“Gold: The resilient reserve”
“What makes gold compelling are the risks we do not take by owning it.... With gold, there is no duration risk, credit risk, or liquidity risk. The metal is not moved by financial instability nor threatened by national insolvency or chaos in foreign exchange markets.
“There are no margin calls and no refinancing risks. There is no risk of technological obsolescence, depletion, depreciation, or decay, nor does it require cheap energy, cheap credit, or cheap trade to remain viable. It does not care about your national energy policy or who you buy your gas from or how many pipelines are running. You do not have to keep the lights on or even keep it warm.
“There are no financial accounts to pore over, no balance sheet to blow up, no cash flows to dwindle, no stale inventory and no margin pressures in difficult times. There are no key manpower or supplier risks, no competitive risks, no management to squander its future. It does not depend on the character, skill, or enthusiasm of any one. It does not require the faith or good will of others. It does not require you to trust anyone at all, except that you must hold it in a very safe place.”
– From a privately published piece by Tony Deden, chairman of Edelweiss Holdings. The Deden article was highlighted on X (Twitter) by a Russian émigré and entrepreneur Simon Mikhailovich. Mikhailovich added his own take: “Bottom line: Gold is the only universally liquid financial asset that is no one’s promise, which is why demand for it rises whenever trust in promises declines.” See bit.ly/4eYSEY3.
Is “running hot” the new normal?
“The Fed’s decision [late last year] to stop tightening to preserve the economic expansion has allowed the trailing mean of Core...inflation to creep higher over time. Now they are cutting rates and guiding to more cuts with “Super Core” CPI [still higher than] their stated 2% price stability target. We have been arguing that the Fed was likely to revise higher their 2% target since Jan 2022. It appears they already have. They just haven’t told anyone.
“The Fed’s decision to let the U.S. economy perhaps permanently run hot is structurally bullish for risk assets and gold and structurally bearish for Treasury bonds and the [U.S. dollar].”
– From an X posting by Darius Dale, founder of investment research firm 42 Macro. See bit.ly/4fhQ2Vn.
