A full tank?
or
Running on fumes?
The historic gold rush to all time highs is a gold investor’s dream, but raises questions. In dollar terms, gold has doubled in barely 2½ years, topped off by over 12% – more than an average year – in just nine days.
In the broader context, it has also solidly outperformed stocks so far this millennium.
Gold investors want to know, what do I do? Buy? Sell? I don’t like to be held in suspense and am not about to do it to you. The answer is I don’t know, and even if I did, the answer would be different for every investor. It might come in the form of another question: How much do you have now? If you had none at all, I might say you better get cracking. If it’s your entire nest egg, I might say you better get diversified. But this isn’t investment advice.
So instead let’s take a look at a case that says gold has a lot of gas left in the tank, and a case that says it’s running on fumes. Then I might ask you, are you invested so that you will come out all right in either scenario? Or anywhere in between?
Gold’s Historic Race to Reclaim Role as Preeminent Reserve Currency
Gold Price Forecast: Entering the Final Blowoff Phase Toward a Major Top
The first article is a fascinating history of reserve currency since mid-century. It’s not really about gold price forecasting. But it does point out that gold was once the pre-eminent reserve currency, and raises the prospect it might be en route to that status again. If it is, it still has a long way to go.
The second article is a detailed technical analysis that emphasizes gold’s strikingly overbought configuration, making the case that, in simple terms, it’s gone too far too fast, and that usually when things go too far too fast, they are prone to correct it.
But I may be making these pictures out to be more in conflict than they really are. As is often the case, superficially opposed outlooks can have common ground. It could well be that “a” top is at hand, but that after some period of retreat and consolidation, it continues on to yet higher highs. It could do poorly over the next few weeks and do well over the next few years. Or not. But that’s not necessary to know, and unknowable anyway.
It easier to say what gold won’t do: It won’t keep rising uninterrupted at this pace, and it won’t go to zero. It’s still cheap compared to US stocks, and expensive compared to other physical commodities. It’s still real money, and a lot of its appeal depends on how unappealing the artificial versions are. There is ultimately no limit on how high the price can go because there is no limit on how low the pricing unit can go. It has long been a good portfolio companion for stocks and likely will continue to be.
Full tank or fumes? Based on all the information I am aware of, the fundamentals, including the indebtedness of the US, suggest that in dollar terms gold continues to have a strong tailwind in the years ahead. The overbought condition and its partial dependence on unpredictable policy moves suggest a sizable correction could come at any time. Be prepared for the full range of potential outcomes and don’t get caught by surprise.
https://www.youtube.com/watch?v=y5lmEjnT-Kc&t=44s
Landlords dumping stock to buy GOLD
Mega’s Dispatch from England:- EV rethink?
Interesting development, Renault & Nissan use the same EV platform so i suspect Nissan (Bankrupt) will love this.
https://www.carscoops.com/2025/04/oil-giant-working-to-turns-evs-into-hybrids/
All of a sudden the real world has come crashing on on the “Woke/Net Zero” leaderships. Simply fact is the dream on no ICE powered cars, cars powered from 100% locally sourced power Eg Wind has turned out to be a somewhat wet one.
Its a vastly better idea to get your local population to be so good as to dump their OLD ICE cars for something like this. The engine looks very small & low tec, not turbo or supercharger i wonder what its BHP is?
I bought a Honda Civic hybrid about 25 years ago. Great little car; would do it again in a heartbeat. As a general prospect though, hybrids have an inherent drawback … two drive systems equals more complexity, more points of vulnerability and more maintenance. All electrics have many fewer moving parts and fewer places for things to go wrong. At least if they don’t complicate things with internet connections and software updates…
Another view
https://www.youtube.com/watch?v=r7UIEa2_Hg4
The federal debt is the most compelling bullish force for gold prices. That doesn’t assure gains in purchasing power for gold though. It is expensive relative to other physical commodities and it’s likely that others, for example copper, will outperform over at least some time frames.
