Gold Ain't A Barbarous Relic No More
Many gold bulls were rightfully impressed with the rally in gold last week, especially when it broke above $2700 on Friday. I’m equally impressed with the action today, early in the day it was up more then it came off slightly. I have been noticing for months that gold is reluctant to give back its gains after rallies which is an extremely bullish indicator.
I also love that the financial media is still pretty much ignoring gold which keeps it in a stealth bull market. CNBC in America hardly mentions it and even BNN in Canada has minimal coverage of gold.
The talking heads on CNBC have pretty much dumped Bitcoin as a big topic a few months ago, and now they are focused on pumping up overvalued tech stocks. On the BNN homepage, you have to scroll well down the page to see a mention of gold.
I have noticed on CNBC that when they have a guest on to talk about interest rates, the US dollar, debt, and the economy, some of them say that gold is a great alternative. Even marque economists like Muhammad El-Erian are making the case for gold. He wrote a great article in the Financial Times stressing why investors in the West should be paying attention to gold.
He and other high profile market folks are noticing the strength in gold and have a lot more influence on investors worldwide than the regular guests on CNBC. This is a pretty significant sea change as not too many years ago if they were asked about gold, they would immediately dismiss it.
Or in the case of Nouriel Roubini, he went as far as calling it a ‘barbarous relic’ but has changed his tune, now he is a gold bull. Plenty of money managers and economists that in the past would not give gold the time of day are now gold bulls.
They see the Death Spiral of Debt and the alarming growth in the costs of servicing the debt and that politicians are unwilling to cut spending. They understand that the debt fiasco in America and other G7 countries is unsustainable. They don’t yet discuss the end game which is either a default on the debt or a return to the Gold Standard.
They certainly see the powerful gold bull market and as they look at all the factors, they can’t help but recognize that something big is happening. Their voices are getting louder and increasingly more bullish on gold.
These movers and shakers are waking up generalist investors to the gold bull market, not only on Wall Street, but in every corner of the financial world. I don’t think it will be long before they start talking about a shift from the broken fiat currency system and the debt crisis to come to terms with the reality that the world financial system is at a crossroads.
On one side of the fork in the road is defaulting on the debt, and the other is a return to the Gold Standard. Both roads lead to much higher prices of gold.
Most of them are not yet singing the praises of gold mining stocks, but they will because as gold goes higher several gold miners are turning into free cash flow machines. We are at the point now that gold mining is becoming one of the best businesses in any sector when it comes to free cash flow growth.
The trend in gold and gold miners are causing more investors to jump on the Golden Bandwagon by the day. Welcome aboard!
All the best,
Allan Barry Laboucan
