Short the Fed and Buy Gold
The comments below are an edited and abridged synopsis of an article by Peter Krauth
Tesla just moved $1.5 billion of its cash into bitcoin. Naturally, that’s big news. But what didn’t make the Tesla headlines may surprise you.
Tesla’s latest 10k filing said: “In January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity…we may invest a portion of such cash in certain alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds and other assets as specified in the future.”
The writing is on the wall. Corporate America is cluing in, but the vast majority of individual investors haven’t… yet. It’s why gold, silver, and pretty much all commodities have started to run higher.
Most analysts expect gold output to grow over the next decade. A report forecasts about 2.5% annual gold production growth between 2020 and 2029, led by Russia, which would overtake China as the largest producer. Russia’s drive to grow its gold output is in order to increase its central bank holdings as a buffer against US sanctions and risks of Russian banks being excluded from dealing in dollar-denominated assets. A lot of Russia’s production may never reach the market.
Going back to the mid-1970s, gold has not only kept pace, but surpassed global M2 money supply growth.
Central banks will be net buyers again this year. Financial and geopolitical uncertainty, near-zero or negative rates, historic levels of fiscal and monetary stimulus, and massive pent-up demand due to the pandemic mean gold is primed to outperform.
The dollar has resumed its long-term downtrend, as investors are beginning to realize it’s about to be printed into oblivion. They need to take steps that will help protect cash and purchasing power. And that means prioritizing precious metals and commodities.
In the end, it’s not just Krauth saying gold is a necessary reserve asset; now even Elon Musk likes gold.