Late last year, Zenolytics put out an extensive note titled, Making The Case For Gold. Much of what was discussed in that piece remains highly relevant, if not more relevant today. However, the entire thesis behind gold needs two catalysts in order for the engine to function correctly:
- A U.S. Dollar that, at the very least, hints at some weakness
- Some type of event that impairs the risk appetite of investors
The entire dilemma faced by gold investors presently can be summed up by neither of the aforementioned factors buoying the gold market. As a result, we have a hot and cold market that is more trendless than anything.
This doesn't take away from the fact that over the long-term there may not be a better risk/reward play than gold after years of going absolutely nowhere. As far as the long-term price trend is concerned, gold is likely at a similar spot on a risk/reward basis as it was in 1999/2000. The "paranoid gold bugs" that have tattoos of Jim Rickards on their pelvis will eventually be vindicated, as the upside will more than likely be parabolic in fashion once it begins.
The only question is when? And simply sitting in an asset waiting for that when is a lot more difficult than it sounds. Especially when you have all types of cool asset classes like ride sharing, SaaS, 5g semiconductors, social media etc. to park your capital in. After all, it is much more fun to talk about your shares of Snapchat at a party than your conviction about the macro-economic benefits of having gold in a portfolio.
With that said, Zenolytics is taking an active viewership role in gold over the near-term. There are some appealing miners out there that may be worth initiating on the long side, in fact.
At the very least, gold certainly fulfills its role as an overall portfolio insurance policy selling at a very attractive premium given current prices.
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