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There’s a lot of talk about the Yuan price of gold falling out of a price suppression channel. Both Zerohedge and Nomura have weighed in on this.

The Yuan price of gold surged overnight to above CNY 8500 per ounce which is a major breakdown But it’s also indicative of something that has long been suspected during this gold bear market.

China doesn’t want the price of gold to rise. Those accumulating gold — China and Russia — have zero incentive to accumulate at higher prices. And the gold chart of the last three years bears out that they have had to come in at higher prices on pullbacks because market bottoms keep coming in higher and higher.

The 2015 low was around $1050. 2016 at $1146. 2017 the low after a pullback in July couldn’t breach $1208 during a strong post-U.S. election rally. This year the price was briefly pushed below $1200 in the longest downtrend of the seven year bear market but has since popped back over $1230 with its sights now set on $1250.

China may have no choice here but to let the price of gold rise. Because conditions in other markets are changing rapidly. So, ultimately, what China wants really may not matter anymore.

Remember, the eurodollar markets broke in late May this year as Jeffrey Snider at Alhambra Partners reminds us daily.

The PBoC cut the reserve ratio again recently to free up liquidity in Chinese banks but it doesn’t seem to have stemmed the tide. And that’s why it has continually loosened the Yuan fix rate, now approaching 7 vs. the U.S. dollar.

Offshore dollar markets are the pool of real savings in the global economy and it determines where we are headed. And the offshore dollar hoarders are pulling out of China… and Europe… and Japan…. and South America.

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

Global Central Bank Buying Puts A Floor Under The Price of Gold

September 28, 2018

Global Central Bank Buying Puts A Floor Under The Price of Gold

The only reason the price of gold’s down on the year is because of a strong dollar.

Actually – for how much the dollar’s rallied this year, gold holding around the $1,200 range is very bullish.

And if gold’s been able to hold its own during a stronger dollar and aggressive Federal Reserve tightening – imagine what it will do once they decide to begin easing. . .

Putting it simply – the price will soar. . .

So, who’s taking advantage of this weaker gold price?

The Global Central banks – but specifically the Emerging Markets.

Here is the latest data showing the Q2/2018 Central Bank gold reserves.

This comes after Central Banks added 116.5 tons to their ‘official’ reserves in Q1/2018. This was the highest first quarter increase over the last four years.

It’s widely known that in the 1990’s and first decade of the new millennium – Central Bank’s were dumping their gold.

Starting in the late 1980’s, gold reserves in Central Bank vaults declined from roughly 36,000 to just under 30,000. That’s a huge drop.

To be clear, they didn’t just sell the gold. The Central Banks also engaged in the ‘gold carry trade’.

This is when Central Banks ‘lease’ their gold reserves to investment banks for a set amount of time and a bit of interest.

The investment banks then sell that gold in to the market – get dollars in return – and buy bonds or equities.

After a while, they take the profits and buy the gold back – returning it to the Central Banks.

You can see how lucrative this trade is. And how it incentivizes the investment banks to keep the gold price down (since they have to buy back the gold later to return it to the Central Banks).

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

The coming boom in gold prices. . .

April 26, 2018

The coming boom in gold prices. . .

In June 1884, a local farmer named Jan Gerritt Bantjes discovered gold on his property in a quiet corner of the South African Republic.

Though no one had any idea at the time, Bantjes’ farm was located on a vast geological formation known as the Witwatersrand Basin… which just happens to contain the world’s largest known gold reserves.

Within a few months, other local farmers started discovering gold… kicking off a full-fledged gold rush.

Just over a decade later, South Africa became the largest gold producer in the world… and the city of Johannesburg grew from absolutely nothing to a thriving boomtown.

This area is singlehandedly responsible for 40% of all the gold discovered in human history – some 2 billion ounces (or $2.6 trillion of wealth at today’s gold price).

And while the Witwatersrand Basin is still being mined to this day, it’s not as active as it used to be.

