3 Surprising Gold Facts - Before It Hits $3,000

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3 Surprising Gold Facts - Before It Hits $3,000

Gold bugs are coming out of the woodwork.

Even the mainstream media is beginning to buzz as the shiny yellow rock rolls to new all-time highs.

I don’t blame you if you missed gold’s run-up and only started hearing about it again over the past couple of weeks.

While studying finance at the Wharton School at the University of Pennsylvania — where I took hundreds of hours of classes — I only remember hearing gold mentioned a handful of times.

And in my three decades on Wall Street, gold was seldom a topic of conversation.

My hedge funds managed billions in assets, and I spoke with other large managers all the time.

But our conversations were always about stocks we liked and occasionally other commodities and bonds — never gold. It was just one of thousands of assets we could invest in, so it was not a big focus.

Only when I began in the investment newsletter business half a decade ago did I focus more on gold. While institutional managers and investors don’t need to focus on it much, it fascinates retail investors.

I soon learned gold is one of the most fascinating assets in the world, and perhaps not for the reasons you would think.

Throughout history, it has proven to be the most useful way to protect wealth. Today, with governments debasing their currency at a record pace, gold has attracted more attention than ever before.

Being new to focusing on gold, though, has led me to approach it with an open mind.

As I have ramped up my research on gold to serve our readers, here are a few things I have learned that might surprise you.

1: Our Planet Has a LOT of Gold

Did you know there is enough gold on Earth to coat the entire planet with a one-and-a-half-foot deep layer of 24-karat gold? It is true!

While we have only mined about 200,000 tons of gold, there are another 1.9 QUADRILLION tons in the Earth’s core. That is more than 100 times what we have found and mined to date.

There are also another 3.5 trillion tons in the mantle and another 84 billion tons in the Earth’s crust.

So what?

While there is almost infinitely more gold on Earth, we have only identified another 50,000 tons that are commercially viable to mine.

This means that at recent prices, the economics don’t make sense to extract the millions and millions of tons of gold on Earth.

However, will that remain true if gold prices keep increasing and we gain access to better technology?

2: You Want a Strong Stock Market to Make Money in Gold

This one will surprise a lot of people.

Gold is famously described as being uncorrelated to movements in the stock market. This means that it moves independently from stocks.

This is true in the short term, as gold prices on a day-to-day basis show only about a 50% correlation and over six months show a 30% correlation.

In the past two bear markets (in the early 2000s and the global financial crisis), gold vastly outperformed the stock market.

This does not, however, mean you actually made money on gold. It just means it didn’t go down like stocks.

Gold was flat from October 1999 to early 2003. And when stocks began to recover, prices moved higher.

It was also flat from January 2008 to August 2009 and only started to rally higher when stocks moved higher.

Now, being flat when stocks lose half their value is an incredible benefit to your portfolio. But you don’t make money with gold unless stocks and other risk assets are trending higher.

3: Silver Was More Commonly Used for Most of Human History

This is another one that might surprise you.

I think of the yellow metal as the “gold standard.” But throughout most of human history, silver was more commonly used as a medium of exchange or a store of value.

This doesn’t mean that nobody used gold, but it was not as widely used. Why? It was too rare!

There wasn’t enough gold to go around to be able to facilitate the amount of trade that was needed.

Gold has been one of the most important stores of value in human history, but it is only one of many.

Does this mean we don’t like gold? Not at all!

I think it is an essential part of a diversified portfolio. I also think the outlook for gold is excellent.

We are also in a bull market for risk assets, and global governments will continue to spend more money and debase their currencies.

This is the PERFECT market to make money in gold!

I would only caution you to understand that gold trades very strongly on technical analysis, the same way that cryptocurrency does.

Over the last 35 years, buying gold while it is “overbought” at this level on the relative strength index (or RSI) has been a bad bet. So patience makes sense for right now.

But bigger picture, investing in gold is an excellent way to protect your wealth and ride surging asset prices.

To Making YOU Money,

Enrique Abeyta