Writing in 1970, author Alvin Toffler remarked that “People of the future may suffer not from an absence of choice but from a paralyzing surfeit of it. They may turn out to be victims of that peculiarity super-industrial dilemma: overchoice.” His book became a modern classic. Future Shock warned readers of all the problems that occur when modernity outpaces our ability to adapt to changing times.

Now, decades later, his words ring true. The timelessness of gold has come head to head with the technological innovation of fintech solutions. This phenomenon has left some questioning how gold fits into the emerging world of digitized currencies like bitcoin.

Recently, The World Gold Council, released a report examining the future of gold amid the breakneck speed of blockchain technology. Interestingly, some experts believe that gold and the popular alternative bitcoin can happily coexist. “On 2nd March 2017, the price of BitCoin surpassed the price of an ounce of gold for the first time. For those who worry that gold has found a digital rival, it hasn’t – this is merely a nominal coincidence,” remarks The World Gold Council. They continue, “But gold also has an advantage – the market is deep (US$8 trillion) and it enjoys an unrivaled sense of security.”

This sentiment underpins an evolving perspective on gold. The emerging role of technology in our financial system only works to reaffirm the power of gold. It was the original form of universally accepted currency and still is. The authors of the piece from The World Gold Council remind readers that “Roughly US$250 billion changes hands each day through the gold market.” Moreover, the advent of technological developments may actually boost gold’s popularity.

Some have come to assert that people can leverage blockchain technology to hold a balance in true, tangible gold while still spending the asset. What’s more, this development would work to increase the liquidity of gold. With greater liquidity gold would become an even more agreeable way to invest cash and retain the value of one’s holdings. For these reasons experts are beginning to see the likelihood of a resurgence of gold increase.

Toffler was right about many things. However, the burden of choice may soon dissipate. Technology enthusiasts and gold holders just might have everything they want in one convenient choice.

Too often we assume that the new replaces the old. While, in some cases this is true, it’s far more common that the new reinvigorates the old. Or, as some have succinctly put it “everything new is old.”

Technology has found more efficient ways to put gold in the hands of investors. Meanwhile, unlike ETF solutions, new technology gives people a true claim to the asset rather than just a glorified promissory note. As this trend continues investors will see faster ways to make gold part of their holding all while knowing they can access it at any time and convert its growth into true spending power. As the authors explain, “In an indebted world, there are plenty of reasons why people should want to carry electronic gold in their pockets – and technology is allowing them to do so in a seamless way.”   

There was no time to weigh the gold, the total was estimated on the fly. It was 1967 and people were frantic. The US Treasury was loading a Starlifter, a massive army transport capable of flying payloads of more than 60,000 pounds. This is what it looks like when the US Government makes the single largest outgoing gold delivery in history.

Several flights were needed to complete the transfer. Each plane carried $100 million worth of gold. Every flight landed at a Royal Air Force base in the UK. The final destination was The Bank of England. “Panic reigns in the gold market,” wrote one Treasury official.

The delivery of gold to the UK was a response to surging gold purchases following a devaluation of the British pound. The Bank of England was unable to satiate the mounting demand. People were losing faith in England’s currency. Other economies, like Japan, began to show signs of weakening support. Gold purchases increased further boosting prices even more. In his recent book One Nation Under Gold, James Ledbetter explains “the volume of gold traded nearly quadrupled.” What happened next? “That was when The Bank of England told the US Treasury that it could no longer back up the markets daily transactions.” Eventually, the US decoupled gold and the dollar.

The dollar became the “mechanism of exchange.” Today, this is hardly shocking or even interesting. However, at the time, amid such uncertainty, Americans were ushering in a new era where the economy changed nearly overnight. This was something different. Ledbetter astutely remarks that while FDR did take the U.S. off the gold standard earlier in the 1930s, there was still a mandatory stock of gold supporting the dollar. This practice was not an abstraction. There was a vault. There was a key. Suddenly, this wasn’t the case.

Meanwhile, for a period, Americans were restricted by law from owning gold. This limitation only added to the already pervasive sense of unease. How does one protect their assets from the inherent problems with a paper currency backed only by confidence? Many turned to pre-1966 silver coins. They hoped the rising value of the metal would buoy their assets against another crisis. 

Not until 1974 would Ford permit Americans to own gold. However, the market has taken an interesting turn since those days. Today’s investors have exposure to numerous methods for owning gold that, somewhat ironically, are reminiscent of the anxieties of an earlier time. Products like gold ETFs make ownership easy but put no real metal in the investor’s hands. What’s more, investors of these instruments have no claim to the physical asset. Starting to sound familiar?

Too often these kinds of investments only serve to make the individual feel like they own gold when in fact their owning paper and sometimes not even that. Too many embrace these modern solutions while forgetting their resemblance to an era when people had no real cover for their assets. Fortunately, the savvy gold enthusiast still has places to go to own the real thing.

US equities came out of the gates running last week by starting with a firm rally across the board on Monday. The S&P 500, Nasdaq 100, and Dow Jones Industrial Average were all largely in the green as the tech sector gained substantially. Most of the gains were driven by the largest company in the world by market capitalization, Apple, as the computer giant announced plans to develop an augmented reality app that enables consumers to virtually test furniture from home before they make a purchase.

