Jordan Roy-Byrne is the editor and publisher of the Daily Gold Premium and he looks at both technical analysis and the fundamentals of yellow and white gold in addition to stocks. His thoughts of the future of gold are fascinating, and well worth any investor, experienced or new to the idea, listening to.
Key Takeaways
Gold will not be replaced by bitcoin as a ‘safe haven’
Federal Reserve’s rate hikes and the value of precious metals are correlated
Gold and silver should increase once Fed’s rate hike schedule stops
Why gold is still important
For many centuries now ‘the precious yellow’ has been seen as something of a safe haven. Today bitcoin and other crypto-currencies have shaken that belief in some people’s eyes.Jordan Roy-Byrne doesn’t feel that way, though. He admits that when bitcoin really started taking off and trending, many people in the gold world were worried that it might start to take over. They thought maybe that is why gold was not performing as well as it had. However, Jordan doesn’t feel that crypto-currency is something that gold investors need to worry about. The reason for gold performing poorly was its fundamentals, not its competition.
The US Dollar is under threat
The IMF has now allowed the Chinese yuan into the IMF’s foreign currency basket, potentially threatening to remove the US dollar as the number one reserve currency in the world. In fact the US dollar has fallen by 95 percent since this new currencyhas been given the green light.
The Federal Reserve is printing so much money that it can’t even tell how much is being printed; there is unsustainable government debt; global reserve currencies are collapsing on average every 80 years… does this mean that gold is the ideal investment now in the short, medium, and long-term?
Jordan Rob-Byrne has a theory. In the long term, yes, these events will have an impact on gold and it remains a safe place to invest. In the short and medium term, however, there will probably be no change.
How interest rates affect the gold price
So, knowing how the stock market works, if it’s a long-term investment you’re looking for, gold is the where to go. In many cases, the real driving force for gold is interest rates, especially when they are below two percent.
If we think of gold as a currency, then clearly it is going to compete with the dollar, the pound, the euro and so on. This is why real interest rates matter; gold tends to be inversely correlated to the interest rates, so when they are dipping, gold is rising.
This is because when interest rates are high, why would people buy gold when they can just put their own money into a high yield account and make a good return? When the interest rates are low they trade gold to make a good return, and that pushes the price up and makes the return even greater, assuming they buy at the right time.
Keep an open and critical mind
Of course, Jordan Roy-Byrne is convinced that gold is the ultimate currency in the long term, but markets work differently, and you always need to be looking to the future to see what is about to happen before making a decision.
Since gold spiked in 2011. Its gradual decline over the ensuing years was exacerbated by the increase in interest rates. In order to boost it back up again, interest rates need to decrease, or inflation needs to increase. Looking at interest rates at the moment, it’s more likely to be down to inflation accelerating over the next few years.
What the future (potentially) holds
Predicting the short term and the next 12 months is difficult. Jordan Roy-Byrne has done a lot of research into historical gold stocks because the price of gold was fixed until 1971. What he found was that gold stocks tend to have significant bottoms.Most of the time this is when the Federal Reserve’s fund rate peaks.
Therefore, it seems likely that the next catalyst for gold will be when the Fed stops hiking rates. It’s hard to predict exactly when that’s going to happen. Most people who have been in the investment industry for a while can see the signs and make use of them.
The path is still downhill
Jordan Roy-Byrne thinks that this halt in rate rises will happen at some point in 2019, possibly around the middle of the year. At this time, precious metals are likely to have a big bounce at the very least. Until then, gold and silver are likely to continue to go down.
The market is getting oversold and the interest rates aren’t getting lower. Although there was a short rally, in general things are heading downwards. In fact, silver has recently broken to a new low. Since these stocks tend to be something of an indicator for gold, we might well see a new low there too.
Gold’s little brother
Since silver is often called ‘gold on steroids’ and it often mimics gold but in a much more aggressive way. Could silver one day be more valuable than gold, especially as it is also industrially in demand?
Jordan Roy-Byrne couldn’t say – it’s an incredibly hard thing to predict. He would be surprised if it happened in his lifetime. It does not mean it won’t! At the moment the silver to gold ratio is 84 ounces to 1 ounce. There is a lot of growth still needed.
If gold significantly dropped, then it might be worth silver investors switching to gold for better long-term gains. But it really is a question of good timing – too soon or too late and you won’t reap the rewards. And for investors, it is important to consider whether silver might bottom first, before gold. In 2011 it peaked five or six months before gold, for example, so it can easily bottom first.
Conclusion
It makes sense for every investor to have some kind of exposure to precious metals. In a sensible, well-balanced portfolio in Jordan Roy-Byrne’s opinion. The best advice he can give is to buy an ETF.
The precious yellow has always been known as a “safe haven” asset class. Do you think that crypto-currencies such as Bitcoin now rival Gold amid global financial collapse?
We’re in a very interesting age for the US Dollar and too for gold,
The IMF has OFFICIALLY greenlighted the acceptance of the Chinese Yuan into the IMF’s foreign exchange basket – potentially threatening to dethrone the USD as the world’s reserve currency.
The value of the USD has fallen by 95% since the inception of the Federal Reserve (hyper inflation in disguise) and this has, in part, been obfuscated by the CPI (or CP lie!)
The Federal Reserve is printing more money and no longer disclose how much money they’re actually printing via the M3 report
Unsustainable government debt
Fiat currency has an average lifespan of 40 years…
Global reserve currencies have collapsed – on average – every 80 years for the last 6 centuries…and we’re beyond the 80 year point for the USD
…..do you think this is the perfect storm for Gold short, medium and long-term?
When do you think markets will wake up to the above?
Since gold spiking in 2011 and its gradual decline over the past 7 years which, I guess. has been exacerbated by increasing Interest rates… What do you consider to be the main catalyst for gold to move up?
Surely the above is no longer a secret and the smart money are positioning themselves in advance of impending financial disaster?
Silver, of course, mimics Gold’s movements. It’s said to be Gold on steroids! What do you think of the argument that it could one day be more valuable than gold, given its industrial demand, too?
Jordan Roy-Byrne, do you think Silver has more upside potential than gold for an investor?
The Gold Silver ratio is at a 5 year high, with it costing 84 ounces of silver to buy 1 ounce of gold. Given that silver is comparatively cheap compared to Gold, would Silver investors do well from swapping it into Gold if, say the RATIO falls to a far lower level at some point in the future (SAY 40:1)?
Gold enjoys a certain degree of seasonality – in the festive season it tends to do rather well, as do equities. Why specifically the festive season?
What advice would you give to private investors listening today?
For more information, where can people find out more about you?
A prolific writer in her own right, Lisamarie brings to the team her unique ability to vividly turn dry and often complex subjects into life, making financial education a more fun and accessible experience for all
A prolific writer in her own right, Lisamarie brings to the team her unique ability to vividly turn dry and often complex subjects into life, making financial education a more fun and accessible experience for all
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For many centuries now ‘the precious yellow’ has been seen as something of a safe haven. Today bitcoin and other crypto-currencies have shaken that belief in some people’s eyes. Jordan Roy-Byrne doesn’t feel that way, though. He admits that when bitcoin really started taking off and trending, many people in the gold world were worried that it might start to take over. They thought maybe that is why gold was not performing as well as it had. However, Jordan doesn’t feel that crypto-currency is something that gold investors need to worry about. The reason for gold performing poorly was its fundamentals, not its competition.
