Famed author of the Rich Dad, Poor Dad saga warns about what sky-high gold prices could mean for the broader economy. A long-term gold bug, Robert Kiyosaki has spent the better part of the last decade encouraging investors to diversify with the yellow metal for greater portfolio resiliency. Recently, he took to his high-profile X account cautioning investors that “higher gold prices aren’t necessarily a good sign.” This message echoes concerns from various financial institutions and analysts about the state of the economy.
Gold’s Shiny Returns
Kiyosaki kicked off his X post recognizing gold’s impressive rally which has extended nearly 40% thus far in 2024.
The author zoomed out to highlight gold’s rise over the past 24 years. In 2000, the gold spot price peaked at $316.60. This year, gold has notched a fresh record of $2,786.44 on 10-30-24, representing an 780% jump.
In comparison, the S&P 500 grew from 1,527.46 to 5,864.67 points in the same period, a 284% gain. Over the past quarter-century, the yellow metal has outshined the stock market’s strongest performer by nearly three times. In summary of gold’s stellar performance, Kiyosaki said, “Since 2000, the people who invested in gold have done very well.”
All that Glitters is Not Good
Gold’s record-busting rise has greatly benefitted investors, but its sustained strength might be symptomatic of deep economic issues. “Higher gold prices generally means investors are becoming pessimistic,” explains Kiyosaki. He goes on to point out the disconnect between the yellow metal and the stock market — assets that tend to have an inverse correlation. Curiously, investors have seen both asset classes hit new peaks throughout 2024. This abnormal activity has led to a lot of confusion and uncertainty about what economic landscape rests beyond the horizon.
Stock Market Crash Incoming?
Kiyosaki soberly outlines his anticipation of an incoming economic downturn. He says he expects “a major stock market crash…because the stock market has been high for too many years.” This possible reversal is attributed to the Federal Reserve’s years-long high interest rate scheme which has flooded the economy with cash that investors diverted to the stock market.
This has resulted in inflated evaluations for companies across the board, especially the Magnificent 7 which has fueled the stock market’s record-setting growth. He’s not alone in this prediction. Economic analyst Jon Wolfenbarger, while acknowledging a few positive indicators, also sees an overall negative downward trend ahead.
Gold Holders in a Good Position
Kiyosaki underscores that the anticipated stock market slump is “not good news for people who do NOT own gold [and] silver.” On the flip side, those who have heeded the warnings of various experts and anticipated a cooling economy by scooping up precious metals will be in a better position to weather the incoming storm. In his post, Kiyosaki takes the time to differentiate between physical and paper gold by revealing his gold holdings are purely in bullion form.
Is it too late to get into gold?
Warnings like Kiyosaki’s often prompt investors to wonder if it’s too late for two key actions: protecting their wealth from a potential market downturn and investing in gold. The answer to both is an emphatic “No, it’s not too late…yet.”. The economy hasn’t entered a recession, although many experts believe it’s running on the fumes from years of excessive printing and spending. Despite gold prices sitting at record highs, experts continue to raise their price predictions, signaling that opportunities in gold remain strong. Traditional financial institutions such as Bank of America and Citibank which tend to prefer stocks have even upped their targets to $3,000.
