A New Reason Why You Should Own Age-Old Gold

The bitcoin-gold debate is heating up again... Thanks, Elon... An inverse correlation... A new reason why you should own age-old gold... Bitcoin might be 'digital gold'... But gold is not 'physical bitcoin'...

We begin today with a quick note of thanks – and a reminder...

Our colleague Dr. David "Doc" Eifrig's research team tells us their Retirement Millionaire inbox is filled with your questions and concerns about retirement, which we asked you to send yesterday...

So, first, thank you.

And as I (Corey McLaughlin) wrote yesterday, the more questions we get... the better Doc's upcoming urgent retirement briefing will be. He plans to answer as many questions as he can. So if you haven't sent yours in yet, please do so at REM@stansberryresearch.com.

Moving on, the bitcoin-gold debate is heating up again...

And this time, we're not just talking about the philosophical merits of both assets as a "store of value" – which bitcoin bull Michael Saylor and gold bug Frank Giustra debated on our platforms not too long ago.

Today, we're simply talking about the price action of bitcoin and gold...

Plenty of people are discussing bitcoin's recent slide. It's down roughly 23% over the past month, punctuated by a drop to nearly $43,000 today... Thanks, Elon.

(We're referring, of course, to Tesla CEO Elon Musk's latest market-moving posts on social media site Twitter. He alluded over the weekend that the electric-car maker might sell the bitcoin on its balance sheet that it bought earlier this year.)

We plan to dive deeper into the sell-off in the world's most popular cryptocurrency in tomorrow's Digest...

But for now, we simply want to point out the other end of the bitcoin-gold story...

And it doesn't seem like many folks have noticed this part of the story... The price of gold has climbed 5% over the same one-month period during which bitcoin has been falling.

We find this significant for a couple of reasons...

One, as regular readers know, bitcoin is often referred to as "digital gold" and is spoken of like an inflation hedge, similar to the precious metal. And two, a lot of folks have expected gold's price to be much higher today than it currently is...

Around this time last year, as you might remember, our Gold Stock Analyst editor John Doody predicted that gold would hit $3,000 per ounce as a result of the amount of government stimulus and spending we were seeing in the response to the COVID-19 pandemic.

For a while, it looked like things were headed that way in a straight line... But after hitting an all-time high of more than $2,000 per ounce last August, the precious metal sold off more than 20% while bitcoin grabbed all the anti-central bank headlines.

The conventional narrative became that people were buying digital gold instead of the real thing – and for the same reasons. Today, the numbers no longer seem to fit the "bitcoin instead of gold" story...

And notably, John still believes in his prediction. He said gold will hit new highs in this economic cycle.

Over the past three months, the price of gold is up 8% while bitcoin is down 25%...

Noted technical analyst Peter Brandt, a guest of our colleague Dan Ferris' Stansberry Investor Hour podcast earlier this year, shared the following chart on Twitter yesterday. It shows the relationship between the two assets...

This is known as a "ratio" chart, of course. It's helpful to make comparisons among any two assets... and can show the trend in the prices of each asset relative to one another. Depending on the direction, it shows which asset is outperforming the other.

In this case, we're looking at gold futures ("$GC_F" in Brandt's chart) relative to bitcoin ("$BTC"). You can see this line is beginning to trend upward... meaning the price of gold has stopped falling relative to bitcoin and started to outperform it.

We highlight this today for a few reasons...

Viewers of last month's excellent debate between Saylor and Giustra moderated by our editor-at-large Daniela Cambone might remember that this point was driven home by Giustra, the Canadian mining financier...

He said even if gold and bitcoin are supported for generally the same reasons (as an "outside the system" inflation hedge and as "hard assets" like we've described them), it's critical to understand that bitcoin is much more volatile at this point in history than gold... which some geologists believe has been around for 3 billion years.

We've pointed out before that bitcoin, on the other hand, is only 12 years old. And as a result, we can expect the type of volatility you might see from a teenager... routinely selling off 10%, 20%, or even 30% as we're seeing now.

In the April 28 Digest, for example, we noted bitcoin might have already topped in the short term.

