Gold Surges
It has been a difficult year for stocks, especially tech, but gold has performed exceptionally well this year, rising approximately 17% year to date. Remarkably, gold is now outperforming the S&P 500 Index over the past 20 years, having delivered a 10.4% annualized rate of return.
In this segment, Trish and Rob review why they have been bullish on gold and why they expect demand for gold from the world’s central banks to remain strong.
Gold has unique physical properties, which are the reason it has functioned as money since the dawn of civilization. Gold’s sharp rise over the past two years (almost 60%) signals its return to prominence as the preferred reserve asset for central bankers.
The U.S. dollar and U.S. Treasuries still dominate central bank holdings but have begun to look increasingly defective.
The move towards gold is driven by exploding debt loads in the U.S. and evaporating trust in dollar-based financial instruments, following the seizure of Russian assets as punishment for its actions in Ukraine.
Gold can be stored domestically in a country’s own vaults and is the only major financial asset that cannot be canceled, debased or confiscated by any nation, company or financial institution.
As Trish and Rob explain, Trump’s desire to rebalance global trade through his tariff agenda may also lead to an acceleration of money printing around the world.
Foreign countries now have an even stronger incentive to weaken their currencies relative to the dollar in order to maintain export competitiveness—which they can accomplish by exchanging printed money for gold.
This all comes as a period of restrictive monetary policy comes to an end with inflation retreating to acceptable levels and global growth potentially stalling. The recent move in gold is potentially signaling a return to much easier monetary policy in the U.S and abroad.
