, the key word is “Had”.
The reason Gold has any value, other than Jewelry, is simple.
It’s SCARCE.
It’s hard to get.
It’s hard to mine more of it.
Thus, you are able to STORE VALUE in it, because people can’t PRINT IT.
This is great, absolutely fantastic.
However, it does have many flaws that make Gold difficult to use.
1) It’s heavy
2) It’s hard to move around due to it’s value (security concerns)
3) It’s hard to verify if Gold is real or fake
4) It’s hard to divide it up into smaller pieces for smaller transaction sizes
5) It’s not totally scarce. If Miners are motivated, they can increase the supply at least 2% per year. We also don’t know how much Gold is in the ocean or on asteroids/other planets.
Now, before 2020, these issues honestly didn’t matter.
It was still MUCH better than holding cash in a bank account, and people always saw it as a great hedge against inflation.
And then, something broke.
I, luckily, saw this coming.
Here is the stock I owned, that tracks the price of Gold. (I would have bought the real thing, but again, that’s difficult, another of the issues…)
As you can see, after Covid hit, and the Gov started the printing press, Gold performed exactly as expected, rising month over month.
And then it hit August.
And all downhill since…
I’m going to make a pretty bold claim here on this letter…
Gold will NEVER go higher than it was in August.
Never, ever.
If you own Gold, you should sell it all.
Here’s why.
Check out this chart of Bitcoin instead…
Notice how Bitcoin started to go parabolic, at the exact same time?
Coincidence?
I think not.
Guess what also happened around that August time frame?
MicroStrategy shares have been on a tear since August as some investors looked at the stock as a way to gain exposure to bitcoin. Shares had been more than 660% since Aug. 11, the date the company revealed its first bitcoin buy. The stock hit a 52-week high of $1,315 on Feb. 9.
Hmmm…..
So…
1) Gold peaks
2) a Publicly traded company buys a crap-ton of Bitcoin and starts teaching the World why it’s “Digital Gold”.
3) And Bitcoin starts a historic price run…
All in the same month?
Coincidence?
Doubtful, actually, pretty much impossible.
Here’s a few smarter people than me talking about it…
I am a long term dollar bear and gold bull but have been neutral on both for over six months. Lots of liquid poured into a funnel creates a torrent. Bitcoin maybe The Stimulus Asset. Doesn’t look like gold is. - Jeffrey Gundlach - DoubleLine Founder and CEO
Bloomberg’s Lynn Thomasson explained it well by saying “Gundlach’s comments are another sign the investment case for Bitcoin is winning over institutional money managers and possibly siphoning cash from the gold market. Historically, traders have turned to the precious metal as a way to play rising inflation expectations. But over the past year, it has been range-bound and gold exchange-traded funds have seen outflows.”
And here’s why I’m utterly convinced Gold is dead, forever.
1) We don’t need 2 “Stores of Value”.
Why aren’t there two “Gold’s?”
Why has Gold ALWAYS been the standard of wealth preservation?
Because it’s universal.
Everyone agrees that it’s valuable.
Everyone knows what it is.
And it isn’t owned by anyone, no one government, nothing.
You don’t need 10 of these assets, you just need 1 that everyone recognizes.
Gold has been around for 4,000 years.
I would argue that if the market NEEDED more “Gold’s” then it would have found more.
It didn’t.
2) Bitcoin is better at being Gold by about 1,000x
Let’s just do a thought experiment.
Let’s say you need to move $1 BILLION dollars from New York City to London.
How much would that cost?
Now, be careful here.
I know many are thinking “we will just send a wire!”
But that isn’t final settlement.
There are like 10 banks and processes involved with doing that.
I’m talking about holding an ASSET that you KNOW is yours, that isn’t owned by some government or some bank.
So, to send $1 BILLION of Gold…
You’d need.
a 747 plane…
Dozens of armed guards…
A vault…
Dozens if not hundreds of permits and other paperwork
Minimum 18 hours of effort
About $5,000,000 to finance it all.
In contrast, you could use Bitcoin.
1 hour.
$5
That’s it.
And the crazy part is, I’m not exaggerating.
Bitcoin is…
Scarcer than Gold (Completely capped supply vs 2% at least)
1,000,000x easier to move
More secure (impossible to hack, don’t need security guards)
More divisible (divide down .0000000000001+)
Completely decentralized instead of held in Government vaults
Verifiable in seconds with any computer
And many more…
I hate to break it to all the “Gold Bugs” out there…
But Gold reminds me of Barnes and Noble…
Or maybe Blockbuster….
Sure, Bookstores had been around for thousands of years..
Blockbuster, not so long, but still…
It seemed impossible that they would cease to exist…
(I know, Barnes and Noble still exists, but when’s the last time you went to one?)
And then little old Amazon came along…
And put the Bookstore online…
And then Netflix came along…
And put Movies online…
And extinction came QUICKLY for the current system.
If you think that the same won’t happen for the “Store of Value” category, you are shockingly mistaken.
This is a “winner take all” battle.
The market has already spoken, and I expect it to speak QUITE LOUDLY over the next 10 months as well.
Sell your Gold, buy the digital version.
If you don’t know how, here’s an easy link from my friends over at Blockfi -> https://blockfi.com/?ref=e9fefa3e
I honestly don’t care if you use it or not, Swan Bitcoin is also great -> https://www.swanbitcoin.com/kale/
With either one I think there is a bonus if you deposit a certain amount, like $10 free or something.
I hope this letter was helpful to you.
These take me a while to write, and I wish more people would read them.
If you could take 30 seconds and forward this to people who you think it would help, that would mean the WORLD to me…
They can subscribe and get this letter 5x a week for FREE just by clicking the “30 day trial”.
After that, it’s like $50 a YEAR.
See you on Monday!
Kale
Please, please, don't buy GOLD.