As DailyWealth Trader editors Ben Morris and Drew McConnell said that week, the price of bitcoin had recently broken below a key indicator – its 50-day moving average – which portended lower prices ahead. Citing Ben and Drew's April 26 issue of DailyWealth Trader, we wrote...

That's a significant behavior... When this has happened in past years, it has marked significant tops.

The three tops they referred to – each occurring since 2018 – and ensuing drawdowns lasted from a few months to an entire year in the case of what happened after bitcoin's late 2017 bubble. As Ben and Drew showed, the drawdowns (peak to trough) were 83%, 48%, and 53%.

A 50% drop this time would put bitcoin's price around $31,000... And frankly, that type of pullback is still on the table today. It remains to be seen how far the crypto's value will fall.

First off, big kudos to Ben and Drew on this call...

Even with bitcoin's relatively brief trading history and preteen status, their pattern recognition worked... And they warned DailyWealth Trader subscribers of a potential sell-off well before Musk moved the market with his tweets this past weekend.

It's not an easy trend to spot ahead of time and share widely, especially when it seems the world is in love with bitcoin today...

Gold, meanwhile, is much older than everyone living today...

And that's just the start... It has a proven track record to the upside as well.

In the 50 years since the U.S. officially went off the gold standard, the price of the precious metal has risen a little more than 4,500% through a variety of market environments...

We simply haven't seen how bitcoin could compare over a period that long yet. If anything, so far, crypto highs and lows could be looked at like a leading indicator for major stock market turns – both up and down – in recent years...

According to the Bear Traps Report, bitcoin peaked in late 2017 at around $2,000 a few weeks ahead of a top in equities in January 2018... the crypto then bottomed a few weeks ahead of a December 2018 low in global stocks... and reached a low again just a few days before the COVID-19 panic bottom for stocks in March 2020.

And the pattern continued last month... with bitcoin hitting an all-time high of more than $60,000 just a few weeks before stocks started selling off across the board.

Here's what this all means for most investors...

If you're interested in owning gold or bitcoin but think they'll behave the same way at the same time, we want to say that very likely won't be the case. As Giustra said in his closing remarks of last month's debate...

I don't think any one of us has experienced an investment climate like the one we're seeing today... I don't have a crystal ball. What I like to do is diversify. You never put your eggs in one basket. That is about the dumbest investment advice anyone can give.

My suggestion is to skew toward hard assets... That includes real estate, gold, art, and bitcoin if you'd like. Buy bitcoin, knock yourself out, it's probably going to go higher, but the best strategy might be if you're going to buy bitcoin, hedge it with gold. That is gold's purpose.

When and if the markets crash, and they will crash again because we are in a bubble environment... to sell your gold is the worst thing you can do. [You] will need it as a portfolio diversifier because it's inversely correlated to what I think bitcoin is and what equities are.

Our emphasis is added in bold at the end of Giustra's quote...

Giustra's prediction proved out not long after he spoke the words. While high-flying tech stocks have been selling off as inflation fears have spiked on Wall Street... and while bitcoin has slid, too... gold has gone the other way – up.

As we've said before, this is why a well-diversified portfolio of stocks and "hard assets" has plenty of room for both bitcoin and gold...

It doesn't have to be one or the other, nor should it be for most investors. Said another way, while bitcoin might be "digital gold"... gold is not "physical bitcoin."

What's more, it looks to us like this might be gold's time to shine again...

All of the "macro" factors for its value to rise – a virtually fixed supply in an inflationary time during which the relative value of everything pegged in U.S. dollars is falling – remain as in place today as they did a year ago...

Strangely, in the commodity boom over the past six months to a year, gold has seriously lagged the field following its quick spike to more than $2,000 last summer. But as we said, things are starting to turn once again...

We're not surprised that gold has recently been on a bit of a run as Federal Reserve-induced inflation fears have been renewed... while talk about even more government spending is ongoing.

In the May 11 Digest, we noted investor Stanley Druckenmiller's assertion that the central bank's excess "easy money" behavior today might ultimately be what ends the U.S. dollar as the world's reserve currency a decade from now.

