Gold will outperform and most of you won’t own it.

1) The first bullish indicator for gold is that this sub hates it.

2) 60/40 replacement: 60/40 portfolios have been a home run for 50 years because bonds paid 3-10% risk free. They now yield almost nothing, which makes them basically cash. This is part of the reason more folks are 80-100% in equities. The alternatives aren’t attractive.

Instead of holding 40% ~cash/bonds during historic non-transitory inflation, or 40% more equities in its place, consider an allocation to gold. It serves as dry powder for a crash, just the same as cash, but it doesn’t melt away, from printing more. People will point out gold doesn’t tightly correlate to CPI prints, which is true, and therefore doesn’t really protect inflation. The fact of the matter is that gold has always kept up with M2 money supply growth, and does protect against currency devaluation. Imagine if your dry powder is appreciating

3) Governments ARE NOT going to store their wealth in foreign bonds anymore. With financial aggression being used as a weapon, the entire world just learned that is a bad idea. Previously, countries like Russia and China would sell things to the world, get a paycheck, and then invest that paycheck in US treasuries, for example, to store their wealth. Recently, the United States just said that all of Russia’s savings from their paychecks don’t exist, roughly. Now, every country in the world is much more incentivized to store their wealth in something else. Historically, before the increasing globalization of the last 50 years, the store of wealth options of choice were gold and domestic infrastructure . (Cue photo of Ft, Knox). Expect it to go back to those.

4) When energy prices moon like this, two things may happen:

a) A recession/crash historically has almost always followed serious energy spikes. The cost to do economic activity becomes too high, companies pull back, people have fewer jobs/less money, companies pull back more. Classic retraction. Gold is great as dry powder in this event.

b) Governments will print to prevent recession/crash. They will hand out energy stimulus checks to people, start huge government infrastructure projects to keep people employed, etc. Gold is also great in this case as an inflation hedge. They can’t print gold.

Gold has caught a bit of a bid recently, but not as much as it should have considering the price of energy.

5) Be contrarian. You make money when you buy something reasonable that everyone else dislikes. On average this will do better than chasing whatever has done well in the last 10 years. This does not mean to buy things people dislike because they are poor long-term instruments, like future based etfs, or to buy things that perpetually look like a bottom, like inverse S&P.