Gold is hard to pin down. It means a lot of different things to a lot of different people. But it’s desirable and expensive, which has made a consistent fulcrum of financial speculation for centuries. Even Costco is trying to get in on the action by selling gold bars alongside cheap hotdogs and giant boxes of household goods. In fact, Bitcoin has long been thought of a sort of digital parallel to gold, with all the same animal spirits driving it. But as the precious metal hits a new record — it’s at nearly $2,200 a troy ounce in Thursday trading — investors could be forgiven for trying to find a reason for its continued rise.
But why?
Enter Jonathan Awde, president and CEO of Dakota Gold Corp. At a recent small-cap stock investing conference put on this week by the equity research firm Sidoti & Company, he took a moment to lay out all the reasons that he thought gold was doing so well lately:
🟡 “Over the last couple of years, you’ve seen record central bank buying. You’ve really seen a couple of key shifts happening. You’ve seen this dedollarization shift where a lot of countries are looking to settle transactions in something other than U.S. dollars.”
🟡 “You’re seeing this move from West to East, where historically speaking, a lot of Western countries have been countries were gold was stored. And this is now changing because of what happened with Russia and Ukraine. The U.S. imposing sanctions on Russia. A lot of countries are saying, all right, we’ve seen your playbook. We don’t want to have gold stored in other countries. We want to have gold stored in our own country. So in case we have or do something that goes against your foreign policy, we don’t have our gold confiscated.”
🟡 “You know, the U.S. government is running at an unsustainable pace of $2.5 trillion to $3 trillion annually in deficits, almost $1 trillion on military, and close to $1 trillion a year on interest payments to service the debt. So at some point, this is not sustainable.”
🟡 “I think the U.S. dollar will also get ahead and historically has an inverse relationship with gold. So I think the setup is there and I think it’s a really interesting time to be looking at gold if you currently have no exposure.”
There you have it. Of course, these are the kinds of fear-driven talking points that have long been a part of the sales pitch for gold — especially gold coins. But the market is the market. Funny enough, despite gold’s recent jump, it’s still been a worse investment this year than the S&P 500.