Subscribers will be aware that we recently increased our gold weighting from 5-10% to 10-15%. We have become increasingly concerned that investment risks, both short and long term, appear to be rising. This reflects four major issues: 1) an extraordinary over-indebtedness in the rich world (OECD total public debt is over 96% of GDP in 2011); 2) the near-certainty of well below normal growth due to public and private deleveraging and the continuing long wave economic decline; 3) a seriously flawed international monetary system and eurozone structure; and 4) dysfunctional politics and profound lack of leadership in Europe, the U.S. and Japan.
As a result of these risks and a clear sense that no “solution” is in sight, risks have escalated to an unknown but substantial degree.
Over thousands of years, gold has a track record of preserving wealth. With no central bank guaranteeing a fixed price since 1971, it has become extremely volatile and therefore is only suitable for those, apart from speculators, trying to preserve wealth over the long run.