If that turns out to be true, it wouldn't surprise us. As Stansberry Gold & Silver Investor editor Bill Shaw wrote in his most recent issue, released last week...

We already know that every single fiat currency in the history of the world has been devalued to zero by its respective governments. And at this point, the U.S. (along with most of the world) is on that path. We're addicted to easy money... There's no going back now.

That's why it's more important than ever to own stores of value like gold and silver.

As Bill wrote, the last time Americans suffered high inflation was in the late 1970s, when it hit 10% shortly after former President Richard Nixon removed the dollar from the gold standard.

In order to get prices under control, the Fed raised its benchmark interest rate from 11% to 20% at the time. Those numbers seem outlandish compared with what we're used to today, where rates have been at just about 0% more often than not for the past decade.

Not coincidentally, as Bill wrote, gold soared to more than $800 per ounce in 1980. In today's dollars, that would equate to about $2,800 per ounce – the highest "real price" ever for gold. Today, it sits at around $1,860 per ounce. More from Bill...

Many gold investors have been frustrated with the precious metal's largely sideways price action over the past few years. But gold is doing exactly what it's supposed to do...

It's maintaining stability for investors in the face of a fluctuating market.

For thousands of years, gold has been proven to be a preserver of wealth and purchasing power. That's nothing like the U.S. dollar, which is seeing its value inflated away today.

So here's the valuable reminder we want to deliver about gold today...

Longer than any of us can imagine, it has given people insurance against the unknown... be it wars, the direction of stocks, or anything else.

And that "unknown" is exactly why you should own some gold today (and every day).

Harry Dent: 'We're Headed to Zero'

Best-selling author Harry Dent catches up with Daniela Cambone to talk about his forecast for a 40% correction to hit the markets as early as June... saying it will be massive and reminiscent of 1929. And if it doesn't happen by 2022, Harry said he's retiring...

Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and don't forget to follow us on Facebook, Instagram, LinkedIn, and Twitter.

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In today's mailbag, Cannabis Capitalist editor Thomas Carroll answers a few questions stemming from yesterday's Digest about the cannabis industry. Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Hi Tom, you quipped in your article that it doesn't matter if cannabis is legalized by the federal government. I strongly disagree. Wish you were right. But as long as the federal government does NOT legalize cannabis, and does not exonerate people who have marijuana drug charges, CBD oil, or any other non THC products, employees who get randomly drug tested will lose their jobs. Federal legalization will make a difference." – Paid-up subscriber M.L.

Thomas Carroll comment: M.L., thanks very much for your comment on my Digest essay about the changing legal cannabis market.

You are 100% correct in your assertion about the social justice and employment impact that formal federal legalization will have. The point of my essay is twofold... First, legalization does not matter from an investment perspective. Second, legalization is already happening all around us, as I noted yesterday in the examples of milestones seen in recent years.

I think the social justice and employment issues will likely be addressed long before the "always late to the party" federal government gets around to full legalization. But to your point, there will be pockets of inequity (i.e., federal employees), where cannabis remains irrationally criminal until the bitter end of cannabis prohibition.

"Dear Stansberry, I have been your lifelong member... The article on sleep & the name of what [Tom's] mom takes was not written. I can say I would like to try. I feel this could help & can you give the name of the Cannabis sleep aid & where I can get it.

"Hoping you can help as I have not slept for the last 9 yrs after coming home from military w/ PTSD." – Stansberry Alliance member George D.

Carroll comment: George, thanks for your question, and I'm sorry to hear about your poor sleeping – and of course, your related struggles with PTSD. Our health is our No. 1 asset, as I like to say, and I hope you can find a solution.

The product I referred to in the essay is called "Good Night." It's made by Curio Wellness in Maryland and is only available within the state.

If you happen to live in Maryland, it's available to folks with an approved medical cannabis card. If you don't live in Maryland, the odds are in your favor of finding a similar product... as 40 states currently have some type of legal cannabis program.

If you're interested in pursuing this further, find out if your state has a medical or adult-use program. Then do some searches online for cannabis sleep aids sold in your area. Good luck to you.

All the best,

Corey McLaughlin
Baltimore, Maryland
May 18, 2021