The central banks know that gold has proven to be a powerful backstop during periods of high inflation, war or default. It could be said that holding gold is an effective plan B.
But the myths surrounding gold are plentiful. High inflation, war or default may not necessarily lead to a higher gold price. For example, if inflation is rising in Argentina, that won’t necessarily impact the gold price in other countries. Furthermore, commentators often attribute a rise in the gold price to a recent negative event, regardless of whether there is a genuine link or not.
At Atlas Pulse we believe that the price of gold behaves rationally and tells us a great deal about the prevailing economic climate. Pessimists own too much and optimists, too little, so there is an opportunity to find the right balance. According to our research, factors that impact the gold price include exchange rates, inflation, interest rates, commodity prices, house prices, growth, credit, levels of speculation, share prices, mine supply, physical demand and sentiment. In fact, the price of gold is linked to anything and everything.
As an individual, you don’t need to own much if your concern is the doomsday scenario; just a modest slice of your liquid assets. In fact you shouldn’t, because unlike financial assets such as equities and bonds, gold doesn’t pay an income.
Instead, gold is an effective diversifier, precisely because its behavior is very different from financial assets, particularly when inflation or real interest rates change. Atlas Pulse believes that gold behaves like an irredeemable, zero coupon, inflation-linked bond with zero credit risk.
Let’s break that down. Irredeemable means it lasts forever. Zero coupon means it pays no interest. Inflation-linked means it matches inflation over the long-term. Zero credit risk means it cannot default.
Atlas Pulse show their gold thermometer each month that clearly states the condition of the gold market whether it be, strong bull, bull, neutral or bear. In addition there is a triangle that states our preference for similar assets such as silver and the miners.
These are interesting because whilst they tend to carry higher levels of risk, sometimes that risk can work in your favour. Typically we would expect the miners to perform well in the early stages of a bull market and silver to do better later on.
Of course, many factors need to be looked at, but that is precisely what Atlas Pulse does. By making strategic changes in accordance with the relative value on offer, returns from your investments in precious metals can be significantly increased.
In late 2013, we initiated coverage on Bitcoin. It isn’t gold, nor is it silver, but it is a major innovation within financial technology. Its creator, Satoshi Nakamoto, designed the Bitcoin protocol around the ‘idea’ of gold. Bitcoins are limited in supply and therefore scarce, they are ‘mined’ by computers and behave more like commodities than money. This has led to the birth of a new asset class that we describe as cryptos.
The potential for this space is huge and it’s all to play for. From late 2010 to December 2013, the price of Bitcoin rose by 17,000 times. Admittedly, the starting point was low, but assuming the Bitcoin network continues to grow, you could argue that it still is.
If the value of all of the Bitcoins is approximately equal to the total amount spent in a year (subscribe to learn more), then you soon realise that the potential is mind blowing. Visa and Mastercard have combined annual transaction volumes that are counted in the trillions.
There’s no guarantee the winner will be Bitcoin and there are already over 500 competitors. Atlas Pulse carries out analysis on the leading cryptos with the aim of identifying the potential winners. The approach is to study value, supply, growth, volatility, trend, fees, sentiment and other network factors.
Stay informed on gold, silver, miners and cryptos. You can read all the news in the world, but at the end of the day, it’s just noise. With insightful analysis, you can stop and think about the real factors that drive prices. That will help you to make fewer and better decisions.
Join us on this exciting journey. .