|
Perspective Happy Birthday America! Tomorrow, we celebrate the adoption of the Declaration of Independence on July 4th, 1776. Although the document was not signed until August 2nd, July 4th has always been celebrated as the start of this experiment in freedom known as the United States of America. 249 years ago… tomorrow… All of us here at Asset Strategies International wish you and yours a Happy Independence Day. Enjoy the time off with your family and friends. Once the barbecues and the fireworks are done, once the hamburgers and hot dogs are eaten and the last boom of the grand finale echoes into the night, I suggest you turn your attention to how you are going to Keep What’s Yours! You see… we have some issues we need to deal with before we turn 250… But First… Israel launched an offensive by way of missile strikes on Iran. The strikes continued for twelve days as they struck nuclear sites, air defense sites, missile launching sites, top military personnel, nuclear scientists, and symbolic targets as well. Then, on Saturday, June 21st, President Trump launched Operation Midnight Hammer to drop bunker busting bombs on Iran’s three nuclear sites at Fordo, Isfahan, and Natanz. The current result is a fragile ceasefire with all three parties – Iran, Israel, and the United States – claiming victory. Most importantly, the shooting has stopped, and it is believed the Iranian nuclear threat has been neutralized for some time. Now… the Issues… In my humble opinion, the United States rose to the level of leader of the free world because we were strong militarily. That military strength does not happen unless you are, first and foremost, strong financially. You become strong financially by making the difficult fiscal decisions that the adults in the room are expected to make. Somewhere along the way, we lost our way. My guess is that it was leading up to August 15th, 1971. It was on that day that President Richard Millhouse Nixon “temporarily” closed the “Gold Window.” On that day, President Nixon announced that U.S. dollars were no longer freely convertible to gold and vice versa. That step was taken because we stopped making fiscally responsible decisions. We chose instead to overspend, to create currency out of thin air, and to have the rest of the world finance our exorbitant lifestyle. Unfortunately, the rest of the world is growing tired of our antics. A year and a half ago, the U.S. dollar was strong. It traded against a basket of major currency trading partners at $110. As I write this article, the U.S. dollar is trading at below $97 against the same basket of currencies. That is a 12% drop in the dollar’s value in a very short amount of time. Over the same period of time, we are seeing the world’s appetite for U.S. Treasuries – basically U.S. debt – diminishing severely. Once the world’s number one choice for safe haven capital flows, U.S Treasuries are becoming less and less desirable. Watch the Money Supply If we continue to increase the amount of U.S. dollars in circulation, there will be more dollars chasing a finite number of goods and services. The result, without question, will be higher prices for everything of value. That could be a cup of coffee, a gallon of gas, a college education, or a new home. And… it most certainly will be higher prices for an ounce of gold (or silver, or platinum, or palladium) as well. The idiotic flow of fiscal mismanagement is so obvious… yet nobody seems to want to stop the trend. Our Congress is trying really hard to overspend yet again with the “One Big Beautiful Bill.” This bill is supposed to add another $3 trillion dollars to our national debt (currently sitting at $36 trillion) over the next ten years… on top of the $2 trillion already expected to add to our debt every single year if they pass nothing. Overspending will absolutely lead to inflation (defined as monetary expansion or the increase in the money supply). Prices will absolutely go higher. Further, the world’s central banks are cutting back on purchases of U.S. dollar Treasuries in favor of the most dependable safe haven asset of all time… gold. These central banks are without question taking steps toward a change in Reserve Currency… from the U.S. dollar to something else. And… that something else will absolutely be tied in some way to gold. That is the real reason they have been net buyers of gold for the past 15 years. That is the real reason they have bought over 1,000 metric tons of gold each of the past three years. That is the real reason they are well on pace to buy over 1,000 metric tons of gold again this year. Time to Grow Up Whatever we decide, whatever we do, the change will not come this year or next. But make no mistake. The change is coming. It is on our doorstep. So, if our elected officials are too ignorant to reverse this trend, I strongly suggest you take the necessary steps to becoming your own central bank. Ensure your income exceeds your outgo. Do without “wants” and focus only on your “needs” to ensure that is the case. Then, buy gold and silver to insure your wealth going forward. Just because our politicians refuse to be adults does not mean we should act like children as well. So, once again, I wish you and your family a wonderful, safe, joyful, and relaxing Fourth of July. But when it is over, I urge you to roll up your sleeves and be the adult men and women our elected representatives are not. Buying gold and silver now, at lower prices and near all-time low premiums, is the best way I know to Keep What’s Yours! Visit our online store. Send us an email. Call us toll free at 1 (800) 831-0007. For all you adults in the room, we stand ready to help. Editor's Note: Adam Rozencwajg is a Co-Founder and Managing Partner at Goehring & Rozencwajg (G&R), a premier global natural resource investment firm based in New York. He'll be joining Rich Checkan and Adrian Day for our next free On the Move webinar on July 16th. Register here. Feature If the theory holds water—and we think it does—it follows that the immense run-up in mega-cap growth stocks, and the protracted languishing of commodity-related equities over the past decade and a half, are inextricably linked. And if that’s true, then it stands to reason that the unraveling of one side of the trade may, at long last, bring about the unraveling of the other. A preview of this unwinding