| The gold-bug universe has been all a-twitter recently with the possibility that a gold-backed currency will be announced later this month at a conference of the BRICS (Brazil, Russia, India, China and South Africa) nations.
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| Pardon me for...possibly...bursting their bubble, but I think it’s much ado about nothing.
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| If you’ve been involved in the hard money community as long as I have, you’ve seen many such storylines, wherein some big, extraneous development holds the potential to suddenly catapult the price of gold higher, like a deus ex machina plot device.
Before the “gold BRICS,” the new Basel III banking regulations were the latest greatest thing for gold bugs to hang their hopes onto...but it turned out to be a dud.
I’m not saying the gold BRICS is a bad idea. In fact, in my view it would be the only way these countries could launch a credible competitor to the dollar.
We can complain about the state of political, monetary and legal affairs in the U.S. for good reasons, but the fact remains that the rule of law in the U.S. is the best in the world — and that is the primary factor behind the dollar’s status as the global reserve currency.
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| Put another way, no significant corporate or sovereign entity is going to trust its wealth to the political ambitions or daily whims of Xi or Putin.
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| So some way to independently and verifiably attach their currencies to the timeless value of gold would be the only way to obtain similar credibility as that enjoyed by the U.S. dollar.
That said, the very discipline that this would impose is a good reason why these nations probably won’t agree to do it, and certainly not as anything but a trade currency.
Another good reason for skepticism is the simple bureaucratic inertia that would need to be overcome to accomplish it...especially as soon as the upcoming BRICS Summit being held from August 22nd to 24th.
In fact, South African officials involved in organizing the Summit have clearly stated that a BRICS currency, gold backed or not, simply isn’t on the agenda.
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| So it appears that gold bugs’ hopes for a magical springboard to much higher gold prices will once again be proven in vain.
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| Over the longer term, however, I firmly believe that a currency reset has to occur as fiat currencies lose their last remaining shreds of credibility. And when that happens, the only way to regain credibility will be to attach them to gold.
That’s the end game...and we’re in that process right now. The one thing we don’t know is the timing, although I’m confident it won’t be this month.
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| The Real Reason To Own Gold
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| Make no mistake: The four-decade, global trend of ever-easier money, and its inevitable result in fiat currencies of little value, is the real reason we must own gold right now.
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| There will be bumps in the road to cheaper currencies and far higher gold prices...but it seems like we’re emerging from one of those “bumps” right now.
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| As I’ve been saying in this letter as well as in our Gold Newsletter subscription publication, I believe gold and silver have bottomed earlier than usual this summer.
Importantly, they appear to have begun a new rally as the markets are beginning to factor in the peak of this rate hike cycle, and begin to price in the inevitable rate-cut cycle.
Here’s the opportunity: Mining stocks, from the majors down to the exploration juniors, are cheaper now than they’ve ever been in history...especially with gold near all-time highs.
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| This is, in short, a generational opportunity. And we’re preparing for it in Gold Newsletter.
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| Our just-released August issue covers an array of my top mining stock picks, including two exciting new recommendations that I feel will be among the biggest winners of this upcoming cycle. (Interestingly, these two new picks aren’t gold plays!)
You can get instantly up to speed on the metals — including these two new picks — by subscribing to Gold Newsletter here.
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| Brien Lundin
Publisher, Gold Newsletter
CEO, the New Orleans Investment Conference
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