But the debt means the Fed will be under immense pressure to inflate. Other currencies aren’t exempt … to the contrary, when the Fed inflates and the dollar depreciates, other issuers tend to follow suit, if only to keep exports competitive. Like stocks, currencies as a class have a tendency to move together, leaving exchange rates almost meaningless in terms of information about real changes in currency values. We have to look to the prices of other assets to draw inferences about what is really happening to currency values.
All things considered, hedging against currency depreciation (inflation) is best done with a combination of commodities, as well as stocks. The main portfolio utility of gold as compared to other commodities is that it has the least industrial character and a low correlation, or tendency to rise and fall in sync, with stocks, hence the remark that it’s a good portfolio companion for stocks, meaning a portfolio of stocks and gold tends to be more reliable and less volatile than a portfolio of stocks and other commodities. They’re less likely to be down at the same time. For more on this, please see The Impermanent Portfolio.
Another thoughtful perspective:
Gold is overbought, but remains well supported as US dollar weakens
The US has announced plans to impose levies on Chinese ships docking at US ports, threatening to shake up global shipping routes and escalate the trade war.
Under a plan put forward by the US Trade Representative on Thursday, all Chinese-built and owned ships docking in the US would be subject to a fee based on the volume of goods carried, on a per-voyage basis.
The fee is to go into effect in six months, with another phase restricting foreign-built vessels that transport liquefied natural gas to begin in three years. After six months, the fee for Chinese vessels would be set at $50 (£37.7) per net ton, or the volume of a ship’s revenue-earning space, and then increase incrementally over three years.
While not as bad as the plan for a $1m per ship fee each time it called at a US port that was floated earlier in the year, it will amount to a significant cost and marks the latest escalation in the ongoing trade war between the two countries.
Confirmation of the plan came as it emerged that Beijing has effectively mounted a boycott of US liquefied natural gas (LNG) in the latest escalation of the trade war between the two superpowers.
China halts US-made LNG imports
Imports of US-made LNG have been halted for more than 10 weeks, according to The Financial Times, with the last recent LNG tanker from Texas arriving in China on February 6. That was months before Mr Trump announced sweeping tariffs on countries around the world, including China, on April 2.
The boycott has been led by Beijing, which imposition of a 15pc tariff on US LNG on February 10. Since then, China has increased its tariff on US LNG to 49pc, effectively rendering the gas unaffordable for swathes of the Chinese market indefinitely.
Mr Trump has levied tariffs of 145pc on Chinese imports, while Beijing has responded with levies of 125pc on US imports in response. Neither side has shown a willingness to back down, with Mr Trump insisting China must come to the table to make a deal.
Trump needs to find a way to start de-escalating. He campaigned on a modest, broad, tariff and a lot of people supported it (including yours truly). But he’s since gone unhinged. Crushing China would do nothing to elevate America; to the contrary it would lower living standards in both. That this is happening when the economic cycle was already turning down and the Fed is politically paralyzed doesn’t help. Without some restraint, this could get as bad as the covid mess.
That said, it’s not at all clear what benefit there is in shipping nat gas around the world. Liquification and shipping use a lot of energy. Gas is a resource most efficiently used where it can be transported by pipeline. It’s hard to imagine there’s no closer source for China to find gas.
An excellent review from Adam Sharp at The Daily Reckoning:
The “Too Crowded” Gold Trade
And Mike Maharrey via Gold Eagle:
Can the Gold Bull Keep Up This Pace?
Do Indicators Point to Potential Further Stock Market Declines?
This article is outstanding. It is the only instance I’ve found in the current financial media recognizing the relevance of the yield curve phenomenon to our current economic configuration. Current-headline-obsessed amnesiac financial media has otherwise virtually forgotten about it.
Yes, we have plenty of disruptive tariff drama, but that’s no excuse for forgetting all economic history. Tariffs come and go, but the influence of the yield curve, stock valuations, debt, inflation and interest rates persists. The road that led us here leads where we go next.