Gold production in Witwatersrand peaked in 1970, when miners pulled a whopping 1,000 metric tons of gold out of the ground.

A few decades later in 2016, the same area produced just 166 tonnes– a decline of 83%.

That’s not unusual in the natural resource business.

Whereas it takes nature hundreds of millions of years to deposit minerals deep in the earth’s crust, human beings only require a few decades to pull most of it out.

This creates the constant need for mining companies to explore for more and more major discoveries.

Problem is– that’s not happening. Mining companies aren’t finding anymore vast deposits.

According to Pierre Lassonde, founder of the gold royalty giant Franco-Nevada and former head of Newmont Mining–

If you look back to the 70s, 80s and 90s, in every one of those decades, the industry found at least one 50+ million-ounce gold deposit, at least ten 30+ million ounce deposits, and countless 5 to 10 million ounce deposits.

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

Gold Price Will Explode When System Breaks – Gordon Long

September 28, 2017

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…

Grant Williams: “History Is About To Repeat Itself Again… And It Might Get Ugly”

August 27, 2017

Grant Williams: “History Is About To Repeat Itself Again… And It Might Get Ugly”

Real Vision’s Grant Williams believes that the 76 million retiring Baby Boomers will trigger a major pension crisis.

“With that potentially bad situation we could face,” the seasoned asset manager and co-founder of Real Vision TV said in a recent extended Metal Masters interview (full interview below), “holding physical metal, somewhere safe, somewhere outside the banking system, is just a sensible precaution to take.”

His outlook has changed drastically since he started his first job trading Japanese markets in 1986: “What I walked into at that time was one of the greatest bull market bubbles the world had ever seen, in the Japanese equity market and real estate market.” During this heyday, precious metals weren’t on his radar at all—until a year later, when he witnessed his first stock market crash and started asking some inconvenient questions.

“I’ve always been a fan of history,” says Williams, who also writes the wildly popular macroeconomic newsletter, Things That Make You Go Hmmm… “So I read financial history and I just kept reading. And it was clear to me that at this point in time, I needed to buy some gold.”

Until then, the gold price didn’t mean much to him, except as an indicator of other things, so he considers the crashes he witnessed in his career wake-up calls and blessings in disguise.

The 1987 crash, he says, was more like “a bad day at the office; it came and went so fast… The bounce-back was quick, but it was a real shock to the system that that could happen.” When the dotcom bubble burst, he was well prepared. “I recognized the madness for what it was much sooner… and so that taught me that markets can reverse and just go down.”

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

Gold Price Skyrockets in India after Currency Ban

November 12, 2016

Gold Price Skyrockets in India after Currency Ban

India’s Government Makes Banknotes Worthless by Decree Overnight

As I write this in the morning of 9th November 2016, there are huge lines forming outside gold shops in India — and gold traded heavily until late into the night yesterday. Depending on who you ask, the retail price of gold has gone up between 15% and 20% within the last 10 hours.

img-20161109-wa0003 Gold quotes in India – gold traded for as much as Rs 49,000 per 10 grams or US$ 2,294 per ounce

At some places, it was sold for as much as US$ 2,294 per ounce. That is, if you can actually find physical gold — gold inventories at stores are rapidly depleting. All of this happened well before the international price started to move up because of the election results coming out of the US.

Last night (8th November 2016), India’s government banned the use of Rs 500 (~$7.50) and Rs 1,000 ($15) banknotes. This pretty much made most currency-in-use illegal. Banks and ATMs are closed today. The government believes that doing this will help eradicate corruption and push counterfeit money out of circulation. According to the Indian government, the counterfeit money tends to come from Pakistan and helps finance terrorism.

My first instinct when I heard the news was that people would be on the streets this morning. There would be riots and the Indian Prime Minister, Narendra Modi, would be unceremoniously thrown out. Despite being a huge critic of him, I thought he at least had the spine to take bold action, however erroneous it might have been.

I am sometimes too optimistic about India and expect too much goodness from Indians. And I was wrong.

