Publisher’s Note: For British investors, the gold rally may feel both tempting and terrifying.
On one hand, the global headlines are clear — gold is up more than 40% this year, investors like Gundlach are calling for $4,000, and central banks are quietly stocking up. On the other hand, the UK faces its own economic storm: stagflation, falling productivity, and a political class distracted by short-term headlines rather than long-term fiscal discipline.
This article points to a deeper truth: neither the UK nor the US has a credible plan to reduce debt. And when neither side of the Atlantic shows restraint, investors must take responsibility for preserving their own wealth.
Gold, as Bill Bonner reminds us, is not about getting rich. It’s about protecting what you already have when the system goes off the rails — as it is now. But wealth preservation is only one half of the picture.
We’ll be writing more in the coming weeks about how UK investors can balance gold with carefully selected growth assets, especially in this new era of currency distortion and debt monetisation. In the meantime, if you’re holding gold: stay disciplined. And if you’re still watching from the platform… just know the Gold Express is already moving.
The Gold Express is picking up speed. The Telegraph:
Warren Buffett hates it, but investing in gold is a good bet
It looks like nothing can stop it. Gold is now trading around $3,740. On January 1st of this year, it was priced at $2,634. That’s a gain of more than 40%. It must be satisfying for those holding the yellow metal. But it is scary. Rockets may go straight up; they also tend to come straight down. Or in more old-fashioned Wall Street vernacular: hogs get slaughtered.
In the short run anything can happen. So, let’s try to make sense of the long run.
There was a lot to agree with in Donald Trump’s speech to the UN. And a lot of nonsense too. It is probably true, for example, that the great climate crisis is mostly claptrap. Scientists do not know the full story of the earth’s climate changes. Even if they are right about the part they think they know, there is surely more they don’t know.
Is the world really warming? Can public policies undertaken in Europe really stop it? Would the world’s people be better off with cooler temperatures? Is it worth the expense of trying to stop ‘climate change’? They don’t know the answers to any of these questions.
Mr. Trump thinks Europe is ‘going to hell’ because of its energy and immigration policies? Maybe.
But there’s a lot of room in Hell…and a lot of ways to get there. Too bad the American president doesn’t seem to notice where he is going. While Europe wastes billions on dumb energy policies, the US wastes trillions on dumb wars. And comparing immigration policies, between those of the US and those of the EU, flatters neither one nor the other.
Mr. Trump did not even mention the biggest problem facing both the US and Europe: they spend too much money. Democracy is fine. But as soon as people discover that they can vote themselves more of other people’s money, it is the beginning of the end. And when the feds switch from real money to paper money, there is no stopping them. They can spend more and more, and build up debt, until the whole shebang blows sky high.
The present generation of politicians dodges the dilemma as best it can. Europe tries to tighten up its social programs…but the voters have come to depend on them and don’t want to give them up. (In extremis, Argentine voters agreed to back a president who would take away their ‘free stuff.’ Whether they will stick with him will be tested next month, in midterm elections.)
At least, Europeans foresaw the problem. Democratic governments tend to ‘print’ money to fill budget shortfalls. Since all the members of the EU share the same currency, each of them agreed to limit deficit spending to 3%. But France brushed the limit aside, with a deficit of 6% last year and looks like it will do it again this year. The Prime Minister was supposed to bring spending under control, but they tossed him out. Reuters:
French unions strike against austerity, pressuring Macron
Radio France:
France hit with credit downgrade as new government faces budget squeeze
France faces a fresh test of economic credibility after Fitch cut its credit rating, deepening the pressure on a new government already grappling with political turbulence and soaring debt.
France 24:
François Bayrou ousted as French PM after confidence gamble backfires
The leftists promise more spending, offering to squeeze the rich ‘until the pips squeak.’ The rightists promise to get tough on immigrants. and crack down on crime. Europeans focus on the climate emergency. For Americans, the big bugaboo is China, ‘terrorists,’ or ‘foreigners ripping us off.’ But they are all on the same wayward bus.
Trump reported to the UN: “I built the greatest economy in the history of the world.” If so, there is no evidence of it. The GDP average growth rate for the four years of Trump I was just 1.4%…the lowest since the Great Depression.
There is no point to fact-checking the president. But there’s a big difference between having the best growth rates and having the worst. And if you don’t know which you have, you’re probably headed to trouble. Which is exactly where the US is headed.
Both Democrats and Republicans have gotten on the same bus. It’s the one with the blind driver…and the brick wall just ahead. Republicans complain about the Democrats’ spending, but neither party wants to withdraw Medicare benefits or trim Social Security. Or cut the firepower budget. And so, with the Big, Beautiful Budget Abomination, BBBA, they are on course to add $5 trillion in debt over the next decade.
What will blow up along the way? We don’t know. But the odds are extremely good that something will. And the stock market might be a good place to look for the fuse. Charlie Bilello:
The S&P 500’s CAPE Ratio has crossed above 40 for only the second time in history. The first was in January 1999. It would go on to peak at 44 before reversing sharply during the bursting of the dot-com bubble.
Stay tuned.
Regards,
Bill Bonner
Contributing Editor, Investor’s Daily
P.S. Gold might be a safe haven in times like this — and for good reason. But if you’re looking to build wealth, not just preserve it, this recession could open a rare window of opportunity. While policymakers here fumble and debt climbs higher, a new cycle of capital is quietly beginning elsewhere. Britain may be facing stagflation — but smart investors are already repositioning. See why this shift could change everything.
