Why Gold Is A Shiny Trap

Warning: This Moowsletter may not be for you.

If you get a little starry-eyed every time you glance at that gold band wrapped around your finger…look away now.

I’m about to wipe the lust out of your peepers. (No hard feelings.)

Here’s the unpolished truth about gold…

If you bought $1 worth of gold 100 years ago, it’d be worth $4 today.

Not $400.

Not $4,000.

Not $4,000,000

Just a lousy four bucks…enough to buy half a cold beer on a hot day.

And if you adjust it for inflation, you’d be sitting on a loss. Ouch!

So why does gold get treated like a treasure?

The idea that gold soars when the economy tanks is a myth as old as the first campfire.

The truth is, it’s a coincidence, not a consequence.

Here’s what really drives gold – interest rates.

When rates drop, gold looks prettier because the returns on cash get ugly.

But when rates rise, gold fades faster than a two-dollar trinket.

The reason gold goes up when the economy falters is because central banks cut rates to stimulate the economy.

Therefore, when people see gold go up they associate it with a weak economy which is kind of correct.

The direct link is interest rates.

But here’s the kicker. Rates can only fall so far – zero percent!

So if rates have a floor, then gold must has a ceiling.

And that’s why gold’s spent decades oscillating in a narrow channel, like a yo-yo on a short string.

So why has gold rallied recently?

It’s riding on the hope US interest rates will be slashed soon.

However, lusters could get caught with their pants down.

Just days ago, the Fed warned Trump’s tariffs could spark inflation, meaning any imminent rate cuts may be off the table.

If rates go up instead of down, cash could look cozy and gold could look more like a mirage.

Gold will always look pretty, and I’m sure your wedding photos look stunning with your ring fingers sparkling in the sun.

But as an investment, I wouldn’t be lusting after it right now. I think the easy money has long gone.

Have a great weekend!

Adam

Back paddock – all the gold ever mined would fit into about 3.5 Olympic-sized swimming pools.