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Gold as an Investment and Safety Net

It is commonly known that the world is not like it once was, nor is it going back to the way it was in nearly all aspects of our lives. The financial system is broken and has been for a long time. I expect we will see one more rally in the US Dollar before it crumples under the immense weight of $31Trillion of debt. When is anyone's guess but you can't keep adding debt, increasing the interest rates you pay on that debt and not create a disaster.


Gold and Silver have always been safe havens when a countries currency collapses and it won’t be just the US Dollar, but it will also see the failure, or dramatic decline of the YEN, the EURO, the British pound and the Canadian, Australian and New Zealand Dollars. It is for this reason the world’s Central Banks elevated Gold to a tier 1 asset class alongside the US Dollar in 2021. They are the only two “riskless assets” in the world and they would not have elevated Gold to a tier 1 asset if they didn’t believe that something was going to happen to the US Dollar. These same Central Banks around the world also bought and are holding a record amount of gold in 2022, and are accumulating at a record pace again in 2023.


As my clients always say, we want to own what they are buying and these days, that is Gold and Silver. It should also be noted that many countries including China are selling large amounts of US Dollar bonds back to the US.


When the Dollar and another western currencies fall the entire financial system changes. Banks will likely go broke, and people will lose money. The new rules all these countries put in place around 2014 to 2016 is the so called “bail in” program. No longer will governments “bailout” banks, next time it will be the banks clients that will bail them out with their deposits. So, when we have another 2008 the banks will not be getting tax payer money, they will be getting their clients’ money and giving those clients shares in their bankrupt company. This is why should be looking to shelter some of your money by de-risking it through the world’s oldest form of money, Gold and Silver.


Study reveals secret Canadian bank bailout

Throughout the 2008-2010 financial crisis, Canadian banks were touted by the federal government—and the banks themselves—as being much more stable than other countries’ big banks. Canadians we assured that our banks needed no bailout. However, CCPA’s (Canadian Alternative for Policy Alternatives) latest study, The Big Banks’ Big Secret: Estimating Government Support for Canadian Banks During the Financial Crisis, suggests that this was not the case.

The study reveals that Canada’s banks received $114 billion in cash and loan support from both the U.S. and Canadian governments during the 2008-2010 financial crisis. The study estimates that at some point during the crisis, three of Canada’s banks—CIBC, BMO, and Scotiabank—were completely under water, with government support exceeding the market value of the bank. Due to government secrecy, the study raises more questions than it answers and calls on the Bank of Canada and CMHC to release the full details of how much support each Canadian bank received, when they received it, and what they put up as collateral.






S&P 500 Total Returns by Year

Year

Total Return

2023 4.15

2022 -18.11

2021 28.71

2020 18.40

2019 31.49

2018 -4.38

2017 21.83

2016 11.96

2015 1.38

2014 13.69

2013 32.39

2012 16.00

2011 2.11

2010 15.06

2009 26.46

2008 -37.00

2007 5.49

2006 15.79

2005 4.91

2004 10.88

2003 28.68

2002 -22.10

2001 -11.89

2000 -9.10


One knock on Gold has been that it is very volatile and therefore, risky. But when you look at the two charts above you will see that Gold has had less volatility over the past 22 years that the S&P500 stock market.


In fact, the 22 year return in US Dollars for Gold is 523% compared to the S&P500 of 161%. Gold averaged 23.7% per year while the stocks averaged 7.3%. On $100,000 that is $362,00 more by investing in Gold than US stocks. And many would say we are only now entering a time in history that owning gold and silver have never been more important.


The following are the words of Sen Brodrick of Weiss Financial. We just got word that the world’s central banks — which bought record amounts of gold last year — accelerated their gold purchases in January.

This is just one of the forces lining up to send the yellow metal on its next rocket ride. And I have a couple ideas on how you can play it.

Around the globe, central banks added another net 77 metric tonnes to their gold reserves in January, according to the World Gold Council. January’s shopping spree was a 192% month-on-month increase from December.


Singapore, China and Kazakhstan were just three of the big buyers. The biggest, however, was Turkey’s central bank, which scooped up 23 tonnes in January in a bid to battle rampant inflation. Turkey’s inflation zoomed as high as 85% last year and was 64% in December. You can see why that country is buying gold, which is historically a safe harbor against inflation.

And rising inflation explains why central banks bought 1,136 metric tonnes last year — the highest level of purchases going back to 1950. Inflation has cooled this year but remains stubbornly strong. We can expect more central bank gold-hoarding going forward. Other bullish forces for gold include a worsening conflict in Ukraine, rising jewelry demand, tight supply from the world’s mines as “peak gold” production looms and a big cyclical rally that’s already in place.


For more information on how you can participate in diversifying and protecting your wealth for what is to come you can reach out to us at daryl@preservation-capital.com or by calling 306-343-7800. Our website is www.preservation-capital.com


Yours in Faith, Family and Finance,



Daryl





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