played out, however briefly, in 2022. The invasion of Ukraine sent both commodity prices and interest rates soaring, a shock that appeared—if only for a moment—to knock the carry trade off its axis. The Nasdaq 100, home to the gilded names of the technology elite, dropped 35% that year. Meanwhile, the S&P North American Natural Resource Sector Index—a reliable proxy for natural resource equities—rose nearly 30%. It was, in hindsight, something of a false start. The forces that had governed the previous cycle quickly reasserted themselves. In 2023, the Nasdaq 100 rebounded sharply, rising over 50%, and then tacked on another 27% in 2024. Commodities and their equities, for their part, resumed their sullen torpor. Still, we would not dismiss the episode of 2022 as meaningless. Far from it. Rather, we view it as a harbinger—a rehearsal, if you will—for a more dramatic performance still to come. The structural underpinnings of the carry trade remain vulnerable, and the pressures building beneath them are mounting. The timing is, as ever, uncertain. But the logic is firming, and the probabilities, we think, are increasingly on the side of a major reversal—with all the attendant consequences for investors on both sides of the seesaw. Could the weakness in technology stocks during the first quarter—paired with the simultaneous strength in commodity equities—be the real beginning of the end for the carry trade? It would not be the first false alarm, of course. We saw a promising tremor in 2022, only to watch markets settle back into their old rhythms. But this time may be different. Or so the mounting evidence would have us believe. The murmurs are growing louder. Talk of a “Mar-a-Lago-style” regime shift in monetary policy, fresh volleys in the tariff skirmishes, and the recent rally in gold—all hint at a deeper unease in the foundations of the financial order as we’ve known it. Meanwhile, commodities and their equities have begun to stir. In the first quarter, prices for raw materials firmed, even if unevenly. The Goldman Sachs Commodity Spot Index, weighted heavily toward energy barely budged—up less than half a percent. But the Rogers International Commodity Index, with a broader mix of metals and agricultural goods, rose more than 5%. The equity markets told a similar story. Resource stocks, which had slumped in the final months of last year, rebounded. The S&P North American Natural Resource Sector Index— populated largely by the largest-cap energy names—rose about 7%. The S&P Global Natural Resources Index, with greater exposure to metals and agriculture, matched the gain. And on the other side of the proverbial trade? Weakness. The kind of weakness one would expect, in fact, if the carry trade were indeed beginning to unravel. The S&P 500, top-heavy with the so-called “Magnificent Seven,” fell more than 4% over the quarter. The Nasdaq 100, home to the mega-cap darlings of the last decade, dropped over 8%. Is this the true beginning of the great unwind? We cannot say for certain. But the signs— those subtle, stubborn signals the market sometimes sends before a major turn—now point in that direction. It feels, more and more, as if we are nearing the edge. Precious Metals The enthusiasm did not stop at the metals themselves. Equities tied to gold and silver also advanced. The GDX ETF, a benchmark for gold mining stocks, climbed more than 35%, while the SIL ETF, which tracks silver-related equities, rose a solid 25%. Notably, central banks continued to accumulate bullion—a trend that has become something of a motif in recent years. More interesting still was the return of the Western investor. After stepping back in the fourth quarter—spooked, it seems, by a surging dollar—Western holders of physical gold ETFs came rushing back. According to our tracking of 18 such funds, net liquidations in Q4 gave way to vigorous buying in Q1, with Western investors accumulating 150 tonnes. The World Gold Council’s data suggests central banks were buying right alongside them. Yet a curious contradiction persists—one that we view as especially bullish. Even as Western investors return to the metal itself, they remain net sellers of gold equities. In our view, this divergence—physical gold accumulation paired with equity liquidation—speaks more to positioning mechanics than to a change in fundamental conviction. It may well mark the early innings of what we believe is the defining gold bull market of the decade. Editor's Note: Frank Holmes is the CEO of U.S. Global Investors —a company that produces quality analysis concerning gold, precious metals, natural resources, and emerging markets—in conjunction with his work as a fund manager. Frank is a long-time friend of ours, and we've chosen to share his article originally published June 20, 2025. For more articles like this from Frank and other leading experts, you can subscribe to the U.S. Global Investors newsletter here. Hard Stuff The U.S. Dollar Index, when measured against a basket of other major currencies, has declined by approximately 10% this year through mid-June and is currently trading at its lowest level in three years. That’s no small dip, and there may be additional downside risk due to concerns over America’s growing deficit and the ongoing fluctuations in tariffs. In a note to clients this week, UBS says the dollar is now “unattractive,” with further declines expected as the U.S. economy slows. Even at these elevated prices, central banks around the world have continued to accumulate. According to the World Gold Council (WGC), official sector gold purchases exceeded 1,000 tonnes in each of the last three years, which is more than double the annual average of the previous decade. Institutions now hold nearly as much gold as they did back in 1965, during the Bretton Woods era. A recent European Central Bank (ECB) report noted that, for the first time ever, gold now represents a larger share of total global foreign exchange reserves (20%) than the euro (16%). This is remarkable, and it aligns with recent survey data from the WGC showing that 95% of central banks expect to increase their gold reserves over the next 12 months. That’s the highest figure since the WGC’s survey began. The Global South Is Leading the Way Editor's Note: This article was originally published in 2015, but remains no less true... The Inside Story |