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Inflation and Gold – Precious Metals Supply and Demand

Reasons to Buy Gold

The price of gold went up $19, and the price of silver 42 cents. The price action occurred on Monday, Wednesday and Friday though so far, only the first two price jumps reversed. We promise to take a look at the intraday action on Friday.

File under “reasons to buy gold”: A famous photograph by Henri Cartier-Bresson of a rather unruly queue in front of a bank in Shanghai in 1949 in the final days of Kuomintang rule. When it dawned on people that the communists couldn’t be stopped, they frantically tried exchange their government-issued paper money for gold. In preparation for its exodus to Taiwan, the Kuomintang regime had forced everyone to exchange their gold, silver and foreign exchange for a new paper currency, the Jingyuanquan in 1948 (“golden yuan”) which it promptly inflated with gay abandon, belying its name. It then tried to combat rising prices with price controls – a strategy that has reliably failed since at least the times of the Roman Empire. It reversed the policy a few months later, as even its main supporters became thoroughly fed up. The people in the picture above were among those who had clearly waited too long to take advantage of this policy reversal. [PT]

But first, we want to clarify something in light of our ongoing commentary about the struggles of the debtors and the lack of drivers for rising consumer prices. Just because farmers and restaurateurs are frantically producing and selling like mad, which results in soft prices, does not mean that people cannot begin to buy gold in earnest again.

…click on the above link to read the rest of the article…

Is the Dollar Really a Petrodollar anymore?

QUESTION: Mr. Armstrong; I want to thank you so much for shedding light on what can only be deranged forecasts on the dollar and gold and never change regardless of how much money they lose people year after year. I received this email with the headline How Much Longer Can the Petrodollar Survive? They claim that now adversarial nations like “China, Russia and Iran” are threatening the petrodollar hegemony by establishing their own trading and banking infrastructure that excludes dollars for trade. Suddenly Iran is now a world power and as you said at the conference, the dollar support is not trade or oil, but where big money parks.

My question is, just how can these people sleep at night putting out false information all the time? Isn’t that what the investment banks pled guilty to putting out false forecasts to support their own positions during the Dotcom bubble?

ANSWER: Yes, you are correct. It is one thing to put out analysis that is unbiased and it is raw corruption to put out forecasts that support your own investments creating a conflict of interest. It would not be a criminal act as long as they disclose what their portfolio is. Only the government gets a free get out of jail card for fake forecasts.

The decline in commodities was was due to a number of factors, including an economic slowdown in China, a severe recession in Brazil, with falling prices for oil and other commodities, and exchange rate volatility that saw the dollar rise. Despite positive growth in trade volume terms, the current dollar value of world merchandise exports declined by 14% in 2015, to US$ 16.0 trillion, as export prices fell by 15%. Even the dollar value of world commercial services exports also fell 6% in 2015 to US$ 4.7 trillion, although the decline was less severe than for merchandise.

…click on the above link to read the rest of the article…

Gold, Interest Rates and Super Cycles

Gold, Interest Rates and Super Cycles

When the Fed raised interest rates last December, many believed gold would plunge. But it didn’t happen.

Gold bottomed the day after the rate hike, but then started moving higher again.

Incidentally, the same thing happened after the Fed tightened in December 2015. Gold had one of its best quarters in 20 years in the first quarter of 2016. So it was very interesting to see gold going up despite headwinds from the Fed.

Meanwhile, gold has more than held its own this year.

Normally when rates go up, the dollar strengthens and gold weakens. They usually move in opposite directions. So how could gold have gone up when the Fed was tightening and the dollar was strong?

That tells me that there’s more to the story, that there’s more going on behind the scenes that’s been driving the gold price higher.

It means you can’t just look at the dollar. The dollar’s an important driver of the gold price, no doubt. But so are basic fundamentals like supply and demand in the physical gold market.

I travel constantly, and I was in Shanghai meeting with the largest gold dealers in China. I was also in Switzerland not too long ago, meeting with gold refiners and gold dealers.

