Gold takes a breather after three straight days of gains
Mauldin says portfolios need to both ‘participate and protect’

(USAGOLD – 8/16/2021) – Gold is taking a breather this morning after three straight days of gains that took it back to the $1780 level. It is down $5 at $1775.50. Silver is down 21¢ at $23.60.  For a long while, John Mauldin (Mauldin Economics) has been one of the more thoughtful big picture analysts – someone whose work we read regularly. In a recent reflection, titled “Ubiquity, Complexity and Sand Piles” posted at the GoldSeek website, he begins with a section on a Brookhaven National Laboratories study of sandpiles. Researchers attempted to ascertain at which point, and to what degree, the last grain of sand falling on the pile causes disequilibrium and the collapse of the pile. It found that the impact of the last grain of sand varied. It “might trigger only a few tumblings or it might instead set off a cataclysmic chain reaction involving millions.”

“We cannot accurately predict when the avalanche will happen,” he concludes. “You can miss out on all sorts of opportunities because you see lots of fingers of instability and ignore the base of stability. And then you can lose it all at once because you ignored the fingers of instability. You need your portfolios to both participate and protect. Don’t blindly buy index funds and assume they will recover as they did in the past. This next avalanche is going to change the nature of recoveries as other market forces and new technologies change what makes an investment succeed. I cannot stress that enough. Don’t get caught in a buy-and-hold, traditional 60/40 portfolio. Don’t walk away from it. Run away.”

Chart of the Day

Gold in key currencies
(2019 to present)

gold in key currencies 2019 to present

Chart courtesy of • • • Click to enlarge

Chart note: The collapse of fiat currencies’ purchasing power, writes market commentator Alasdair Macleod in a detailed analysis posted at Gold Eagle, “is unlikely to echo the great European inflations of the 1920s, because to a large degree commerce subsisted on the alternative of gold-backed dollars, instead of local currencies. Today, the collapse of the dollar will mean there is unlikely to be any alternative currency available, because they are all tied to the dollar.” Gold’s strong, synchronous performance in the world’s top currencies since January 2019 makes Macleod’s point. It is up 41% in U.S. dollars, 49.5% in India rupee, 28.1% in British pounds, 33% in Chinese yuan, 35.2% in European euros, and 41.9% in Japanese yen. In the event of a global breakdown in fiat currencies, concludes Macleod, “anyone who does not plan to get hold of some physical gold and silver with a high degree of urgency could end up sinking with nothing but valueless fiat currencies.” (All data as of 8-13-2021)

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