Gold bullion and equities are deeply undervalued
The guest argued that gold and gold equities present a highly compelling contrarian entry point due to historically low valuations and extreme bearish sentiment.
The argument
The guest pointed to a bull-bear sentiment index on gold dropping below 10% (and briefly hitting 0%) as a powerful contrarian buy signal. He also argued that gold is fundamentally undervalued relative to global debt, money supply, and GDP, noting that even a 25% backing of the US dollar would imply a gold price of $5,600 to $5,700.
The thesis, stress-tested
✓ What validates it
- ✓Reversal of fund outflows from gold ETFs like GLD, GDX, and GDXJ
- ✓Physical gold ETFs trading at a premium to their Net Asset Value (NAV)
▸ Risks discussed
- ▸Gold does not generate cash flow or pay a dividend, making traditional discounted cash flow valuation impossible
- ▸Short-term price volatility can lead to continued redemptions in physical gold ETFs and mining funds
Hear it yourself
"Just to give you an example, if you looked at gold backing just for the dollar, just for the dollar, we're not talking about the growth in global money supply, but just the growth in the money supply of the dollar for it to for us to have a 100% backing, you would be looking at a $21,000 gold price."
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