Our Perspective.
As we write this month’s commentary, we appear to be on the verge of either the unimaginable reality of a US default, or an increase in the US debt ceiling. We hope that it will be the latter. Whilst we believe balancing a budget is important, whether you are a household or a nation, we also know that politicians are rarely willing to make tough decisions, as these might just cost them their jobs! So, rather than increasing taxes or cutting spending, we expect the most likely outcome to be more of the same……namely more money printing. Under the circumstances a devaluation of the US Dollar is most likely, and probably not for the last time either. Where the US leads many have been tempted to follow, so we should not be surprised if other developed economies head down the same inflationary path.
This brings us to our topic this month: Gold!
We have just released a podcast (insert link) discussing its value(s) and characteristics, but suffice to say the three pillars of our Gold-thesis are:
- A store of value whilst central banks and governments around the world continue to devalue currencies whose intrinsic value is ultimately based on trust (fiat!),
- A provider of insurance amidst the rising risks of increasing geopolitical tensions as the two biggest global powers continue to lock horns, and
- A provider of liquidity as asset values – from equity markets to commercial real estate – potentially take a plunge later this year!
As for the debt ceiling, we believe the true risk lies not in a US default…this will merely be a technicality…but in the nature of our escalating reliance on debt and the very meaning of fiat…Trust!
History shows that when Trust is in short supply Gold tends to outperform…and right now Trust, in both the fractional reserve banking system and the fiat currencies that underpin it, are definitely in short supply!
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