Gold will be a big story for the next three years, Real Vision CEO Raoul Pal said during today’s Daily Briefing.
Pal said that gold is currently one of the best trades because of its straightforward value proposition: come reflation, gold goes up, come inflation, gold goes up, come deflation, people usually think gold goes down, but if we go to deflation, central banks will do more printing and gold will go up.
This extraordinary set of outcomes has made gold a very popular trade for people, so to have a correction beginning like we saw this week is not that unusual, Pal said. He doesn’t see any real change in the base case for gold and thinks it will continue to outperform.
Meanwhile in the equity market, the S&P closed out the week at 3,372, which Pal attributed to the influence of “headline equities.” They’re going higher and nothing stops that, he said, and we have no idea what’s driving it. It could be central banks, debasement of currency, index flows, or any a number of things, which is why Pal argued that there are better-quality trades out there than the equity market.
One of those trades is the crypto market, which Pal called the best trade in the world right now. He and Ash Bennington discussed the extraordinary opportunity over both the short term and long term of the crypto market, and Ethereum specifically.
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Ethereum is now outperforming Bitcoin significantly and Pal said he believes this will continue.
“It’s ripping higher and people are getting tuned into the whole space,” he said. “I can’t think of a better trade for risk-adjusted returns through the end of the year than crypto.”
Pal and Bennington discussed the distinct advantage of the crypto market: there’s no central bank intervention, no corporate buybacks, and no passive index funds, making it a clean market to trade.
While the pair agreed that the potential for upside is huge, they did acknowledge that there is risk involved in the crypto space because it can’t be priced, it is a difficult system for investors to understand, and the volume is unknown.
However, Pal argued that people tend to overestimate risk and underestimate the upside and said the moment any increment of that risk reduces, crypto will explode in price.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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