STEPHEN LEEB: Gold Will Dramatically Outperform Financial Assets; Likelihood Of Vicious Circle Involving Commodity Scarcity Growing

There are a lot of uncertainties. But I feel certain that gold (the assured successor currency to the dollar) will dramatically outperform financial assets… Along with all other commodities.
There are a lot of uncertainties. But I feel certain that gold (the assured successor currency to the dollar) will dramatically outperform financial assets… Along with all other commodities. File photo: Allstars, Shutter Stock, licensed.

NEW YORK, NY – The war in Ukraine is horrific, however it’s a testament to the nascent phenomenon of the perils I’ve been long foreboding: growing resource scarcities. My belief is that Putin would not have invaded Ukraine if it wasn’t for imminent shortages of commodities, especially energy.

Likewise, as the fighting intensifies, natural resources desperately needed to build a sustainable future are carelessly expended for a nefarious agenda. Merely one more catastrophe to magnify the enormous damage inflicted on Ukrainian economic infrastructure and the inequitable loss of innocent lives.

The likelihood of a vicious circle involving commodity scarcity is growing at an exponential rate. Thus far, despite the most draconian financial sanctions ever imposed by the West, hasn’t stopped Russia. While much of the coverage of the war has focused on greater unity in the West, this crisis has unveiled the blatant fading hegemony of the United States economy.

The hard facts reveal the developing world contains roughly 85% of the world’s population. Why does this matter? The countries that failed to support the United States in the United Nations ‘resolution against the Russian invasion of Ukraine represent a critical mass of the world population!


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That’s increasingly worrisome because cooperation between the West and the developing world is essential for surmounting resource scarcities on a global scale. Even if the sanctions are lifted, Russia would continue to suffer from lack of investment in its oil industry. And this would in turn adversely affect both the developed and developing world. It’s not hyperbole to say;

If the current situation isn’t a wake-up call, it could be a possible death knell for humanity.

There are a lot of uncertainties. But switching for a moment to an investment perspective, I feel certain that gold (the assured successor currency to the dollar) will dramatically outperform financial assets… Along with all other commodities.

Putin’s desire for Russia to regain territory lost after the Cold War is nothing new. The question is why he waited until now to act?

Some argue that when U.S. intelligence showed Russia preparing to invade Ukraine, the U.S. should have offered to permanently exclude Ukraine from NATO. Unfortunately, that would not be accepted from a moral point of view. Additionally it would prove that Russia had the power to strong arm the United States. Putin would have seen it as a sign of weakness and been emboldened to attack on a grander scale. Moreover, Russia’s attacks on Georgia in 2008 and Ukraine in 2014 (when it annexed Crimea) had dramatically lessened the odds of either former members of the USSR ever joining NATO. An article in euronews several weeks before the invasion noted:

“Rafael Loss at the European Council on Foreign Relations says that ‘Ukraine doesn’t really satisfy the criteria for becoming a member. On the political side, members need to implement reforms under the membership plan and on the military side, they’re meant to be ‘adding to the security of the alliance and not detracting from it,‘ Loss said.

That means that Putin’s actions in 2014 have made it much less likely that Ukraine would ever become a member due to the territorial dispute over Crimea, he says. ‘By invading Ukraine in 2014 and by invading Georgia in 2008, Russia has effectively established a veto over those two countries’ membership,’ Loss said.”

OPEC’s Nemesis: Oligopoly

What seems evident is that Putin acted now because he felt that Russia’s oil (fossil fuels) and mineral resource wealth gave it more leverage than in the past. The world is now facing an ever worsening resource crisis that Putin assumed would hamper the West’s ability to respond. Remember, on the eve of Russia’s invasion, oil was trading north of $90 and was in a powerful uptrend thanks to large increases in demand and OPEC’s difficulty in meeting its plan for measured increases in supply.

