Home About Archives RSS Feed

The Retired Investor: Gold Regains Its Mojo

By Bill SchmickiBerkshires columnist
In inflationary environments, investors historically have hedged their bets by buying gold. However, this time around, the precious metal has languished as investors bought alternative investments. But times are changing.
The primary alternative to buying gold has been cryptocurrencies. Bitcoin and Ethereum, two of my 2021 buy recommendations (for those with a strong stomach) have enjoyed spectacular gains in 2021. Bitcoin, at one point in May, had gained almost 100 percent, while Ethereum saw gains of more than 400 percent.
In addition, other commodities held more interest than gold for most investors. In January 2021, I recommended investors focus on some specific commodities, especially oil, copper, and soft commodities, like food and lumber. I listed gold as my last pick among those commodities.
That proved to be the correct approach because I recognized that the world had moved on, at least temporarily from something as arcane as gold. In today's internet world among the Robin Hood traders and GameStop crowd, gold was simply not be as attractive as digital currencies. There are plenty of arguments for why that could be the case. Bullion, for example, is expensive to hold, and rising interest rates increases the cost of holding it. Gold is cumbersome, while digital transactions are easy and far more efficient. And while gold is still used in several products, copper, lumber, and oil are far more leveraged to a re-opening global economy.
It is not as if gold has gone nowhere. Gold made what I consider a cycle low back in November 2020 at $1,767.20 an ounce. Today, that same ounce of gold will fetch $1,882.70. That's roughly a 6.5 percent gain. That's much better than the risk-free rate in the bond market but compared to the stock market's 12 percent gains it has been disappointing at best.
However, recently gold has begun to perk up and I believe we may be on the cusp of a new move higher in this precious metal (and silver along with it). Why the change in attitude? The increased worry over how high and how fast inflation will rise and the dollar's sharp decline has investors nervous. At the same time, other commodities are at record peak prices, while gold has done little.
In addition, recent arguments that crypto currencies are the Twenty-First Century's "new gold" is beginning to unravel as speculation within that asset class runs amuck.
As an example, the crypto world is in the midst of a massive decline (evenas I write this). Bitcoin has fallen from a high of $64,000 to Wednesday's low of $33,700, which is almost a 50 percent decline. Ethereum and Dogecoin have also incurred similar losses. The argument that it is a hedge against inflation or rising interest rates seems to be suspect given recent events.
I have noticed over the last few months an increasing number of Wall Street firms including Goldman Sachs and Credit Suisse have warmed to the prospects of gold. Some respected analyst forecasts are expecting gold to move much higher. Twelve out of 32 analysts are predicting that gold will average $2,000 an ounce this year. The median forecast with half above and half below, averages $1,965 an ounce.
I expect that all these forecasts could be low. I am putting gold at the top of my commodity list for the second half of 2021. Silver could be a close second. For investors interested in this area, keep in mind that gold and silver mining stocks usually outperform the metals by a ratio of 2-3 to one. Remember, however, that commodities overall, and precious metals in particular, are highly aggressive investments.

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.



Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Longtime Wahconah Coach John Kovacs Hangs Up His Whistle
Williams' Kirshe, American Ruggers Come Back for Win
Dog Perishes in Pittsfield Structure Fire
Williams Alum, U.S. Rugby 7s Compete Thursday Night on USA Network
BRTA Seeks Input For Proposed Bus Stops
Pittsfield Babe Ruth 13s Fall One Short of World Series
Carr Hardware Window Wraps Deemed 'Art' Not Signage
NRM Announces Winners of Juried Outdoor Sculpture Show
Former Olympian Receives Additional Indictments
Cheshire Select Board Discusses CARES Act Funding

@theMarket (375)
Independent Investor (451)
Retired Investor (52)
July 2021 (7)
July 2020 (2)
June 2021 (6)
May 2021 (6)
April 2021 (9)
March 2021 (8)
February 2021 (8)
January 2021 (5)
December 2020 (6)
November 2020 (8)
October 2020 (7)
September 2020 (6)
August 2020 (6)
Japan Pullback Recession Fiscal Cliff Banks Election Federal Reserve Congress Selloff Oil Crisis Retirement Euro Stimulus Debt Ceiling Energy Metals Currency Markets Rally Greece Bailout Debt Stocks Deficit Europe Jobs Interest Rates Taxes Europe Wall Street Housing Commodities Stock Market Economy
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: How Will Wall Street II Play on Main Street?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: Will the Municipal Bond Massacre Continue?
Recent Entries:
The Retired Investor: Olympic Price Tag Breaks Records
@theMarket: Wild Week for Stocks
The Retired Investor: What's That Smell?
@theMarket: Week of Surprises Keeps Investors Hopping
The Retired Investor: China's Red Hand of Regulation
@theMarket: Markets Grind Ever Higher
The Retired Investor: Will SALT Be Repealed?
The Retired Investor: Beware the Delta Variant
The Retired Investor: Chlorine, Cars and the Supply Chain Challenge
@theMarket: Inflation Is Running 'Hot'