May 1, 2019

Gold buying

A 10 month high in the US Dollar has slightly dented the appeal for the yellow metal. Since gold is priced in the U.S. dollar, a rising U.S. currency acts as a headwind for the metal. But Doug Kass sees value in Gold. 


I reestablished a large position in gold (via GLD) and placed GLD on my Best Ideas List at $120.12.

Everything I see going on - in policy, the abundance of uncertainties  and in the trajectory of global economic growth -  make the case for having a gold position and/or hedge.

Here is my thesis:
* Central banks seem hell bent in continuing their monetary largesse as signs of a structural growth slowdown multiply.

* Whether it's the ease of current policy, or, in the extreme, a broadening acceptance of modern monetary theory (MMT) - the pendulum of monetary belief seems to have shifted to near perpetual ease.

* In the U.S. (from both sides of the political pew) and around the world, prudent financial discipline has been abandoned - government debt loads are breaking new records and will and can not be paid off given structural economic headwinds. 

* Debasing of currencies and disregard for sovereign deficits should be viewed as friendly to the gold markets.

* Real interest rates have fallen sharply - which gold historically is tied to. (The five year real rate has fallen from 1.16% in November to only 0.51% today).


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