I’ve heard the same stories from Switzerland to Shanghai and everywhere in between, that there are physical gold shortages popping up, and that refiners are having trouble sourcing gold. Refiners have waiting lists of buyers, and they can’t find the gold they need to maintain their refining operations.

And new gold discoveries are few and far between, so demand is outstripping supply. That’s why some of the opportunities we’ve uncovered in gold miners are so attractive right now. One good find can make investors fortunes.

 

…click on the above link to read the rest of the article…

Cryptos May Destabilise Fiat

The assumption in some quarters is that crypto-currencies will replace gold as money, or at least challenge it. This is an error borne out of a misunderstanding of catallactics, or the theory of exchange. It also ignores the fact that beyond a few European countries and North America, gold is firmly money in the minds of ordinary people. I wrote an article on this subject, explaining why cryptocurrencies are not a new form of money, here.

Anyone reading this article may wish to read my original article first, to understand the true status of cryptocurrencies. I concluded that cryptocurrencies are the purest form of financial bubble in the history of speculation, and will be of great theoretical interest to future generations, just as the phenomena of the Mississippi, South Sea, and tulip bubbles are to us today. I also wrote that

“It’s worth noting that all crypto-currencies together are worth $120bn, with bitcoin $55bn of that total. This is only a very small fraction of cash and deposits worldwide. Therefore, the point where new money to fuel the craze runs out does not appear to have been reached, and could have much further to go.”

That was in August, when bitcoin was about $3,000 against today’s price of more than double that. In the short-term, all sorts of dubious promoters are sending unsolicited invitations to buy, promising price gains of thousands per cent. It’s a fair bet these promoters own cryptocurrencies themselves, and are puffing their own interest. A failure of the innocent to take the bait in sufficient numbers could easily lead to a sharp correction.

We must look beyond that. This article will examine more closely the dynamics driving bitcoin and other cryptocurrencies, and it concludes that rather than destabilise gold, if the craze continues it is far more likely to destabilise fiat currencies.

…click on the above link to read the rest of the article…

Global Gold Investment Demand To Overwhelm Supply During Next Market Crash

Global Gold Investment Demand To Overwhelm Supply During Next Market Crash

When the next market crash occurs, global gold investment demand will likely overwhelm supply.  When this occurs, we could finally see the gold price surpass its previous high of $1,900.  Now, this isn’t mere speculation, as we already have seen this taking place in the past.  When the broader markets crashed to the lows in Q1 2009 and the 10% correction in Q1 in 2016, these periods were to two highest quarters of Gold ETF investment demand.

I don’t really care on whether the physical gold is actually in the Gold ETF’s, rather I like to look at it as an important indicator that shows us how much investor fear there is in the market.  Moreover, with the amount of leverage and debt now in the system, when the market crashes this time around, it will push gold investment demand up to a record we have never seen before.

The chart below shows the amount of physical global gold investment demand over the past 14 years.  As the gold price increased, so did amount of gold bar and coin demand:

As we can see, during the U.S. Banking and Housing Market crash in 2008, gold bar and coin demand doubled to 868 metric tons (mt), up from 434 mt in 2007.  That was quite a lot of gold bar and coin demand as it totaled nearly 28 million oz (1 metric ton = 32,150 oz).  Furthermore, as the gold price jumped to $1,571 in 2011, gold bar and coin demand shot up to nearly 1,500 mt (48 million oz).

Now, the reason for the huge spike in physical gold investment in 2013 was due to the huge price smash as the gold price fell from nearly $1,700 in the beginning of the year to a low of $1,380 by the middle of April.  Investors thought this was a huge sale on gold so demand for bars and coins reached a new record of 1,716 mt.

…click on the above link to read the rest of the article…

BITCOIN vs. GOLD: Which One’s A Bubble & How Much Energy Do They Really Consume

BITCOIN vs. GOLD: Which One’s A Bubble & How Much Energy Do They Really Consume

If you are investing in either Bitcoin or Gold, it’s important to understand which asset is behaving more like a bubble than the other.  While it’s impossible to understand how the market will value these two very different assets in the future, we can provide some logical analysis that might remove some of the mystery associated with the market price of Bitcoin versus Gold.

