Physical Gold Is The “Best Defence” Against “Escalating Currency Wars”…(They Are Having A “Field Day” With My Computer This Morning!!!)
By: GoldCore
GoldSeek.com
Tuesday, 24 July 2018
As governments around the world debase their currencies, you need an asset that can ride out the hard times. And nothing fits the bill like gold writes John Stepek of Money Week
We’ve always said that you should have a bit of physical gold in your portfolio (about 5%-10%, depending).
And note that, by gold, we do mean gold, not gold miners. If you own the miners (and sometimes it can be a good idea to do so), then you should consider them as forming part of the equity chunk of your portfolio.
The point of physical gold is that it provides you with diversification (it behaves differently from both bonds and equities) and it tends to be a “hard times” asset, whereas most of the rest are “good times” assets.
And if you are low on gold in your portfolio, now might be a good time to top up.
Gold looks cheap relative to US stocks
Gold is trading at its lowest level relative to the S&P 500 since 2002, notes Bank of America Merrill Lynch. In other words, compared to US equities, gold is cheap.
More importantly, it is probably one of the best ways to defend against what the investment bank describes as the “ultimate populist policy” – the end of central bank independence.
Central banks are meant to be independent, so that the vagaries of the election cycle don’t play havoc with the interest rate cycle. That’s the theory. So politicians are meant to keep their paws off.
Obviously, US president Donald Trump doesn’t care about that. He has been very willing to note how unhappy he is about the Federal Reserve raising interest rates at a time, he says, when the US dollar is already pushing higher.
As Trump argues, this makes it harder for the US to sell its goods overseas. Or to put it his way (via Twitter):
“China, the European Union and others have been manipulating their currencies and interest rates lower, while the US is raising rates while the dollars gets stronger and stronger with each passing day – taking away our big competitive edge. As usual, not a level playing field…
“The US should not be penalized because we are doing so well. Tightening now hurts all that we have done. The US should be allowed to recapture what was lost due to illegal currency manipulation and BAD Trade Deals. Debt coming due & we are raising rates – Really?”
Now, let’s be honest here. Central bank independence is a bit of an amusing idea in any case. It arguably hasn’t made much difference to monetary policy over the last two decades or so (the Bank of England became independent in 1997), because interest rates have been on a secular downtrend for that whole time.
The Rest…HERE
