Gold is for War. That is why governments stack it. Its not because they are going to go back to bimetallism, its because Gold is for bullets and tanks and ships when the chips are down. It is the international currency of war. So its not a happy moment to watch gold go vertical.
It is not fate that Gold will go to $5000 but from the kick in the pants the US just gave Europe and NATO we appear to have started on a long and unhappy journey of superpower escalation of, and I quote, ‘hard power.’ Gold is hard power.
So obviously we should all be stacking Gold, Sliver and Platinum.
BUT!
These are dumb assets. What are the productive investments we can own and by owning them support our countries economic vitality and in the process make more than the profit from unlevered Gold?
So this is what made fortunes the last time around:
Arms and Munition Manufactures.
There is no surprise there. Drones would seem to be the place for the risk hungry to look at. Then there are makers of pick-up trucks with bullet proof sides, Bipedal robot makers, satellite communications providers, rocket makers, tunnel diggers… oh wait a minute.…
Shipping and Logistics.
Winning wars is about logistics. This is big infrastructure and needs to be laid in.
Industrial manufacturers. These days its all about chips and its no good making them in your adversaries’ country. I have been writing recently about Intel. It is the big baker of chips in the US and Europe, while may a tech darling gets their chips and assembly in China or next door. Anyone who took the point is sitting pretty and if the US is really looking to secure the pacific as stated this week its going to need to secure its silicon. Intel is the play because Fabs cant be thrown up overnight. What was in WW2 Cars and Guns and general engineering is going to be onshore tech.
Drones and Space.
It was Radar and Aviation, but the high frontier is higher now. Altitude is life. There is that man again!
Food and essential goods.
The is nothing like conflict to blow the froth of your cappuccino. Essentials start to take on a lot more consequence and fast lose their commodity status. Commodities are cheap, essentials are expensive. Slim margins become fat margins.
Finance and banking.
Conflict is the fast lane to bankruptcy. Rushing down it is an expensive business and finance and banking are the financial military and their medals are golden. The profits from war finance are so huge the booty lasts generations, while most others that prosper soon fall by the wayside.
So this like Gold is an overlay to your investing. If a company is great and good value, this new reality may make them even more valuable.
Meanwhile Luxury Goods, passenger travel and tourism, sports and much vulnerable leisure, import dependant industries prone to materials shortages, Education, house building and important to us, ultimately the stock market itself can all be marked down if tension goes on a vicious cycle of escalation.
Relax, this is not fate, it won’t happen overnight, but it is a megatrend, perhaps as long as a 5-year process. You will have to decide for yourself if tension is increasing or falling and if you want a good indicator, it will be the price of Gold, and you will need to remember it is reflecting what has recently happened not what is going to happen. The Gold price will demonstrate human intent, so I’ll be happy enough if and when the current trend breaks and Gold starts to trend sideways.
Its not time to buy real estate in New Zealand yet but when it is, Gold will tell you.