I’ve read some analysis on Bitcoin profitability and energy consumption that seemed unreliable, so I thought I would put my two cents in on the subject.

For example, many sites are using the Digiconomist’s work on Bitcoin energy consumption.  However, I believe this analysis has overstated Bitcoin’s energy consumption by a large degree.  According to the Digiconomist, Bitcoin’s annual electric use is approximately 24 TerraWatts per year (TWh/yr):

In a recent article that was forwarded to me by one of my readers, How Many Barrels Of Oil Are Needed To Mine One Bitcoin, the author used the information in the chart above to calculate the energy cost to produce each Bitcoin.  He stated that the average energy cost for each Bitcoin equals 20 barrels of oil equivalent.  Unfortunately, that data is grossly overstated.

If we look at another website, the author explains in great detail the actual energy cost to produce each Bitcoin.  According to Marc Bevand, he calculated on July 28th, that the average electric consumption of Bitcoin was 7.7 TWh/yr, one-third of the Digiconomist’s figure.  Here is a chart and table from Marc Bevand’s site showing how he arrived at the figures:

This graph shows the increase in Bitcoin’s hash rate and the efficiency of the Bitcoin Miners at the bottom.

…click on the above link to read the rest of the article…

“This Could Be Huge”: Gold Bar Certified By Royal Canadian Mint Exposed As Fake

“This Could Be Huge”: Gold Bar Certified By Royal Canadian Mint Exposed As Fake

The last time there was a widespread physical gold counterfeiting scare was in the summer of 2012 when as we reported the discovery of a single 10 oz Tungsten-filled gold bar in Manhattan’s jewelry district led to a panic among the dealer community, which then resulted in local jewelry outlets discovering at least ten more fake 10-ounce “gold bars” filled with Tungsten. Fast forward to today when a similar instance of gold counterfeiting has been discovered, this time in Canada, and where the fake bar in question had been “certified” by the highest possible authority.

According to CBC, the Royal Canadian Mint is investigating how a sealed, “pure gold” wafer with proper mint stampings has emerged as a fake. According to the Canadian press, the one-ounce gold piece, which was supposed to be 99.99% pure, was purchased by an Ottawa jeweller on Oct. 18 at a Royal Bank of Canada branch. The problem emerged when tests of the bar showed it may contain no gold at all.And, when neither the mint nor RBC would take the bar back, jeweler Samuel Tang contacted CBC news.


Joy Creations owner Samuel Tang contacted CBC News when neither RBC nor the

mint would take back the one-ounce gold piece he’d purchased.

“Who is going to make sure those [gold wafers] are real?” asked Tang. “I am worried there are more of those [gold wafers] out there, and no one knows.”

Following the news, RBC felt an obligation to pick up the bar and returned it to the mint for testing, refunding Tang the $1,680 purchase price.

The Royal Canadian Mint said in a statement to CBC it is in process of testing the bar, “although the appearance of the wafer and its packaging already suggests that it is not a genuine Royal Canadian Mint product.”

…click on the above link to read the rest of the article…

The Petrodollar’s Biggest Challengers

The Petrodollar’s Biggest Challengers

Rig

Established in the early 1970s, the petrodollar has secured the United States’ influence over the oil trade for over 40 years, but recently, it is clear that this monopoly is slowly beginning to fall apart.

Due to the plummeting value of the dollar, the debt from the Vietnam War, and excessive domestic spending, President Nixon abruptly pulled out of the Bretton Woods Accord, which pegged the dollar to the price of gold and based the value of other currencies on that of the dollar. Labeled the “Nixon Shock,” these actions left the country bursting with debt and low on cash, with many of its key allies such as Britain, France, and Germany questioning whether the U.S. was justified in its position as the leader of the global economy.

