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Gold Bugs Finally See Their Predictions of Doom Coming True

Commodities Apr 04, 2020 06:01AM ET
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Gold Bugs Finally See Their Predictions of Doom Coming True

(Bloomberg) -- For years, gold bugs were relegated to the fringes of financial markets. Often viewed by mainstream investors as tinfoil-hat conspiracists with basements full of beans and bottled water, their warnings sounded apocalyptic: a coming collapse in financial assets, widespread devaluation of paper money and global disasters that erode civil liberties.

Welcome to 2020.

As the coronavirus brings economies around the world to a standstill, gold is rivaling Treasuries and the dollar as the best-performing major asset this year. The metal proved its haven status with a 6% rally as almost $16 trillion was wiped off global stock markets and oil plunged.

There’s also been a scramble for physical metal as investors in exchange-traded funds build the biggest stockpile in history and dealers say they’re struggling to find gold to sell.

How Virus Shows Again Why Fear and Gold Go Together: QuickTake

“We’ve been trying to warn people that something like this would happen,” said Jim Rickards, the author of several books that predicted a coming financial reset. Rickards, who spoke from a New England mountain compound, has long recommended holding gold as a precaution for wealth preservation.

“I’ve been saying it for years,” he said. “I’m not happy about being right.”

There’s echoes of many of the typical gold bug predictions in today’s crisis. Besides the obvious economic and financial-market upheaval, social interaction has become taboo and in some places soldiers are telling people not to leave their homes.

Even the so-called paper market for gold is showing cracks and a squeeze last month on New York’s Comex, the largest gold futures exchange, added fuel to another of the prophecies: that when the crisis came, there wouldn’t be enough gold to go around.

When a Hot Gold Trade Blew Up, the Rush for 100-Ounce Bars Began

“We have written more than 3,000 pages of research about gold and mining stocks in the last 14 years and it is pleasing to see that many of our theories have come true,” said Ronald-Peter Stoeferle, managing partner at Incrementum AG, a Liechtenstein-based investment and asset-management company.

“We’re seeing lots of interest because we’ve been pounding the table for gold as a portfolio stabilizer, it’s a defender of your portfolio and gold did its job really perfectly.”

No Counterparty

Of course, some of the predictions were always a bit vague. The Armageddon survivalists see gold more as the ultimate haven against generalized risk. As a hard asset, it acts as an inflation hedge. It has deep, liquid markets in which to trade, has kept its value over centuries, and, most importantly, physical metal stored in a vault has no counterparty that can default, not even a government or central bank.

“Central banks have officially lost control of their most powerful policy tools,” said Roy Sebag, chief executive officer and founder of Goldmoney Inc., a precious-metal investment firm with $2 billion in assets. “It is against this macroeconomic sea change that gold will thrive as the money par excellence.”

Gold rose for a sixth straight quarter in the three months through March and spot prices traded around $1,612 an ounce on Friday. While that’s still well shy of the record $1,921.17 reached in 2011, predictions are mounting that the metal will scale new highs in the coming years.

Even those in the mainstream are climbing on board.

Analysts at Citigroup (NYSE:C) see gold climbing to a record above $2,000 an ounce in 2021. Merk Finck chief strategist Robert Greil predicts it will rise to $1,750, and Cesar Perez Ruiz, who manages 236 billion Swiss francs ($243 billion) at Pictet Wealth Management, has been buying metal on dips near $1,500.

“Gold might be one of the few things that diversify your portfolio,” said Chief Investment Officer Ruiz. “It’s moved quite fast very recently, so I’m waiting for a pause.”

It hasn’t only been one-way traffic for gold. As in the 2008 crisis, prices have fallen during days of acute stress in the broader market as investors faced margin calls and sold liquid assets to raise cash. Still, the declines have been largely short-lived.

“Before this is over, gold is going to go up a lot,” commodity investor Jim Rogers said by phone from Singapore. “Whenever people lose confidence in money and in governments, they always buy gold and silver.”

©2020 Bloomberg L.P.

Gold Bugs Finally See Their Predictions of Doom Coming True
 

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Comments (16)
Large Father
Large Father Aug 27, 2020 2:35PM ET
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The corruption and manipulation really need to increase here, it’s been lacking lately
New Jazenevd
New Jazenevd Jul 12, 2020 10:22AM ET
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Ole warren could double-down on left-wing rhetorics now, just keep his media status intact.
Stak Hard
Stak Hard Jul 05, 2020 1:36PM ET
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Beware investing. com readers. Any articles by Bloomberg or Rueters is radical left wing agenda . They are pushing NWO agenda. They back BLM riots. They are against the USA as a country. They are pushing for race wars. Every article here is propaganda plain and simple
Chinese Flu
Chinese Flu Jul 05, 2020 1:36PM ET
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You are 100% right.
Stak Hard
Stak Hard Jul 05, 2020 1:26PM ET
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Bloomberg writers are a joke.Obvious attack on citizens that buy and hold gold . Why little writer? You do not hold gold? No one sat you down and educated you? So much for that “degree”” you have. Lol
Jitendra Chandan
Jitendra Chandan Apr 05, 2020 2:05PM ET
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gold will cross new highs in dollar terms and will double in US dollar terms in 4-5 yearsgold is already on new high in major other currencies barring US dollar
short gold
short gold Apr 05, 2020 1:57PM ET
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With all the gold mines shot down you will notice rivers and oceans are much cleaner let keep them shut down plenty of gold sitting in vaults we dont need any more
DAVID GOLDSTEIN
DAVID GOLDSTEIN Apr 05, 2020 1:57PM ET
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I can think of 10 other industries that pollute more than gold miners. I hope you short gold, because you will get destroyed...
Berat Arda Dedekoca
Berat Arda Dedekoca Apr 05, 2020 7:25AM ET
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Gold will be between 1580 - 1630 for 3 weeks.. EUR/USD will not decline to 1.07500 s .. depending on the spread of Corona V in US, will probably rise up to 1.13 ... please remember no financial data will be the main actor for the upcoming results ... Corona news and oil news will probably design financial markets ... so sad but true.
Evans Eps
Evans Eps Apr 04, 2020 3:13PM ET
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According to  my calculations, since US dollar fell during the non farm payrolls stated in the last friday the so called NFP, GOLD prices will rise as the demand keep getting higher, the chart shows a consolidation and by what Bloomberg said ''dealers say they’re struggling to find gold to sell'' that justifies the consolidation, but still there is a higher level of demand for less supply, GOLD will keep rising till 1685.02 at R1 pivot, so, the sentiment, the fundamental and the technical analysis are all pointing the same, there is a higher chance to keep on bullish.
Silverbug 19
Silverbug 19 Apr 04, 2020 1:49PM ET
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This is an attack on those who believe in sound money. Reuters be damned
Stak Hard
Stak Hard Apr 04, 2020 1:49PM ET
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Obvious attack on stackers . Why? Bloomberg doesn’t want the people to own gold?? I am buying more. When you read articles like this time to buy. I just bought last week. Eagles fly.
Arch Crawford
Arch Crawford Apr 04, 2020 1:37PM ET
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We like it!
 
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