Nov. 22, 2022
We’ve been talking a lot lately about gold as a safe haven commodity.
In fact, earlier this month, I said,
“With yield curves and inflation pointing to recession… and with the situation in Ukraine worsening and the political divide in the US widening… contrarians will do well to position in gold and select gold mining equities now before that next inevitable leg up.”
Gold was then trading at $1,630 per ounce. It has since moved north of $1,750.
And although we can expect intermittent pullbacks along the way, gold indeed looks poised to continue its upward trajectory in the coming quarters as those aforementioned issues continue to unfold both here at home and globally.
A lot of investors — including some very well-known ones — got caught up thinking cryptos had replaced the yellow metal as the new safe haven.
However, that idea is now up in smoke with the recent collapse of the FTX crypto exchange at the hands of co-founder Sam Bankman-Fried. A new bankruptcy filing shows the value of FTX’s crypto holdings is just $659,000 after Bankman-Fried said they were worth $5.5B. I guess his Bank account is now a bit Fried… as are many others!
FTX’s incoming CEO, John Ray, criticized Bankman-Fried for making “erratic and misleading public statements” saying, “never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”
You may recall, Bankman-Fried, on the eve of the collapse, tweeted that his cryptocurrency exchange and its assets “are fine” and then swiftly deleted his tweet as if no one would notice.
As part of the fallout, Bitcoin — the most “stable” and “trusted” cryptocurrency of them all — has cratered from $21,400 in early-November to around $16,600 now. And it’s down 75% from its all-time high of $68,789 from just one year ago.
So much for “the new” safe haven.
Same goes for the US housing market with the boom now officially over and with mortgage rates currently twice what they were at the start of the year, reaching their highest point in a decade and a half.
On the flip side, gold — which has been relied upon as a safe haven asset for some 5,000 years — has been more than holding its own through the current market malaise.
Following an October bounce in the broader indices, the markets have since resumed their steep sell-off as the Fed continues its hawkish stance with more tightening ahead.
For the year:
- The S&P 500 is down 17%
- The Dow is down 8%
- The tech-heavy Nasdaq is down nearly 30%!
- We also recently discussed the yield curve inversion between the 3-month Treasury and the 10-year Treasury — a reliable indicator of recession ever since the late-1960s.
In yet another sign of an impending recession in the United States, major corporations have been announcing large-scale layoffs in droves. For example:
- Lyft is laying off 13% of its workforce
- Meta is cutting 11,000 jobs
- Chime is laying off 12% of its staff
- Roku is cutting 7% of its workforce
- Stripe is laying off 14% of its employees
- Amazon is laying off 10,000 personnel
- Apple has announced a hiring freeze
Thus far in November alone, tech companies have laid off more than 31,000 employees… more than double what we saw in the 10 months prior.
And Twitter — Elon Musk’s newest pet project — has already cut half of its 7,500 person workforce.
Musk followed that slashing with a company-wide email requiring those who survived the first cut to either pledge to work “extremely hardcore” or leave. Has he actually met any Millennials of late… get ready for a mass exodus, Elon!
We’re also finally beginning to see some weakening in the US Dollar Index following a 20-year high — which is yet another positive signal for gold.
Globally, we have Europe on the verge of recession with the region — as a result of Putin’s war-of-choice and his weaponization of fossil fuels — now facing its worst energy crisis in more than half a century.
China’s GDP growth outlook has sputtered to 3.3% according to private-sector analysts (since you can’t trust any numbers from China itself)... a big downgrade from estimates from the start of the year.
Those projections show that growth in the world’s second largest economy will be much slower than anticipated and, thus, will weigh heavily on the global economy in the coming quarters.
Of course, all of that is not to say gold is heading straight up. In fact, attempts at even calling an interim bottom are typically a losing game.
Yet, the overall trend continues to look bullish for the world’s only true safe haven asset.
Recent hints of a Fed pivot from tightening to easing — which will likely come into play within the first two quarters of next year — pushed gold prices upward by $30 coupled with a 4% rise in the silver price… yet another bullish indicator for the precious metals.
With volatility everywhere you look, it makes sense to have — at the very minimum — a small percentage of your overall investment capital allocated to gold and gold equities.
You can buy gold bullion and/or gold coins as part of that strategy… and I talked about my preferred way of doing that here. Just make sure you store your gold in a safe or in a safety deposit box.
The major gold producers — which have been dragged down by the broader indices — are still trading near their 52-week lows… so there are some good buying opportunities there along with some healthy quarterly cash dividends to boot.
And for those with a slightly higher risk tolerance, this particular junior gold explorer/developer — currently trading below $0.50 per share — is advancing a 4 million ounce gold project in mining-friendly Idaho.
The company just completed an extensive drill program where numerous high-grade gold intercepts have already been reported with additional assays due over the next few months.
Our own Nick Hodge recently put his boots-on-the-ground at the project where he met with the company’s upper management and lead geologists.
He even put together a video presentation of his mine site visit you can watch here.
It’s an eye-opening look at an exciting development stage gold firm with geological and mineral resource modeling underway ahead of a planned Preliminary Feasibility Study and future drilling.
And it’s just one more way to gain exposure to the world’s only true safe haven asset — gold!
Editor, Daily Profit Cycle