supply of currency per capita (for gold in dollar terms measurement), keeps increasing. And yet, the global supply of currency per capita, and particularly the U.S. The ratio of how much gold there is per person is a relatively static figure. In other words, decades ago there was about one once of gold per person above ground, and today there is still about one ounce of gold per person above ground. There also happens to be 7-8 billion people in the world, or just under 1 ounce of gold per person. According to the World Gold Council, there are about 200,000 tonnes of mined gold known to exist, which equals roughly 7 billion ounces. The reason I like to compare it per capita, is because the supply of above-ground gold grows at 1% or a little more per year, which is similar to the global population growth rate, and similar to the U.S. And the speed with which currencies lose value is significantly tied to their money supply growth rate, especially when central banks print more and more currency to finance government deficits. The idea behind this ratio is that, over time, currencies inflate and devalue vs gold at various rates, while gold holds its purchasing power over the long term. dollars, which is perhaps the best comparison because both gold and the dollar are traded worldwide. This works for any major currency, and I happen to track it in U.S. 1) Money Supply is Expanding QuicklyĪs long-term readers know, one of my favorite charts for gold is to compare the price of gold to the growth of broad money supply per capita. Here are four reasons why I remain bullish on gold in the intermediate and long term.
I’m still happy to buy gold at current prices, even though they’re not as good as prices that I bought at back in 20. It’ll rise and fall of course, but my base case continues to view gold as being in a healthy upward trend. I still think this rally has legs, and remains an attractive risk/reward addition to a diversified portfolio. Should contrarian investors get concerned? Should we pivot away from gold now? In the year and a half or more since then, gold and gold stocks have outperformed. I added gold and gold stocks to my model newsletter portfolio in October 2018, and have dollar-cost averaged in from then until the present day. In other words, I still think we’re in the first half of this gold bull move from 2015/2016 lows, rather than the tail end. In my view, there’s still a good case for including gold and gold stocks in a portfolio, despite their recent period of outperformance. As for the fundamentals that are pushing metals higher, here is an analysis of the four main ones. It represents a healthy and temporary decline that calms the euphoric feeling in the market and will allow the next upward phase to be fully energized.
As I explained in my previous article, the current downtrend does not mean the end of the bull market. With gold and silver prices correcting, as they have been doing for several weeks, I like to reread this article by American analyst, Lyn Alden, which explains the four fundamental reasons to continue to own gold in 2020.
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