While the U.S. economy entered a nose dive, another geopolitical event was unfolding which exacerbated the economic free fall.

In 1973, Syria and Egypt, backed by several other Arab Nations, launched an attack on Israel which marked the beginning of the Yom Kippur War (or Ramadan War). The war placed increased pressure on oil prices, and when the United States provided Israel with financial aid and arms, the Arab Nations responded.

In 1960, the Organization of Petroleum Exporting Countries (OPEC) was formed. At the core of this organization were Kuwait, Iran, Libya, Qatar, Saudi Arabia, Iraq and the United Arab Emirates – countries which were strongly opposed to U.S. interference in the 20-day war.

Following U.S. provisions to Israel, resource rich OPEC placed an oil embargo on all those thought to have aided Israel, including the United States, Britain, Canada, Japan, the Netherlands and later South Africa and Portugal. By 1974, the price of oil quadrupled.

With the success of the embargo, and cartel’s new role as an oil price influencer, Saudi Arabia became the de facto leader of OPEC.

…click on the above link to read the rest of the article…

Get Ready To Party Like It’s 2008

Get Ready To Party Like It’s 2008

Apparently Treasury Secretary, ex-Goldman Sachs banker Steven Mnuchin, has threatened Congress with stock crash if Congress doesn’t pass a tax reform Bill.  His reason is that the stock market surge since the election was based on the hopes of a big tax cut.  This reminds me of 2008, when then-Treasury Secretary, ex-Goldman Sachs CEO, Henry Paulson, and Fed Chairman, Ben Bernanke, paraded in front of Congress and threatened a complete systemic collapse if Congress didn’t authorize an $800 billion bailout of the biggest banks.

The U.S. financial system is experiencing an asset “bubble” that is unprecedented in history. This is a bubble that has been fueled by an unprecedented amount of Central Bank money printing and credit creation. As you are well aware, the Fed printed more than $4 trillion dollars of currency that was used to buy Treasury bonds and mortgage securities. But it has also enabled an unprecedented amount of credit creation. This credit availability has further fueled the rampant inflation in asset prices – specifically stocks, bonds and housing, the price of which now exceeds the levels seen in 2008 right before the great financial crisis.

However, you might not be aware that Central Banks outside of the U.S. continue printing money that is being used to buy stocks and risky bonds. The Bank of Japan now owns more than 75% of that nation’s stock ETFs. The Swiss National Bank holds over $80 billion worth of U.S. stocks, $17 billion of which were purchased in 2017. The European Central Bank, in addition to buying member country sovereign-issued debt is now buying corporate bonds, some of which are non-investment grade.

…click on the above link to read the rest of the article…

How Gold Bullion Protects From Conflict And War

– Gold and silver’s historical role in conflict shaped the world today and the modern financial system
– Gold played an important function in the great conflicts up to and throughout the 20th century
– Gold and the effective use of bullion played a crucial role in the outcome of the American Civil War
– Gold was an important economic agent in both World Wars, conferring a huge advantage on the allies
– In a world beset with risks of war both in the Middle East and with North Korea, Russia and China … gold will protect

Gold and silver have played important roles during periods of conflict and have protected people but also protected nations and conferred power. HSBC Chief Precious Metals analyst James Steel has written a fascinating piece for this month’s Alchemist about this.

The article takes us through the major wars and conflicts from the 15th century to modern times. Each major war serves as a reminder that success is as much down to the management of bullion and finance as it is about the role of gold and silver.

…the way bullion was used, moved, stored and shifted had profound effects on long-term economic or military success. Indeed, the role of gold and silver in wars not only in influenced the shape of the world today, but laid the foundations for the modern financial system.

When managed effectively we see how important gold and silver were for victorious countries. Central bankers and politicians of today should use the following historical examples of military successes to appreciate the importance of a strong source of bullion and conservative financial planning both in and out of peacetime.

