Feb. 5, 2024
It pays to stock up on gold even if the world does not end!
Several of you sent me a Telex article and asked for my opinion. First of all, thank you for your trust; let us talk about it.
You may already see that I approach questions about gold differently from most people. What do I mean? Above all, if you use gold for its intended purpose—preserving value over the medium and long term—it is worth buying at any time.
By contrast, many articles and reports discuss the short-term changes expected in the gold market. I made a video about this; you will find the long answer there.
The short answer is that nobody is a fortune-teller. Nobody foresaw the Russian–Ukrainian war, the COVID pandemic, the rocket attacks on Israel, or the American bank failures.
So why does the article say it will be worth considering gold next year because its price will rise? I cannot resist pointing out that gold will not become more valuable; money deteriorates. Gold is for long-term value preservation, not for making money. Anyone who thinks they are earning from it does not understand the difference between purchasing power and nominal value. Here is some help:
The idea that people buy gold only when the end of the world is coming is also extremely uninformed, as I mention in the video.
But on what does the article base its claim that 2024 will be the year of gold? Let us see.
First, gold is a classic safe-haven asset, so many people turn to it when trouble comes. That is true. Unfortunately, they often do so without adequate knowledge: Hungarians typically panic-buy. I believe it is better to use gold consciously than to buy and sell in a panic, as I also discuss here.
Sadly, I agree that geopolitical tensions are more likely to intensify than ease—not only in the Middle East, but in Eastern Europe, around Taiwan, and between the great powers—and in the long rather than short term. The world is moving towards a kind of instability of power. Realignments are under way, and conflicts, flashpoints, and clashes are inevitable consequences. These processes naturally favour gold.
The next consideration is the easing of the crisis and a period of low interest rates. I would not get carried away yet, although I hope we are slowly emerging from recession. Many say this will put gold prices on an upward path because high interest rates push prices down, and once that period ends prices begin to rise. That is not necessarily true in every case.
In any event, the article says gold has performed well in almost every recession. So whether there is trouble or not, gold is worth considering. “Almost every” is the most precise wording; if you watched the video, you know what I mean. In some situations gold does not behave in the short term as expected, so I would not buy it for short-term speculation even before a recession. I can only repeat: it is for preserving value over the medium and long term, not for making money.
Central banks' unbroken interest in gold also raises its price, and the article expects this to continue in 2024. Central-bank purchases really can move the price upward because they buy not one or two grams but tonnes. On that I agree.
The article also mentions ETFs, meaning exchange-traded gold. Perhaps I am old-fashioned—and in many cases I certainly am. I think a man should court a woman if he wants to win her over; decaffeinated coffee and alcohol-free beer make no sense to me as concepts, and neither does paper gold.
All things considered, I believe gold will serve your goals this year too if you use it for its intended purpose: preserving value over the medium and long term.
If that is your goal, own gold!