Gold: The all-weather investment

The mainstream financial media quoted me last week saying gold was the “all-weather” hedge against whatever may happen with the Fed pivot and more.

That’s been proven accurate, as stocks are down, the dollar is stronger, and yields are rising... yet gold is soaring.

Here’s what it all means and what you need to do about it.

As we all know, the long-awaited Fed pivot was launched on Wednesday with an aggressive half-point cut.

One might think that the markets would have celebrated that deep cut, and indeed, all the risk assets soared immediately afterward as the black-box algorithms interpreted the major move.

But all the markets ended the day lower as investors — real humans — began to ponder what prompted the Fed to make its first cut so large. What did Powell & Co. know that we don’t?

Added to this was the “buy the rumor, sell the news” phenomenon that I’d been warning you about. Traders who had bet heavily on the inevitable Fed pivot were naturally exiting the trade now that it was a fait accompli.

But all those worries and factors were temporarily brushed aside yesterday, as everything bounced back with a vengeance. The Dow gained 1.25%, and the Nasdaq rose over 2.5%.

Gold jumped nearly $27, and silver soared over 70 cents.

But all those correlations are breaking down today...

The one investment to rule them all

In my Golden Opportunities email newsletters, I’ve been making the point that gold is perfectly set up for whatever may happen post-Pivot.

If we get a no-landing or a soft-landing scenario in the U.S. economy, the Fed’s shift to easier money will drive real rates lower, with stocks, bonds, and metals all doing well.

But if we get a hard landing into a recession, stocks and bonds will nose dive, but (outside of a brief, liquidity vacuum type of sell-off) gold will soar as the Fed is forced to cut more aggressively.

It’s the perfect investment, and that’s why it’s increasingly attracting portfolio allocations from around the world.

That’s the point I made to a MarketWatch reporter last week, who quoted me in their top article for the day:

It’s no surprise to hear that expectations for interest-rate cuts by the Federal Reserve were behind gold’s latest rally to record highs, as recession worries boost the precious metal’s appeal.

But gold also may prove its worth as an “all-weather hedge against whatever happens next” even if the central bank makes an unexpected move.

There has been “some risk from the ‘buy the rumor, sell the news’ phenomenon” when the Fed actually cuts rates or as the decision day is very near,” Brien Lundin, editor of Gold Newsletter, told MarketWatch.

However, global portfolios are increasingly adding gold allocations because the metal “stands to do well if the Fed cuts gradually or it’s forced to lower rates more urgently in a recession.”

Gold rallied Thursday even when stocks were down, and the dollar was up and rose even more as stocks recovered and the Dollar Index fell, said Lundin.

“The lesson, in my view, is that gold has established itself as the all-weather hedge against whatever happens next,” he said.

These points are being proven out today: As I write, stocks are down, the Dollar Index and Treasury yields are higher... yet gold is taking off once again to the upside.

Gold has not only reached the key $2,600 level on a spot basis, it’s barreled right through it and is putting it well behind.

Again: A generational opportunity

Earlier this week, I told you that this was a “generational opportunity” — something akin to the gold bull market of the early 2000s that created fortunes for those who rode it from the bottom.

But there are key differences today, as gold is already at all-time highs, yet the mining stocks are still near long-term lows. The investment case is incredibly powerful right now.

Moreover, today’s massive debt loads make higher interest rates...anything higher than the rate of inflation...impossible to endure over the long term.

So, we will have negative real rates going forward and, therefore, a bullish environment for gold, silver, and mining stocks for years to come.