Gold Outperformed Markets – Holmes

Release Date: 
Friday, August 4, 2017

A positive jobs report and robust equities market sent gold prices lower this week.

“Gold futures turned lower Friday and are on track for a modest weekly drop after the July payrolls report showed stronger-than-expected job creation last month, although without much pickup in wage growth.

“The data rallied stocks and the dollar index, dulling demand for gold. The job market’s performance could keep a Federal Reserve interest-rate hike on the table for later in 2017, although the lack of wage inflation is seen keeping the debate for such a move heated among Fed members….” (“Gold falls, tracking weekly loss, as hiring strength in July boosts stocks and dollar,” MarketWatch, 8/4/17.)

Gold ended the week down $10.70, closing at $1259.40. Silver prices closed at $16.34, down $0.50.

Gold Outperformed Markets – Holmes
Writing in Forbes, U.S. Global Investors CEO Frank Holmes explained that gold prices currently have outperformed the S&P 500 Index in this century.

“Spot gold finished July up more than 2 percent, its best month since February, when it returned 3.7% … More impressively, the price of gold has outperformed the S&P 500 Index so far this century, returning 86 percent more than the market if we index both asset classes at 100 on December 31, 1999. Over the past 17 years, the S&P 500 has undergone two major contractions, both of them resulting in a loss of around 40 percent. Gold, meanwhile, has held its value well, boosting its appeal as a portfolio diversifier …

“In a telephone interview with Reuters this week, DoubleLine Capital CEO Jeffrey Gundlach, known on Wall Street as the ‘bond king,’ said that he still has exposure to gold, which he predicts will see continued upward price momentum in the short term. ‘Gold looks cheap compared to markets that have rallied a lot, including bitcoin and including Amazon,’ said Gundlach, whose firm oversees $110 billion in assets….” (“Surprise! Gold Prices Have Beaten The Market So Far This Century,” Forbes, 8/3/17.)

Crushing Debt May Force States Into Bankruptcy – Kotecha
Dr. Kal Kotecha explored Illinois’ debt crisis and its potential to lead to a number of states declaring bankruptcy.

“Throughout the history of the United States, there was only one state has ever had to declare bankruptcy, and that was during the Great Depression.  All of that may be about to change, however.  Illinois is presently facing a challenging financial crisis, one so severe that even the lottery may be shut down in its wake … How severe is this situation?  The state has $13 billion dollars in unpaid bills, and $130 billion obligations for pensions that remain unfunded.1  As if that weren’t bad enough, the state’s entire budget is consumed by court-ordered payments, leaving the state without an operating budget ...

“Will Illinois be the first state in over 80 years to file for bankruptcy?  It appears the jury is still out. For Gold Investors this news can only be a good thing, and for potential pensioners a warning.  Gold is a great investment to prevent vulnerability to ones supposedly guaranteed pension being siphoned away by poor fiscal management on the part of our government.  One cannot overlook for those already invested this is only good news as gold thrives in an economy in upheaval.

“Gold has been a go-to investment against an unhealthy economy, as evidenced by the spikes in value following the Brexit decision, and preceding the election of Trump due to his policies.  Both of these examples have shown that when economies are anticipated to experience a negative impact, gold prices skyrocket.  However, when economies are expected to stabilize, the price of gold drops.

“For those looking at getting into gold investing now could be the time - if Illinois does pursue bankruptcy it will pave the way for 12 other states to do the same.  With that kind of instability in government funds, gold should rise quickly in value - do you want to miss out on this potential boom?” (“What State Debt Means For The Price Of Gold And Your Portfolio” Gold-Eagle, 8/3/17.)

Worst Crash In Our Lifetime Is Coming – Rogers
Author and financial analyst Jim Rogers told Kitco News that the worst crash seen in our lifetime is coming soon.

“We’ve had economic problems in the U.S. and North America every four to eight years since the beginning of the Republic so to say we’re going to have a problem is not unusual. It would be bizarre if we didn’t have a problem again … We’re going to have another one it’s been over eight years since our last one. The last one was caused by too much debt. Since 2008 the debt has gone through the roof … So the next time it will be the worst in our lifetime … I would expect it to start this year or next ...

“We’ve always had economic cycles and will continue to do so … In the end gold is going to b gigantic, it’s going to go up a lot because when people lose confidence in government and paper money they always put their money in gold and silver ... I hope I’m smart enough to sell my dollars and buy gold because gold is going to be explosive in the next few years….” (“  Gold Prices Will Be 'Explosive,' Just Wait and See - Jim Rogers,” Kitco, 8/3/17.)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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