If you listen to the mainstream financial media, you might think gold is a horrible investment and should generally be avoided. In this episode of the Money Metals' Midweek Memo, host Mike Maharrey compares these mainstream myths with gold's market realities. As it turns out, gold has historically performed much better than you've been led to believe.
Mike opens the show remembering the summer that the mainstream media became obsessed with shark attacks. Reporting gave the impression there were suddenly a lot more aggressive sharks out there. As it turns out, the number of attacks was down that summer.
"It just seemed like there were more angry sharks because everybody was talking about it. It created a false impression that was difficult to shake. It became an accepted fact. It was the summer of shark attacks, even though it wasn’t.
"I feel like gold and silver suffer from this same reporting bias. They are bad investments because, well, everybody knows they are bad investments. But does this stand up to the facts?"
Mike notes that the mainstream financial media tends to be pretty negative toward gold and silver.
"I'm not completely sure why the mainstream pooh-poohs gold, although I have my theories. As I mentioned last week, I think a lot of it is because the regime needs you to hate gold and embrace its fiat money. Any kind of sound money hamstrings government. It needs to be able to create money out of thin air to support its borrowing and spending. Money is power and government maintains power because it monopolizes money. You can’t print gold or silver. And without the money printing press, the government can’t maintain and expand the massive welfare and warfare states."
This negativity about gold has seeped into the investment world.
"The mainstream tends to spurn the yellow metal. But it’s not justified, and if you buy into this narrative, well, you’re missing out!"
When you look at the data, you will find that gold measures up against most other investments. In fact, gold has outperformed most asset classes over the last 20 years.
"I know that you would never get this impression if all you do is listen to CNBC and Fox Business, but it’s true! Just like I pointed out last week when it comes to gold as an inflation hedge, the numbers don’t lie. Historically, gold has generated long-term positive returns in both good and bad economic times."
It's not just about solid returns. There are other advantages to holding gold in your portfolio, including its lower volatility, its liquidity, its role as a diversifier, its safe haven properties, and the fact that gold is money.
"And it is sound money. Every major currency has depreciated significantly compared to gold."
But sometimes gold performs so well, even the mainstream has to sit up and take notice. Mike points out a couple of recent reports that are bullish gold, including an article published by CBS News.
Mike also highlights a Bank of America analysis that makes the case for $3,000 gold in the next 12 to 18 months. He points out that several of the factors the BoA analysts said need to be in place to sustain the gold rally seem to be in play, including a continuation of central bank gold buying.
Mike goes on to highlight one scenario left out of the Bank of America analysis.
"The Fed faces an ugly reality – this economy can’t function in a higher interest rate environment. While the central bank hasn’t done enough to slay price inflation, it has driven rates high enough to wreck a bubble economy blown up by easy money. The economy feeds on inflation. Rate hikes have already kicked off a financial crisis that continues to bubble under the surface. It’s only a matter of time before something breaks in the economy. At that point, the Fed will likely cut rates rapidly to zero and launch new rounds of quantitative easing. That means more price inflation and the perfect environment for gold to run even higher.
"The Bank of America report doesn’t even consider this scenario, and yet it still makes a strong case for $3,000 gold."
Mike concludes that while the gold price has been treading water in recent weeks, there are still plenty of reasons to be bullish on the yellow metal.
"Gold has been pretty rangebound over the last several weeks. This pause might be a good buying opportunity. You might want to take advantage and get some gold. And silver too. Because as I discussed in length a couple of weeks ago, silver has historically outperformed gold in a gold bull market. So, yeah, now is the time to call 800-800-1865."
About the Author:
Mike Maharrey is a journalist and market analyst for MoneyMetals.com with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
