With Uncertainty on the Rise, Investors Flock to Gold
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
Ever since the Federal Reserve broke all records of money printing, people became anxious. Trillions of newly-conjured dollars may have staved off total market crash, and they may have enriched the ultra-rich even further. But is such a system sustainable? Judging by the rise of Bitcoin (BTC), gold, and silver, many fear it is not. Prepare accordingly.
The Cost Of Hysteria
For a moment, imagine that America had a non-partisan medical professional as the head epidemiologist, such as Sweden’s Dr. Anders Tegnell. In such an alternative timeline, it’s possible that we would have had:
- no lockdowns
- no economic shutdown
- no mass unemployment
- no extra deaths outside the seasonal flu range among the elderly
- no increase in suicide rates and substance abuse due to lockdowns
- no destabilization of the entire financial system
For whatever reason, America chose a different path. The momentum has been set, and the sunk cost fallacy’s push is too strong to be easily averted. In such an environment, alternative assets will thrive as they have done so in the past.
Even without the coronavirus pandemic, keep in mind that the behavior of the Federal Reserve and government spending hasn’t changed since the last financial crisis in 2008. We see the same pumping of stocks to inflate the markets, we see the same growing chasm between the ultra-wealthy and the rest. Take heed from the lessons of the past.
Inflation or Hyperinflation?
With the permanent obliteration of tens of thousands of small businesses and the unprecedented corporate consolidation, the distance between Main Street and Wall Street could be at a breaking point. Gold stands to benefit from this the most, alongside Bitcoin, as the trust in US dollar erodes.
The fate of the Digital Dollar Project still remains uncertain, especially in the current political climate. Even if implemented, it will not resolve the underlying problems plaguing the debt-laden US economy.
In fact, hyperinflation seems highly likely if we consider the Fed did not conjure material goods out of thin air, but merely dollars to price those goods. In the past, and in many countries, this has almost always spiked the price of gold as a haven in the coming financial storm.
Gold as Anchor in the Storm
At the time of this publication, gold sits at almost $2,060 per troy ounce, which is a remarkable rise compared to the same month last year, at $1,415. Comparatively, some do not consider gold a solid investment, as it yields no interest and no dividends like other assets. The value of gold is, at least in part, tied to the perception of other investors of its value.
Despite its regular use in jewelry and high-end electronics, the price of gold is also highly speculative. All of this tells us that the current surge in the price of gold reflects a deeply uncertain period ahead. One in which the trust in regular assets is rapidly shrinking. We have seen such gold spikes before:
- In 2011, amid potential eurozone dissolution and the US debt ceiling debate.
- In the early 1980s, following the Iranian Islamic revolution, which spurred concerns over oil supply.
You only have to visit the World Economic Forum, and the Great Reset agenda, to understand how the world’s ruling elites view the current crisis. Therefore, to weather this storm, it would be wise to consider the following criteria when choosing which gold-mining company to invest in:
The location of the gold-mining company is paramount. For instance, South Africa was for a long time a highly-developed economic powerhouse.
Following the abolishment of apartheid, South Africa rapidly continues to descend into third-world status, to the point of having trouble maintaining a stable electric grid. On top of the growing security concerns, South African deep mines suffer accordingly.
Likewise, resource-rich Venezuela may have withstood previous coup attempts but for how long? For these reasons, it is best to pick a gold-mining company situated in a relatively stable country.
Maintaining a profitable gold-mining company requires a confluence of expertise from different fields such as geology, engineering, and finance. You will usually find such personnel small in number but highly dedicated and with a long track record of success.
Look beyond the shiny promises of the company’s promotors. Instead, laser-focus your attention on past achievements of all key personnel from the three fields mentioned.
Gold-mining companies in the early stages of mining exploration may be appealing, but they are fraught with risk. For an average gold-buyer, who lacks the necessary technical expertise, it would be difficult to assess the company’s long-term outlook. To avoid such risks, it would be best to focus on gold-mining companies with registered reserve stockpiles and a detailed plan for gold extraction.
Extra Safety Cushion in the Form of Royalties
Investing in companies that acquire much of the profits from royalties is a great way to diffuse your own investment risk. In exchange for early mine development, these companies charge royalties as the gold mines ramp up their production. Not only do royalties neutralize potential cost overruns, and other missteps, but they usually rake in royalties from multiple gold-mining operations. Franco Nevada Corp. (FNV) and Wheaton Precious Metals (WPM) provide an especially good opportunity in this regard.
Additionally, by checking which royalty company bought production shares in which gold-mining company, you can vicariously assess the quality of the gold-mining operation. After all, proven companies like FNV and WPM will conduct a thorough analysis of a company’s ability to perform, one that is out of reach to most people.
Relatively Safe Gold Picks
With these criteria in mind, a number of reputable gold picks are as follows:
- Newmont Corp. (NEM)
- Barrick Gold Corp. (ABX.TO)
- Alacer Gold Corp. (ASR.TO)
- Tudor Gold Corp. (TUD.V)
- SSR Mining Inc. (SSRM.TO)
- Kinross Gold Corp. (KGC)
With the exception of Turkish Alacer, most of the players are Canadian. South African Caledonia Mining Corp. PLC (CMCL) and DRDGold Ltd. (DRD) are still performing fairly well, but it is uncertain if they will withstand the societal, political, and infrastructural chaos engulfing South Africa.
Lastly, whether you are buying Bitcoin or gold, consider holding on to it for a while, resisting day-to-day temptations. Anyone familiar with Bitcoin should be well-aware by now that patience is your greatest ally. As for the right trading app to use, peruse through some of our reviews to find one that best matches your needs.