The majority of people do feel inflation in food, cost of housing, services, etc. Some government officials deny that we have or are going into a prolonged period of inflation or even stagflation (see [1]), which is the strong indicator that we do will have them. It is hard to find decent paying jobs and many young people do not see many opportunities around (see [2]). It seems there are doom and gloom and no bright future, for many. But, I have good news. In periods of high inflation and/or stagflation there is a very simple way to make profit with little risks. To understand what we should expect from prolonged high inflation and stagflation we need to learn lessons from history during such periods.
Let us look into the last such period from 1965 to 1982 (see [3]). In 1971 gold was about $35, in 1971 about $40, in 1972 about $58, .. and reached $850 in 1980. As we see, the price of gold increased 28.28 times. At that time, there was no a single country with trillions dollars of debt. Today, we do have multiple countries with many trillions in debt and the only reasonable way to reduce such debts is to inflate them. Therefore, if we assume that in this gold bull run semi-cycle (caused by prolonged inflation and/or stagflation) price of gold will demonstrate the historical performance then we should expect that before 2034 we will see gold price about $58,285. The majority of credible analysts do agree that gold prices will go up if we have a prolonged period of inflation and/or stagflation, but disagree about the maximum (see [4-6]).
James Rickards predicts (see [6]) that gold price will reach $26,000 in 2026, which is consistent with the prediction of $58,000 before 2034. James is in top 5% of analysts, who has proven historical records with predictions of high accuracy.
As we can see, such historical facts give us a “bright beam” of hope in our dark and gloom economic environment. Non crypto investors just started to “jump on the train”, but crypto investors are still in non gold backed cryptos. And this is the opportunity for crypto investors. There are many gold backed cryptos, for example such as:
Tether Gold (XAUt)
DigixGlobal (DGX)
Paxos Gold (PAXG)
GoldCoin (GLC)
Perth Mint Gold Token (PMGT)
Meld Gold by Algorand (MCAU)
AurusGOLD (AWG)
Cash Telex (CTLX)
AABB Gold Token (AABBG)
CACHE Gold (CGT)
Kinesis Gold (KAU)
What is important to understand is that many gold backed cryptos are exchangeable with physical gold. This means that the value of gold-backed crypto will not go to zero, because you can exchange gold backed crypto on real physical gold. In other words, contrary to zero intrinsic value cryptos, like btc, eth, … gold backed cryptos do have intrinsic values. But, a counter party risk does exist. If no one will agree to give you their physical gold in exchange for your crypto then you will not be able to get real physical gold.
A simple, low risk strategy is to buy and hold gold backed crypto until the price increase multiple times. For those, who likes risk and wants to profit from timing speculative bursts, there are many strategies to use.
Let us look on the chart of Kinesis Gold (KAU).
As we can see from the chart, there are two phenomena: gradual growth (comparable with appreciation of gold) and speculative bursts about 15-20% (typical behavior for crypto). Therefore, advanced traders with good timing abilities for speculative busts will be able to make about 10-15% profit from short term trades in addition to getting profit from gold appreciation gradual growth.
DISCLAIMER:
I am not a financial advisor. All statements in this post are my personal opinions and should not be considered as financial advices or recommendations. Make your own decisions, based on your own research, analysis and conclusions (DYORAC).
References:
[2] https://www.linkedin.com/pulse/20140710184322-5525604-why-youth-are-unemployable
https://www.federalreservehistory.org/essays/great-inflation
[4] https://blog.gorozen.com/blog/gold-bull-market-prices
[5] https://seekingalpha.com/article/4660289-gold-analytics-signal-potential-birth-of-new-bull-cycle
