Monkey See Monkey Do
In the past six months a massive amount of money has been pouring into gold mining ETFs. Since September, according to the Wall Street Journal, over $1.4 billion has been poured into one ETF alone in the $20 billion gold-mining industry. That amount is huge and should make everyone stop to reflect on what is going on to cause such a massive influx of money into the gold industry.
Also, while this tsunami of money was pouring into the ETFs (Exchange-Traded Funds—baskets of securities you can buy and sell through a broker in different asset classes including commodities,) additional surges of money were pouring into physical gold, even at a time when gold prices were not moving up or down by large swings.
Stop. What do these money managers and savvy investors see to cause them to jump into the gold market in such a frenzied way? What do the banks and billionaires and actual countries amassing large amounts of physical gold know that we need to know?
Because I work in the precious metals business, and own gold myself, I have a decent amount of knowledge about the long-term value and sustaining purchase power of physical gold. A recent lengthy report I read summarized it well:
Men and machines are becoming more productive and are doing more efficient work. In a healthy, sound and fully-backed monetary system, prices would therefore steadily decline. Alas, the exact opposite is actually the case. What changes perpetually is the value of paper money. It declines year after year, while the working population is forced to struggle with stagnating or even falling real incomes.
Gold by contrast has a track record of successfully preserving value and purchasing power over thousands of years. In the course of human history, the market has chosen gold as the best money based on logical and rational reasons – such as its high liquidity, indestructibility, high value density, fungibility, divisibility, world-wide acceptance, etc. The slow and steady growth in its supply from mining (the global stock of gold is growing at approximately the same pace as the population) ensures stability and confidence. These unique characteristics are making gold one of the best hedges against excessive money supply expansion and Black Swan events
If “in the know” investors are flocking into the market, while I don’t necessarily subscribe to the “monkey see, monkey do” philosophy, maybe in this case mimicry isn’t so bad. Maybe it’s the best way to make money and preserve my wealth. Most of us will never understand the complexities of the global markets and the hundreds of economic indicators that are watched by experts on an hourly daily basis—that predict what is going to happen. So watching what they are doing, and following suit, could be a very smart and savvy strategy.
In a funny way, it reminds me of a YouTube video one of my kids sent me. It’s about monkeys and rocks and cucumbers and grapes. And while I chuckled watching it, I also found it quite insightful. Click here to watch it and then ask yourself—which monkey do you want to be?
Maybe it’s time to invest in gold. You see what others are doing. Don’t be stuck eating cucumbers only when you can also have grapes.