Everyone & Their Mother

The desire of gold is not for gold. It is for the means of freedom and benefit.

— Ralph Waldo Emerson


Addison WigginDear Reader,

“Everyone and their mother is saying, ‘Buy Gold! Buy Gold!’” writes reader Tony F. “I’ve been hearing this for the last couple of years now. Meantime, in reality, gold doesn’t seem to hold up against anything. Its price keeps falling! Is there anyone out there who knows when the price of gold will rise, short-and-sweet without a bunch of hogwash?”

Thanks for the write-in, Coach. I hear you. A comment from our YouTube video with Rickards (watch it here) says the same thing, a little more bluntly:

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You guys are right. There is a lot of hand-wringing over inflation. It feels like gold should be taking off. But that’s just not how the geopolitical mechanism works.

I refer you to Matthew Piepenburg’s Session:

Gold will rise. To me, it’s like a Thanksgiving turkey. If you’re a turkey on a farm and the farmer’s feeding you every day, things feel great, but that farmer isn’t your friend come November. And I know that turkey’s going to get his head cut off around Thanksgiving. I know gold is going to take off at some point. That doesn’t matter to me when I want to have that turkey. I want to have that in my portfolio.

If you’re looking at gold prices day to day, you will be disappointed. “That’s not enough for a lot of people,” Piepenburg continues.

Like any other investment, precious metals like gold could go down in value. Though its historical performance has shown it to be one of the safest investments, there is always some level of risk.

People often brandish gold as the #1 hedge against inflation and deflation… But the chart below shows that gold’s price year-over-year has very little correlation with CPI data.

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Data from Q1 1971 to Q4 2020. Coloured dots refer to periods of ‘high’ CPI y-o-y and high gold returns. The purple dots refer to occurrences between Q2’73 and Q3 ’80, the green dots to occurrences between Q4 ’07 and Q2 ’08. (Source: Bloomberg, World Gold Council)

Translation: It’s more complicated than a simple hedge. Rather, we buy gold as insurance, not as a speculation.

“The goal is a rising cork in an inflationary market,” Piepenburg concludes. “It’ll certainly get the last laugh.”

So it goes,

Addison Wiggin

Addison Wiggin
Founder, The Wiggin Sessions

P.S. Piepenburg says gold is being “openly manipulated in over-the-counter markets and futures markets, the OTC forward contracts, futures contracts, the bullion banks.” That’s a completely different story… You can find his explanation here. Mind you, even despite market manipulation, gold serves its purpose as a protector of wealth and a quality asset in a diversified portfolio. “At this point,” Piepenburg continues, “It’s about preservation, not gain.”

Addison Wiggin

Addison Wiggin

Addison Wiggin is founder and executive publisher of Agora Financial LLC, an independent economic forecasting and financial research firm. He and Bill Bonner began writing the firm’s flagship Daily Reckoning in the midst of the tech boom and bust. It was one of the first widely distributed email newsletters on the Internet. The publication’s critical eye on finance and economics continues today. He’s also creator and editorial director of Agora Financial’s daily missive The 5 Min. Forecast.

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