Mike Maloney on the gold rush that “will take your breath away”
- International gold prices plunged in February.
- Mike Maloney believes that the factors supporting a bull run are much stronger than in the 1980s.
- Gold can also be viewed as de-dollarization insurance in the event of a weaker greenback.
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During the past month, the international gold price was pummelled, reaching near a 2-month low.
At the time of writing, the gold continuous contract was trading 5.5% lower over the past month.
The gold price may have trended lower amid expectations of additional tightening by the Federal Reserve after inflation measures shocked to the upside.
Interested readers can review these developments in this article.
For now, the yellow metal has been able to stay above the psychologically important $1800 mark.
As discussed earlier in this piece, the spot price only reflects the paper markets and must be interpreted with caution.
Traded derivatives rarely amount to an actual exchange of physical products, and as a result, there are far more paper gold transactions than actual physical metal volumes available to the exchanges.
A rally that “will take your breath away”
Mike Maloney, the Founder and Owner of GoldSilver.com, is a veteran of the physical gold and silver markets.
He recently drew viewers’ attention to a Time Magazine article from January 1980, entitled, ‘Stampede for Precious Metal.’
Last week gold left even its most frenzied boosters gawking in astonishment. In five wild and erratic trading days, it leaped by an incredibly 34%.
In the gold rush of four decades ago, prices headed higher by roughly 25 times in a short period of 8 years, and as reported above, triggers often played out very suddenly.
Comparing today’s gold market to the bull market of the 1980s, Maloney notes that the factors prevailing that could propel gold price forward are even more potent today,
Today we have twice as many ounces of gold available above ground for investors to buy as we did when it peaked in 1980. However, there are 18 times more people that can legally access (this)…There’s 55 times more currency according to the OECD; 56 times more millionaires around the planet; 200 times more billionaires and 220 times more available consumer credit…the global stock market is 49 times larger so you take all of these factors people trying to protect their wealth in a crisis.
Thus, it seems that there is significantly more buying power and market access across the world today than there was four decades ago.
For instance, in the 1970s and 1980s, the former USSR and China did not participate in global markets.
Countries in Africa and South America did not have developed bullion exchanges to take advantage of this surge in prices.
Add to this, the rising emphasis on de-dollarization, creating access to alternative modes of international payments and the highly inflationary period we are currently experiencing.
Interested readers can read about China’s recent push to drive de-dollarization here.
Maloney believes that despite the lacklustre performance of gold over the past month, the underlying factors that will drive the bull market of a lifetime are undeniable.
Moreover, the lopsided ratio of derivatives to actual physical metal at hand will likely force a surge in physical prices in a breach of the paper market.
Central banks around the world seem to be well aware of the importance of gold as a stable, reliable and highly liquid asset, having accelerated physical purchases this decade.
Maloney is highly optimistic regarding the direction of gold and expects
… (gold will go to) ten thousand dollars an ounce and never look back.
For those who are interested in purchasing physical gold, the current dip may be a good buying opportunity, with Ian Everard, a precious metals retailer and Founder of arksilver.com, noting,
…the surge is coming in premiums for sure.
Alternatively, gold could be viewed as a source of insurance against a black swan event where the dollar loses significant purchasing power in the coming years. This article discusses some of the insurance aspects of gold in both inflationary and deflationary scenarios.