Gold set another record this morning, briefly touching $3,919 before suffering a sharp sell-off. And then a rebound.
Today’s volatility aside, the metal is up over 45% year-to-date, on pace for its best year since 1979.
And yet, relative to money supply, gold is still cheap.
If gold matches its 2011 money-supply ratio, you’re looking at about $4,400 per ounce.
If it matches the 1980s ratio, it’s about $9,700 (Source: Katusa Research)
If the gold price matched its 2011 ratio to the money supply, it would be closer to $4,400 per ounce today.
If it matched the 1980s? Nearly $9,700. Adjusted for inflation on top of that? Closer to $20,000 per ounce, as we’ve noted in our gold research for the past year.
Miners are enjoying the run, too. “Despite their strong recent performance, P/E ratios have actually contracted — a sign that earnings are growing faster than share prices,” reports the Financial Times.
The NYSE Arca Gold Miners Index is up 123% this year, the best this century.
The last time gold ran this hot — 1979 — savers stood in lines that wrapped around city blocks, waiting hours for Krugerrands and Maple Leafs. Fathers pulled kids out of school to get in line before the shop sold out. Dealers locked their doors mid-afternoon, unable to meet the demand.
It was less of an investment than survival. Inflation made cash a wasting asset, and gold was the last refuge.
We don’t want to see that again.
Gold is best as ballast — steady, weighty, tethering a portfolio to something real. When it turns into the object of a mania, it means we’ve entered the debt crisis of which we’ve long been wary.
No bueno.
Collapse Behind the Curtain
“If you’re trying to understand why gold is going parabolic,” Porter Stansberry warned this week, look no further than the destruction of the nation’s currency.
Digging into the numbers on X, Stansberry explains that official CPI says inflation is 3.5%.
The Chapwood Index, measuring real-world costs, says Boston households feel inflation more like 13.6%. That hidden spread is the iceberg beneath the waterline.
“It’s why 52% of Americans who do not own financial assets are being destroyed,” Porter continued. “If we don’t set honest interest rates, we’re going to lose the dollar. And then we’re going to lose our country. No one will listen. But everything I’ve warned about [since 2010] has come to pass. War is next.”
Meanwhile, the government has gone dark. And “a prolonged shutdown would greatly complicate the Federal Reserve’s deliberations,” Nationwide economists wrote. Advisors at Edward Jones said it would leave the Fed “flying blind.”
Jerome Powell’s vaunted data-driven decision paradigm is currently meaningless. Relying on the Fed right now is akin to our confidence in Congress.
Which… is… umn, well… we don’t have any confidence in Congress right now.
Markets High, Society Low
Oh, well.
Investors on Wall Street ignored what’s happening in Washington and central banks around the world. Again.
The S&P 500 and Dow notched new highs, their best third quarter since 2020. AI froth drove the move.
Today’s highlight: OpenAI vaulted to a $500 billion valuation, leapfrogging SpaceX as the world’s most valuable private company. Long gone are the days when a privately held company with a $1 billion valuation was so rare that it was called a unicorn.
But signals matter. Dow Theory notes that when the Dow Industrials make new highs while the transports fail to confirm, danger lurks.
Yesterday, the Dow notched another high, but transports still sit 4% below their February peak. Combine that with the declining cargo rates we cited this morning and we’re concerned.
Technical charts don’t guarantee a crash, but this correlation has preceded every major one of the last century.
Investors, today, are convinced this time is different. “They are willing to ignore short-term risks for long-term AI euphoria,” CNBC summarized nonchalantly.
Dial-Up Money
AOL finally pulled the plug on dial-up this week. Some of us remember the hiss and screech, the minutes spent waiting for the tone to clear. At the time, it seemed like magic.
Now it’s just annoying. A whole generation has grown up online without the distinct joy of hearing their laptop connect to the world, briefly, before getting kicked off…
We can’t help but indulge the metaphor. The paper dollar lingers like dial-up — still connecting, still hissing — but hopelessly out of step with the speed and quiet of the age. Deficits balloon, Treasury auctions strain, repo markets flare. A government hostage to its binge-borrowing.
The Fed’s dilemma is brutal. Hold rates low to finance Washington’s deficits, or admit that real inflation calls for double digits. Wall Street begs for another cut. Powell whispers, “data dependent.” For now, the data has gone dark.
Gold is holding its own, and bitcoin promises to bring it into the digital era. For Washington, shutdown aside, Dollar 2.0 can’t arrive soon enough. Without it, they are stuck with the hiss and buzz of an outdated line.
~Addison
P.S.: Today, on Grey Swan Live! we’re going to tackle Dollar 2.0 with Mark Jeftovic.
We’ve received a bevy of questions about Dollar 2.0 and the future of the world’s reserve currency. Mark, Andrew and I will field them all and review your options as the U.S. dollar enters the digital age with the Trump administration’s full support.
Your money is changing as we speak. You don’t want to miss today’s Grey Swan Live!, sign up now if you haven’t done so already.