…click on the above link to read the rest of the article…

Yahoo Hacking Highlights Cyber Risk and Increasing Importance of Physical Gold

 Yahoo Hacking Highlights Cyber Risk and Increasing Importance of Physical Gold

– Yahoo admits every single one of 3 billion accounts hacked in 2013 data theft
– Equifax hacking and security breach exposes half of the U.S. population
– Some 143 million people vulnerable to identity theft
– Deloitte hack compromised sensitive emails and client data
– JP Morgan hacked and New York Fed hacked and robbed
– International hacking group steals $300 million
– Global digital banking  and financial system not secure

Hacking

Imagine there was a chemical disaster at a factory. The surrounding water and air supply are affected over hundreds of miles. Thousands of people, if not more, are affected.

There would be a national response. Governments would step in to ask why this had happened, how it was going to be dealt with and how it would be prevented.

More importantly, those affected would be notified with immediate effect. The responsible company would not set up a website inviting potential victims to log on with personal details in order to find out if and how badly they have been affected.

And if the company did do this then people and the government wouldn’t stand for it.

Imagine that another disaster happens a few months later, at another company. But it turns out the dangerous chemicals have been leaking into the environment for possibly the previous three months.

No-one knows the extent of the damage.

There would be uproar.

Yet there seems to be little reaction when the equivalent happens in the cyber world. Just this week, less than a month after the Equifax announcement, Yahoo have admitted all 3 billion accounts were compromised four years ago … four years ago …

This is just another example of repeated data breaches that have compromised the personal data and lives of billions of people.

…click on the above link to read the rest of the article…

Challenging the Dollar: China and Russia’s Plan from Petroyuan to Gold

Challenging the Dollar: China and Russia's Plan from Petroyuan to Gold

Challenging the Dollar: China and Russia’s Plan from Petroyuan to Gold

As seen in my previous article, US military power is on the decline, and the effects are palpable. In a world full of conflicts brought on by Washington, the economic and financial shifts that are occurring are for many countries a long-awaited and welcome development.

If we were to identify what uniquely fuels American imperialism and its aspirations for global hegemony, the role of the US dollar would figure prominently. An exploration of the depth of the dollar’s effects on the world economy is therefore necessary in order to understand the consequential geopolitical developments that have occurred over the last few decades.

The reason the dollar plays such an important role in the world economy is due to the following three major factors: the petrodollar; the dollar as world reserve currency; and Nixon’s decision in 1971 to no longer make the dollar convertible into gold. As is easy to guess, the petrodollar strongly influenced the composition of the SDR basket, making the dollar the world reserve currency, spelling grave implications for the global economy due to Nixon’s decision to eliminate the dollar’s convertibility into gold. Most of the problems for the rest of the world began from a combination of these three factors.

Dollar-Petrodollar-Gold

The largest geo-economic change in the last fifty years was arguably implemented in 1973 with the agreement between OPEC, Saudi Arabia and the United States to sell oil exclusively in dollars.

Specifically, Nixon arranged with Saudi King Faisal for Saudis to only accept dollars as a payment for oil and related investments, recycling billions of excess dollars into US treasury bills and other dollar-based financial resources. In exchange, Saudi Arabia and other OPEC countries came under American military protection.

…click on the above link to read the rest of the article…

Gold Price Will Explode When System Breaks – Gordon Long

Gold Price Will Explode When System Breaks – Gordon Long

Private investor Gordon Long contends the price of gold will shock the world when it revalues to reflect the massive amount of currency that has been printed globally. Long explains, “That is correct, and it won’t be something that is gradual, it will be very abrupt.  The system will break . . . and the financial markets will freeze up.  When they come out of the other end of that freeze, and it may be a number of weeks because the next crisis will be global and much more complex than 2008.  We could control that with the Federal Reserve . . . and this one you cannot do because you cannot get agreement with all those countries.  Never mind understanding the complexity.  So, when we come out on the other side . . . there will be a massive revaluation in the U.S. dollar. . . .  Gold could jump to $5,000 or $10,000 an ounce or something like that. . . . It will be massive.  They will have to put some stability in the monetary system, and the only way they can do it is having something they cannot print.  This is what has gotten us into this problem.  We have to get back to sound money.  It will have to be gold.  What percentage of backing will determine what the value the gold will be.”

