Ray Dalio’s latest investment letter updates some of their macro positioning and offers some insights into the bull case for gold. He writes:
Above is the post from Cullen Roche's post on his Pragmatic Capitalism website.“Gold is primarily an alternative to fiat currency and a storehold of wealth. The main advantage that gold has over other currencies is that it can’t be printed. While we have just gone through a period in which the degree of monetary stimulation has ebbed, the ongoing deleveraging means that developed economic will remain highly reliably on continued stimulation for years. By the end of the quarter, central banks were starting to shift back toward renewed stimulation. In addition, one of the primary disadvantages of gold relative to fiat currencies, that it doesn’t pay interest, is mitigated by low rates in the current environment. Real interest rates are likely to remain very low and below real growth rates as a means of combating deleveraging and improving debt sustainability (as described in our “beautiful deleveraging” work). As such, deleveragings strongly favor shifts from financial assets into gold and other tangible assets.Gold is also being supported by secularly increasing demand. “
Ray Dalio (of Bridgewater Associates) sums up the current rally in Gold quite accurately.
Gold prices have risen by $88 over the last month as the market eagerly awaits QE3 and more Bond Buying from Central Banks.