Evidently, the news was enough to excite investors and the S&P 500 hit a fresh all-time high during Monday’s trading. Nevertheless, stocks managed to give back some of their gains later in the week with softer than expected economic data and weak crude oil prices.

However, slight weakness in domestic equities was drastically overshadowed by weakness overseas. The benchmark FTSE 100 index finished in the red for four straight sessions ending last week with a loss of 0.50%. Overall, the index has fallen for three consecutive weeks, which is the longest stretch of losses for the index in a year.

Essentially, much of the weakness in global stocks can be attributed to the relentless dive in the price of crude oil. Crude oil prices directly affect both European and US energy companies.

“The enormous volatility in the oil market is unsettling investors around the world. The fear of falling inflation and reduced growth prospects is at the forefront of traders’ minds. It is not unusual for us to witness rallies, but the big picture is that oil has been falling since March, and now the selloffs are becoming even more severe,” said CMC Markets analyst David Madden in a note to clients.

Because the energy industry represents a significant portion of bedrock companies in the US and Europe, it’s difficult to have rallies when the entire sector has plummeted 15% YTD.

The plunge in oil prices even has some traders wondering if it will alter the Federal Reserve’s rate-hike agenda. But a fixed income strategist for BMO Capital Markets noted how “the Fed doesn’t respond to it much because oil is so volatile.”

At this point, it’s unclear if oil inventories will continue to rise and prices will continue to fall, despite OPEC’s concerted efforts. If prices continue to slide, it’s not unreasonable to see further weakness in markets around the world.

Along those lines, one mysterious investor is particularly bearish in the next couple of months. On Tuesday of last week, an unknown investor purchased $3.8 million worth of VIX call options. The large trade of 74,300 contracts had everyone on the Street buzzing, because the trade will only pay off if there is a stark decline in asset prices and a huge pop in volatility.

Basically, there will need to be somewhat of a stock market crash between now and mid-August when the options are set to expire. Otherwise, the options will expire out-of-the-money and be completely worthless and the $3.8 million will be fully lost.

Because of the large size of this trade, many investors are wondering if the mysterious buyer of volatility knows something that other people don’t. Regardless, if there is a large increase in volatility and the VIX due to an unexpected market plunge, gold arguably stands to benefit just as much as the call options, if not more. And, unlike the calls purchased last week, gold won’t expire worthless if nothing happens in the next two months.

Therefore, gold truly is one of the better investment vehicles of this generation, because it serves as a prudent investment and a hedge against a market catastrophe.

For over 40 years, Blanchard and Company has helped over 450,000 clients invest wisely in precious metals and rare coins. Call us today at 800-880-4653.

Cash is nice, and stocks are fun, but nothing beats gold. Nothing. This sentiment was the focus of America’s ruling politicians in the mid-1960s. Fearing a gold shortage, President Kennedy remarked in a closed-door meeting “If everyone wants gold, we’re all going to be ruined because there is not enough gold to go around.” The gold standard was still a pillar of the U.S. economic system.

There was a problem. Sourcing gold through conventional mining was becoming increasingly difficult. In fact, many mining operations in the U.S. had shut down amid more successful competing mines in other countries. If Kennedy and others couldn’t find gold underground, they would find it somewhere else.

Operation Goldfinger endeavored to extract gold from the strangest of places, seawater, plants, meteorites. Scientists even added deer antlers to the list of places they would look for gold. The administration recruited a leading scientist who formerly worked on the Manhattan Project. This, apparently, is what it looks like when the government goes on a gold hunt.

They kept the project secret calling it a routine mining exploration project. Kennedy and others feared this frantic quest for gold might be perceived as desperate among the international community. After a few backroom handshakes, Operation Goldfinger was a go.

Some of the greatest minds in technology designed new ways to search for gold. Methods carrying esoteric names like mobile neutron activation promised to scour for gold without having to collect a single speck of dirt from the ground. The technique resembled a million-dollar, heavy duty metal detector anchored to a truck.  Before long the team added X-ray technology to their arsenal of research tools.

Remarkably, they did, in fact, find gold in obscure places. The problem: there was never enough to make the find worth their while. They were excellent and finding traces, but the motherlode eluded them. If they couldn’t find big deposits, they would make them. In its later years, Operation Goldfinger turned to atomic science in an ambitious attempt to engage in alchemy. Of course, none of it worked. In a bold move, the scientist put serious consideration into using nuclear detonation to penetrate potential gold deposits deep underground. In the end, the “nuclear option” worked, though it didn’t require a blast shield.

The “nuclear option” was the decision to step away from the gold standard all together. One evening, in mid-August of 1971 in a televised message, Nixon announced that he was pulling the dollar off the gold standard. Less than a decade later President Ford signed a proclamation legalizing gold ownership for U.S. citizens.

Today, gold remains as desirable as it did to American scientists scouring the ocean depths for hints of gold. While abolishing the gold standard was likely a necessity it created a problem we still see today; the government prints more money and goes further into debt. Meanwhile, gold investors still hold the inherent value of the rare metal in hand knowing that it’s a relic from a time when currency was backed not by confidence but by literal weight.