Is it still a smart buy?

00:00 Speaker A

Let’s just kind of like hold space for a second at the fact that we’re still holding above this what, 3,300 level. And ultimately there were larger questions around more largely what’s the kind of all-time high new marker should be that we’re thinking about gold. What is kind of your best analysis as to what’s pushing this and how much higher we could continue to run? Or maybe, uh, if the high is already in, I think there’s another way to rephrase that question.

00:52 Speaker B

Um, listen, I turned quite bullish on gold October 2023, and the last three or four weeks I’ve been getting more and more negative on gold’s price, which looks like it could be entering some kind of manic fervor phase, as I see more and more people, uh, convinced that the recent past is going to continue into the future. Let’s take a step back. Gold tends to do well when there’s demand for non-correlation in a portfolio. It’s one of the few assets that tend to not really be correlated to anything. It marches to its own beat. It’s not correlated to inflation, it’s not correlated to deflation, not correlated to the dollar, not correlated to stocks, not correlated to bonds. So, when, especially institutional money is worried about a cycle turn in risk-on assets, that institutional money tends to find its way into gold as a way of lowering intra portfolio correlations. Now, nobody turned bullish on the retail side up until recently, which is, you could argue to an extent typical, because retail, uh, no disrespect to retail, but retail tends to get in when it’s often too late. And I think we’re getting close to that point in the way gold prices have acted now. I have made the argument for the last several weeks that if we are in the early stages of what could be multiple pulses of margin calls, given the volatility that we’re seeing in stocks, it is only a matter of time until gold becomes the source of liquidity to cover those margin calls. There’s a very specific reason for that. In behavioral finance is something called the disposition effect, which means that people tend to sell their winners before they sell their losers. Well, guess what, folks? Gold is one of the few winners left now.