Market Watch - Watch out, America: China and Russia are Stockpiling Gold

Article by Brett Arends in Wall Street Journal Market Watch

I’ve never been a gold bug. The yellow metal generates no cash, grows no crops, provides no shelter and supplies no useful service. It hasn’t been official money for decades. It isn’t any kind of “safe haven” because it always seems to be crashing or booming or crashing again. It hasn’t been an efficient way of verifying payment since Samuel Morse invented the telegraph.

But here’s the funny thing: It’s been going up. Big time. And for none of the usual reasons.

There’s no inflation. Prices are currently rising by about 1.6%a year. There’s no obvious economic distress. The U.S. economy is growing by about 2.1% a year. And there’s no financial panic. Stock markets are rising. Wall Street has been hitting new highs. Junk bond spreads — the extra interest that risky companies have to pay to borrow money — are low.

Yet for all that, gold has now risen 11% in the past two months. Over the past year, it’s up 15%.

That’s more than the S&P 500 or the Nasdaq Composite. And more than the so-called FAANG stocks — Facebook Apple, Amazon, Netflix and Google holding company Alphabet — that are so fashionable on the Street.

‘Something’s going on here’

What’s going on? And, more interestingly, perhaps, is it worth a trade?

London hedge fund manager Crispin Odey, at Odey Asset Management, says the precious metal drew his eye during the stock market meltdown last fall. “Gold should have gone down last year,” he says from his plush offices in London’s Mayfair district. “It should have ended the year around $1,000 [an ounce]. Instead it was $1,200. I thought, ‘Something’s going on here.’”

The explanation? Some of America’s biggest geopolitical rivals were stockpiling gold. Especially China and Russia.

To read this fascenating article in Market Watch in its entirety, click here.