On the value of the U.S. dollar, Long contends, “Personally, I think the revaluation of the U.S. dollar will be well over 70% devaluation. It doesn’t mean the world is coming to an end.  It just means you have to go through this to reset.  Those who prepare and understand why this is happening and watch for the signals, there’s going to be fortunes transferred.  They are being transferred right now, frankly.  One other big caveat on gold prices going way up, expect the government to tax it like you have never seen before.”

…click on the above link to read the rest of the article…

The ONLY Variable That Matters To The Price Of Gold

The ONLY Variable That Matters To The Price Of Gold

 

There are all sorts of positive fundamentals when it comes to the price of gold. There are the positive supply/demand fundamentals. The gold market is in a supply deficit. Mine reserves are at a 30-year low . The price of gold is below what is necessary to sustain the gold mining industry .

There are the positive geopolitical fundamentals. The world’s two most-unstable leaders – Kim Jong-un and Donald Trump – have been constantly trading threats and insults. And both of these people have nuclear weapons at their disposal. There is the endless “War on Terror”.

There are the positive economic fundamentals. Western real estate bubbles in major urban centers are at never-before-seen levels of insanity. Western markets are generally also at bubble levels, with U.S. markets representing bubbles on steroids . Western governments are bankrupt.

In relative terms, none of these fundamentals count .

There is one more important fundamental for the price of gold. Not only is it the most important fundamental, but it involves a variable which dwarfs all other fundamentals in magnitude — combined.

Regular readers have heard many times before that gold (and silver) is “a monetary metal” . The definition is simple. Gold is money. Therefore the price of gold must change proportionate to changes in the supplyof other forms of “money” (i.e. currency).

This is not a theory. It is a function of simple arithmetic. An elementary numerical example will illustrate this principle.

Suppose (in the entire world) there was a total of 10 oz’s of gold. Suppose also (in this hypothetical world) that there was a total of only $10,000 U.S. dollars. And in this hypothetical world, the price of gold is $1,000/oz.

…click on the above link to read the rest of the article…

The Demise Of The Dollar As We Know It: “A Break Is Coming… On A Worldwide Basis”

The Demise Of The Dollar As We Know It: “A Break Is Coming… On A Worldwide Basis”

The significance of the shift taking place on a geo-political basis to unseat the U.S. dollar as the world’s reserve currency cannot be understated. It is, by all means, a complete upending of the financial and economic systems as we have come to know them. According to Keith Neumeyer, the Chairman of First Mining Finance and Chief Executive Officer of First Majestic Silver, the world’s purest silver producing mining company, the move is already taking place with countries like China, Russia, Venezuela and Iran already beginning to trade commodities with Yuan, Rubles and gold.

Amid a recent announcement about developments in the gold and silver mining industry discussed in the following interview with SGT Report, Neumeyer, who previously called out, in very public fashion, the manipulation of precious metalsby a small concentration of market players, says that the global currency wars currently playing out on the monetary battlefield will lead to significant price increases in the world’s most trusted hard assets of last resort.

We’re seeing Chinese and Russians trading in gold for oil… there’s a real move on a worldwide basis… There is a break coming…

It has to… It’s just time… The United States is a very powerful country… it has a very powerful military and they want to keep the system that’s in place because a lot of people have made a lot of money in the current system…

I think as the world develops and gets off oil, I think that’s going to help facilitate a break from the Petrodollar system…  and everything that’s going on in the world is very supportive of much, much higher gold prices… I do contend that silver is going to far exceed the move in gold.


(Watch At Youtube)

…click on the above link to read the rest of the article…

Olduvai II: Exodus
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Olduvai
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Olduvai II: Exodus
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Olduvai III: Cataclysm
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