Jim Grant: Gold Necessary Because of World’s Monetary Turmoil

Release Date: 
Friday, July 24, 2015

Gold and Silver Prices
Gold prices fell sharply this week, bring the spot price to five year lows, due to positive U.S. job market data and an earlier selloff by an unnamed sellers.

“Gold slid more than 1 percent to its lowest since early 2010 on Friday, on course for its biggest weekly loss in nine months, as upbeat U.S. jobs data helped deepen this week's rout and fuelled fears the metal still has some way to fall… As the selling pressure intensifies, traders from Hong Kong to New York are pointing the finger at others for being behind Monday's rout, while struggling to unmask the mystery sellers.” (“Gold sags to 5-1/2-year low, heads for worst week since Oct,” Reuters, 7/24/15.)

Gold finished the week down $33.80, closing at $1,100.50. Silver prices closed the week at $14.84, down $0.10.

Jim Grant: Gold Necessary Because of World’s Monetary Turmoil
Financial author Jim Grant is very bullish on gold in light of the monetary turmoil which exists in the markets.

“Don’t tell Jim Grant, the publisher of Grant’s Interest Rate Observer, that gold is a hedge. The author and publisher said the metal is much more dynamic; providing a trifecta of price, value and sentiment, and investors should have exposure to it. ‘[G]old is an investment in monetary and financial disorder – not a hedge. You look around the world and you see exchange rates are properly disorderly, when you look around the world of lending and borrowing -- we are in a regime of price control by another name, so-called zero percent rates and quantitative easing by the world central banks – we are in one of the most radical periods of monetary experimentation in the annals of money… You want to have exposure to the reciprocal asset of the paper assets that are the most popular - so gold, to me, is now the conjunction of price, value and sentiment, and I am very bullish indeed…’

“Grant summed up the gold selloff as “Mr. Market having a sale,” and added that the downward spiral is ‘terrifically vexing but a wonderful opportunity… ‘The important thing to recall is why those of us who own it, bought it. What is it about gold that ought to make it appealing – when it seems to be absolutely the thing you don’t want to have.’ He added that gold thrives in the face of monetary turmoil, disorder and uncertainty, noting, ‘I think we have all three of these things.’” (“'I'm Bullish' On Gold, Fed In A Hurry To Raise Rates - Jim Grant,” Kitco News, 7/23/15.)

Cramer: Gold Is Portfolio Insurance
CNBC’s Jim Cramer discussed why gold should be included in a well-diversified portfolio.

“In light of a market that has dramatic swings from one day to the next, Jim Cramer is teaching investors a new way to diversify their portfolio that will win in any market… To begin, every retail investor should have [a variety of equities] and gold. Yes, that's right. Good old gold.

Gold brings a special element into a portfolio, one that makes it different from all other metals…’I think that 10 percent is the upper limit because I consider gold as an insurance policy and no worthwhile insurance policy should be 20 percent of the money you have invested,’ the "Mad Money" host said.

Cramer recommended gold because it tends to go up when everything else is going down. It is the investors' insurance against geopolitical events, uncertainty and inflation…However just as you wouldn't own a home or car without insurance, you shouldn't have a portfolio without gold. Do you get upset when your insurance doesn't go up in value? No. So, don't ridicule gold. Owning gold is not about upside potential. It is about minimizing risk to the downside.”  (“Cramer: Go for gold! It's portfolio insurance,” CNBC, 7/17/15.)

Market Veteran Says Fed Is “Lost,” Buy Gold
Precious metals market veteran Todd “Bubba’ Horwitz told Kitco News why gold’s low prices present a buying opportunity for investors.

“I think [gold] is a great buying opportunity … I don’t think we are going straight up but I think gold has seen the lows and you want to be a buyer, it’s a hard asset everyone should own some portion of gold in their portfolio… I want to own the physical metal and I’m going to own it… I like to touch it and feel it.”

Horwitz went on to explain the Federal Reserve’s reluctance to raise interest rates.  “[Fed Reserve Chair Yellen] telegraphed that they have no intention of raising rates because the bottom line is they have no idea what they’re doing; they’re lost, they have painted themselves in a corner and all of these unintended consequences that they are now suffering because they have no idea what to do next so they’re continuing to punish the middle class.” (“Fed is Lost. Own Gold - "Bubba" Horwitz,” Kitco News, 7/15/15.)

Analyst Sees Silver to $30
Research analyst Jing Pan believes rising demand and restricted supplies will lead to silver prices doubling in the coming months.

“Yes, silver prices have been plunging since 2011. But know this: demand for silver is booming while supply is shrinking. The grey metal is due for a big squeeze…

The nice thing about the grey metal is that, unlike gold, a substantial amount of demand comes from industries…One industry that is going to have a huge demand for silver is solar energy. This is because silver is a crucial part in the making of solar panels. It is used to conduct electricity out of solar cells…The growing adoption in solar energy has brought significant demand for sliver. Back in 2000, only one million ounces of silver were used in photo voltaic cells to make solar panels. By 2013, the usage of silver in solar panels had surged to 64.5 million ounces and is expected to grow to 100 million ounces in 2015…

At today’s silver prices, silver mining companies are shrinking their production of the grey metal…Once other mining companies shrink their production of other metals, the production of silver as a byproduct will decline, too…

When you have demand higher than supply in the physical market, very soon it will translate to price increases... I wouldn’t be surprised if the grey metal doubles its price in the upcoming months.” (“Silver Price Forecast: Here’s Why Silver Prices Could Hit $30,” Profit Confidential, 7/22/15.)

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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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