Wait until you see the price of gold in Venezuela right now
Last month in Venezuela’s capital city of Caracas, a cup of coffee would have set you back 2 million bolivars. That’s up from only 2,300 bolivars 12 months ago, meaning the price of a cup of joe has jumped nearly 87,000%, according to Bloomberg’s Café Con Leche Index. And you thought Starbucks was expensive.
From Frank Holmes at Frank Talk:
Gold Could Save Your Life
So where does this put gold? At some point, hyperinflation gets so ludicrously out of control that discussing exchange rates becomes pointless. But as of July 30, an ounce of the yellow metal would have gone for 211 million bolivars—an increase of more than 3.1 million percent from just the beginning of the year.
My point in bringing this up is to reinforce the importance of gold’s Fear Trade, which says that demand for the yellow metal rises when inflation threatens to destroy a nation’s currency—as it’s doing right now in Venezuela. A Venezuelan family that had the prudence to store some of its wealth in gold would be in a much better position today to survive or escape President Maduro’s corrupt, far-left regime.
In extreme cases like this, gold could literally help save lives.
Such was the case following the fall of Saigon in 1975. If not for gold, many South Vietnamese families might not have managed to escape the country. A seat on one of the thousands of fleeing boats reportedly went for eight or 10 taels of gold per adult, four or five taels per child. (A tael is slightly more than an ounce.) Gold was their passport. Thanks to the precious metal, tens of thousands of Vietnamese “boat people,” as they’re now known, were able to start new lives in the U.S., Canada, Australia and other developed countries.
The Diversification Benefits of Gold
The gold bears were on top last week, with the metal trading as low as $1,205 on Thursday. That’s the closest it’s come to dipping below $1,200 since February 2017. Friday’s lower-than-expected jobs report gave gold a modest boost, but it wasn’t enough to prevent a fourth straight week of price declines.
In times like this, it’s important to remember that, according to gold’s DNA of volatility, it’s a non-event for the metal to close up or down 1% at the end of each session, 2% for the 10-day trading period. And guess what? The S&P 500 Index has the same level of volatility.
Ten days ago, gold was trading just under $1,230 an ounce, or 0.6% more than today. The math is sound.
It’s also worth remembering that gold has traditionally had a low to negative correlation with other assets such as equities. This is why many investors over the years have used it as a portfolio diversifier.
Case in point: On June 26, Facebook suffered its worst single-day decline since the company went public in 2012. Its stock plunged 19%, erasing some $120 billion in market capitalization—the most ever in history for a single trading session.
Gold, meanwhile, held relatively steady, slipping only 0.62%…