How Much Do I Need to Start Investing in Gold?Ask Successful Investors - Part 2

Global Macro Analyst at Crescat Capital and a guest speaker to the International Monetary Fund expects a rapid re-emergence of inflation similar to the stagflation environment of the 1970s and 80’s. He is a proponent of owning a variety of commodities with gold being the larger percentage.

As a result of the trend of foreign central banks, moving from US treasuries to gold as a reserve, the eventual resurgence of inflation, unsustainable corporate and sovereign debt, and overvalued equities. he sees the standard portfolio shifting to 20 - 30% in gold, as a growth asset, not just a defensive asset.

Global central banks' policy reversal from US treasuries to gold purchases signals a return to historical averages where central banks hold 40-percentage ownership of gold relative to international reserves similar to the 1970s.

This would require the addition of 3.2 trillion of gold purchases, which would result in a 25 percent increase in the value of gold above ground. This alone would push gold prices to record levels.

Historically, when this trend among central banks owning hard assets such as gold occurs, smaller institutions, 60/40 portfolios, patient funds, endowment funds start to trend in that direction similar to what was seen in the 1970s.

In his view, betting against gold would assume, that the compounding national debt, and federal deficits, are going to be resolved soon. One does not need, to be overly cynical, to believe that there, is a very low likelihood, of that happening.

Tavi maintains, that if the rationale, for owning US Treasuries today, is solely based on the premise, that the system, cannot endure substantially, higher interest rates, then gold, is a far superior choice as will be explained further.

He points out, along with maco-economic expert Luke Grommen, that the long-standing correlation between gold prices and real interest rates will decouple over the next decade similar to what was seen in the recessionary times of the 1970s. In the 1970s, 10-year yields were rising right alongside gold prices.

The reasons for this long-standing correlation breakdown are the recent demand for gold being pulled back into the system as a primary central bank reserve asset, the increased solvency risk due to unserviceable sovereign debt with the combined high-interest rates, and the historic debt-to-GDP ratio of 120% and rising. These dynamics lead to fiscal dominance risk which creates very secular inflation.

Rising rates are no longer negative for gold as these variables increase.

When you add the risk, of national debt default, and the resurgence of inflation driven by the government/fiscal spending side which the Federal Reserve cannot control, the real rate and gold price correlation part ways. This adds immense stress to the treasury markets.

Gold is a neutral asset, with no counterparty risk that also carries centuries of credible history as a safe haven and monetary alternative.

Leveraging the expertise of investment and macroeconomists like Tavi Costa is important when embarking on any new investment path.

When starting on the path of gold investing, working with a credible and trustworthy precious metals vendor is key. Finding an established gold investment company that understands the many vacillations of the gold markets and the numerous variables affecting its price will save much time and financial setbacks. Working with a reputable company with institutional knowledge can assist you with logical price entry points, positioning, and dollar-cost-averaging so you can maximize your investment capital

Gold IRAs provide additional advantages to merely buying gold from a local dealer. Furthermore, these companies can provide serious gold investors access to competitive prices, transparency, a sound buyback policy, reliable customer service, and robust security protection of their precious metal investments.

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