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Warren Buffett once famously stated that gold doesn’t do anything but “look at you”.

What Buffett meant was that unlike corporations, gold doesn’t have earnings, pay a dividend, or grow revenues. It’s simply a hard asset. In this sense, its value is determined by circumstance (economic growth, inflation, etc.) as opposed to the future value of its cash flows.

I was thinking a lot about Buffett’s quote yesterday as I watched gold rocket to new all-time highs yesterday. For those who aren’t paying attention, gold is now outperforming every major stock market index as well as every investing legend (including Buffett himself) this year.

Heck, it’s even outperforming Wall Street AI-darlings like Nvidia (NVDA)!

What is going on?

What’s going on is that Buffett is actually wrong, gold does do something: it hedges against currency devaluation. And globally, central banks are in the process of turning their currencies into confetti. Practically every other day, another central bank announces a new round of easing/ money printing.

Case in point, yesterday China’s central bank, the People’s Bank of China (PBoC) launched a new round of liquidity, pumping 260 billion worth of yuan into China’s financial system. Gold rocketed higher to new all-time highs on the news.

The PBoC joins the Fed, the European Central Bank (ECB), the Bank of England (BoE), Bank of Canada (BoC), the Reserve Bank of Australia, and the Swiss National Bank (SNB) in easing monetary conditions.

The fact that gold is now outperforming stocks indicates that this easing will be highly inflationary. Put another way, the financial system is telling us that it is more worried about future inflation than it is excited about future growth.

This is a MAJOR development.

Central banks are supposed to balance the risks/ benefits of prioritizing growth vs. inflation. Based on what gold is doing relative to stocks, we are getting clear signals that there will be a resurgence in inflation in the coming months.

This is THE theme for investors who want to make a killing in the markets. The BIG money is made by preparing for what’s about to happen, NOT focusing on what is already happening.

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