$GLD, $USD, $EUR, $GBP, $CNY
What we have been seeing over the past few years is that confidence in government is fading and the price of Gold is rising.
Some current examples
The UK House of Commons voted 413-202 last week to delay Britain’s exit from the EU.
Despite resounding defeats, Prime Minister Theresa May refuses to heed the advice, and vote of the people in hopes of a cancellation of the BREXIT vote.
The next few days will decide whether or not Britain leaves the EU, paving the way for more consequential exits in the future.
Next Italy, then Holland, then Hungary, then…
The drama playing out is the start of what we believe will be 1 of the most tumultuous periods in the global political scene in quite some time as the cracked EU crumbles.
The political cards Mrs. May is playing and her refusal to concede to the people’s vote is why people around the world are calling for a restructuring of major institutions and why political discourse is so polarized.
The Big Q: Why should stock and commodities invstors care?
The Big A: Because the volatility that looks to be coming will be a direct result of people around the world no longer trusting government.
That lack of trust will see a transfer of wealth from public (bonds) to private assets (Gold).
S&P Global Ratings recently reported that companies, governments, and households increased their combined debt load by 50% in the 10 years following the financial crisis.
As of June 2018, corporate, government, and household debt surged to $178-T.
Of that $178-T, $62.4-T was borrowed by governments.
During the past 10 years, the US government debt has soared from $9 trillion to $19.5-T.
The debt is not sustainable. And eventually,the debt will catch up with Europe, institutions will fall, and a new generation will be forced to pick up the pieces.
Before that happens we will see volatility, as government never relinquishes power willingly.
With the Fed cautious (a softer USD), the EU imploding, and volatility rising, the macro backdrop could not be better for Gold in here.
The argument that Gold does not yield a return in the traditional sense goes out the window when you consider negative interest rates, a trend we see accelerating as governments borrow while they can.
Count on these Key factors: accommodative central banks, bigger deficits, volatility, and on higher Gold prices in Y 2019.
Have a terrific weekend