The last six months have been tough for gold investors or as Santiago Capital's Brent Johnson self-reflectively jokes, "if adversity builds character, then we gold investors should build a new Disneyland." But as he explains in this excellent summary presentation, the critical factors requiring ownership of gold (or hard money) are still in place and in fact - in some cases - are even more prescient now than ever as we suffer through a surreality of the tale of two economic realities and the tale of two gold markets.
There are many reasons why an allocation to gold is still critical:
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But in addition to these 'well-known' reasons, there is an additional factor in the gold market that bears a much closer look...
It is a Tale of Two Realities - the reality is far different from the one proclaimed each day on CNBC or CNN...
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4:05 - and a Tale of Two Markets - the derivative (or paper) market and the physical market and here is where Johnson provides a useful summary of the various dislocations that are occurring...
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and this is where Johnson spends the bulk of his time discussing the ETF holdings reductions, the fractionally-reserved COMEX, and the increasingly negative GOFO rates which mean - in his view - quite simply that the market values gold more highly than it values cash.
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Source: Brent Johnson via Santiago Capital