Dear Reader,
This is Dylan Jovine with Behind the Markets.
Happy Friday. Today is Friday, March 27th. TGIF.
Quick note before we get into it — we launched a new website this week. I urge you to log in, check it out, and let our customer service team know what we can do to make it better. We are very happy with it and I think it's a real leap for us.
Anyway, today I want to talk about gold.
Famous analyst Ed Yardeni is still sticking with his $10,000 gold target, and UBS put out a note this week doubling down on its bullish stance. Their Global Wealth Management team — analyst Wayne Gordon and his crew — basically said that despite the recent pullback, investors should stick with gold as a defensive hedge. I think they made a pretty good case, and I want to add my own color commentary.
Here's something worth understanding about why gold has come off recently.
Since this war broke out, one of the biggest structural buyers of gold has been foreign central banks — countries using their excess reserves to hedge against the dollar.
Think about an oil producing country like Saudi Arabia.
Every day they're taking in enormous amounts of money from oil sales, and a portion of those reserves gets allocated into gold as a hedge. But right now, those same countries are getting defensive. They're holding onto their reserves just in case — military budgets, internal needs, uncertainty. So that steady structural buying has paused, and gold has dropped meaningfully because of it.
But here's how I think about gold, and I think it's the right framework. There are really two things happening at once. You have the fundamental case, and you have the speculators. The speculative activity — I'd estimate it accounts for maybe 20% of the price movement — is going to pop up and down and up and down. That's just noise. You have to learn to tune it out.
The fundamental case is what matters, and it's still very much intact. If you go back through American history and chart gold against periods of high inflation and currency debasement, gold goes higher. During periods of low inflation and fiscal discipline, gold goes lower. So the question you have to ask yourself is simple: do you believe the US is going to keep spending money, keep running deficits as far as the eye can see, and keep debasing the currency?
If the answer is yes — and I firmly believe it is — then gold belongs in your portfolio. Ray Dalio has said 10% to 20%. You put it away, you don't obsess over it, and you let the fundamentals do their work over time.
And if you believe, as I do, that the major central banks around the world are smart enough to realize they don't want to keep buying 30-year US Treasuries at 5% from a government that can't keep its fiscal house in order — that they'd rather hold gold than lend us money long-term — then the structural buying will resume once this war settles down.
Here's the thing I always try to remind myself of. The rise of gold isn't really about gold. Gold is a byproduct. Something else that's happening is US currency debasement. That's the signal. Everything else — the short-term speculation, the war volatility, the day-to-day price swings — that's the noise. Keep your eye on the signal.
I'll be honest — I was never a gold bug. I've never made a career out of recommending gold. But when we started to debase our currency in a serious way, I went back to history and history told me clearly what to do. That's why we went long gold in 2022, and it's done well for us in the model portfolio since.
The fundamental case hasn't changed. The noise has just gotten louder.
And frankly, if you believe what I just laid out — and I think the evidence is hard to argue with — then the question isn't whether to own gold. It's how to own it.
Physical gold protects your wealth. But if you want to really multiply it, you want to own the companies that have the gold still in the ground. When gold reprices, those stocks don't just go up — historically they go parabolic.
I've been doing a deep dive on exactly this, and I put together a full presentation on what I think is the single best-positioned company for what's coming.
A stock sitting on one of the largest undeveloped gold deposits in the world, in one of the safest mining jurisdictions on earth, and still trading at a fraction of what those ounces in the ground are worth.
If you want to understand the full case for where gold is headed and which stock I believe captures the most upside, I urge you to read this before the window closes.
Anyway, that's all I have today. Have a wonderful weekend. I'll see you Monday — and try the new website. Let us know how we can make it better for you.
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