OPEC’s troubles were hardly a secret to leaders of the oligopoly, Russia and Saudi Arabia, which have long been part of OPEC. Russia could also foresee its role in the original Iran nuclear accord, which meant it could prevent the United States from striking a new deal with Iran. At the very least, a temporary deal that could have compensated for any blockade on Russian energy and commodities. An important point to mention- the Consumer Price Index CPI latest stats – just shy of 8% year-over-year (an astounding 40-year high) reflected data from well before the Ukrainian invasion.

The worsening resource scarcities that enabled and underlay Putin’s invasion in Ukraine similarly could embolden any autocrat to feel comfortable flouting the West. For example, it has been widely reported that both Saudi Arabia and the UAE refused to take a phone call from Biden concerning temporarily increasing oil supplies.

Even India, the world’s biggest democracy with important ties to the West, didn’t support the United States in the United Nations vote. India is part of an Indo-Pacific security pact that also includes Japan and Australia, which is aimed primarily at countering China. According to Media Bias/Fact Check, WION is the least biased English-language news source. It has more than 5 million subscribers on YouTube and it was interesting to hear how it was covering the Ukraine invasion. While I would not characterize them as Russian apologists, they do spend a lot more time criticizing the West than condemning atrocities committed by Russia.

And from The Times of India, which has been voted the most trusted newspaper available in English, the following quote from a recent editorial blog speaks for itself:

“But if the West is serious about delivering Ukrainians from permanent servitude to eternal victimization it must immediately undo the myths it has perpetuated over the ongoing war. One theory being amplified by the West is that this is Putin’s war. That the Russian President is looking to restore Russia to the glory days of Soviet dominance. Calls are being issued to assassinate Putin in the hope that this will fix the problem.”

The most likely reason for India’s reluctance to criticize Russia is that India, while in general resource-rich, imports more than 80% of its oil. Any action that raises the price of oil, not to mention food, would strongly affect India’s growth just as the country is starting to break free of widespread poverty. India’s stance on the war initially surprised, and dismayed, me. But it seems clear that the basic needs of a country’s population will trump its moral stance no matter how clear it is which side is right.

As I’ve repeatedly stressed, in today’s world, roughly 15% are “haves” and 85% are “have-nots.” Though the “haves’ consume far more resources per capita than do the “have-nots”, that has led to their using up far more of their resource endowment. The fact that the poorer part of the world is now growing considerably faster than the richer part is a potential source of conflict that could determine whether the human race will be able to continue sharing this planet. 

“The only answer is cooperation.”

And the key to that cooperation, inescapably, has to be China. I’m not a China apologist. I simply believe that unless we find a way to work with China on global problems, we’re all likely doomed. A short-term benefit would be that China is the one country that could restrain Russia. But the benefits to cooperation extend far beyond that.

One critical area of cooperation would be in developing technologies that refine and enhance the way existing resources are used. To give just one example, the end game to a sustainable world could involve fusion. Fusion may require a lot of helium 3, found on the moon. Making that work would be difficult if not impossible to achieve on our own. And there are many other potentially game-changing advances. The payoff would be massive.

You Must Own Gold

As a human being and citizen of the world, I desperately hope that even as the horrors of the moment are in the forefront of our minds, the world will find a path to cooperation. From an investment perspective, however, cooperate or not, everything points to gold. In the 22-plus years since growth in the developing world began accelerating, the S&P 500 with dividends reinvested advanced by about 4-1/2-fold – compared to a nearly 7-fold gain for gold. That big edge for gold will become even more pronounced in coming years, because whether the world comes together or not, resource scarcity will persist for decades. Moreover, as I’ve discussed often before, I see no way of allocating diminishing resources among users without a gold-backed monetary system. For these reasons, gold’s edge over financial assets will expand, and expand dramatically, though no doubt in fits and starts. That makes gold the most critical investment you can own for as far as the eye can see.

Editors Note: This story originally appeared in King World News and within the pages of Stephen Leeb’s own website. Dr. Stephen Leeb’s material is republished in The Published Reporter® with his explicit permission.


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