In the morning no opposition against the government was in sight. But there was some animosity detectable between people.

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

Gold is the only sound money

March 12, 2016

Gold is the only sound money

This article notes that the technical situation for the gold price has sharply improved, to the evident surprise of many mainstream analysts. It discusses possible reasons behind the turnaround, and implications for the future.

The technical situation is shown in the chart below.

Golden Cross

A “golden cross”, with the 55 day moving average crossing above the 200 day moving average with both of them on a rising trend, and the share price above both these moving averages, has now occurred. This is generally taken by traders to indicate the bear trend has reversed, and a bull market is now in place.

More interestingly, this change of direction is combined with a bullish pennant pattern, which commenced on 11th February and completed on 3rd March, taking precisely three weeks. This is shown by the dotted lines. The intraday price movements (not shown) conform exactly to the pattern, and the break-out on 4th March saw high volume with an increase to a record amount of outstanding Comex contracts.

The other technical qualifications for a pennant are also fully satisfied. It follows a sharp rise, is a consolidation lasting no more than three or at most four weeks, volume diminished while the pattern played out (taking Comex volumes as proxy), and the break-out was a resumption of the trend. It therefore appears to be a text-book example.

Pennants give us a price objective, which equates to the preceding rise from its breakout point. This yields a minimum price target of approximately $1400, which with pennants can happen quite quickly. And that helps explain, from a purely technical point of view, the seemingly unstoppable strength in the gold price.

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

Pop in gold x USDX reaching a critical point

February 28, 2016

Pop in gold x USDX reaching a critical point

Here at the World Complex I have been using gold x USDX (i.e., the gold price in US dollars per ounce multiplied by the US dollar index, divided by 100) as a proxy for the value of gold mined by companies not operating in the US. Assuming that their expenses are in some local currency, the cash flow of such companies can be improved either by a rising dollar (gold remaining constant) or a rising gold price. In fact, a rising dollar may be preferable, as when the gold price rises sharply, such companies are often hit with special “windfall taxes”–something I have yet to see when it is the dollar which rises (hopefully nobody gets any ideas about that).

There is a lot of excitement in the gold space in the past few weeks. As we saw over a year ago, there has been a breakout of the gold x USDX from a sizeable triangle.

The above chart lends itself to a couple of investment theses. One is that a lot of people seem to make a New Year’s resolution to buy a lot of gold, as there is a notable move in the index at the beginning of each of the last three years.

With all the excitement of the last few weeks, it is time to take a closer look. We are at an important point in at least three important respects. At present, gold x USDX is at 1203.79. The peak in the index hit during the move last year was 1229.93. I would submit that the present peak has to exceed last year’s level, or else it is just another lower high.

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

Gold price over $1,200 has bullion buyers sure rally will continue

February 19, 2016

Gold price over $1,200 has bullion buyers sure rally will continue

Price of bullion is rising fast, especially when converted into Canadian currency

Gold has outperformed almost every single other asset class as an investment this year. Many backers of the precious metal say the rally is just getting started.

Gold has outperformed almost every single other asset class as an investment this year. Many backers of the precious metal say the rally is just getting started. (Frantzesco Kangaris/Bloomberg)

The price of an ounce of gold bullion has risen from a little over $1,000 US an ounce in late December to above $1,200 US Thursday, through a period when every single major stock index has fallen.

That’s part of a widespread flight to safety that has seen investors dump anything perceived as risky — stocks, oil and currencies like the Canadian dollar — and put their money into investments that are perceived to be safer.

That’s leading them right to gold, which is gaining ground after a multi-year slide.

“Investors are suddenly waking up to the risks in the market, pretty much like what happened in 2008,” said Robert Cohen, a portfolio manager at Scotiabank’s Dynamic Funds.

Mini-rally underway

“This time it’s more of a slower motion train wreck out there, so people are slowly digesting that information and systematically moving to safe havens like gold.”

Part of gold`s rally is due to a relative dearth of better options. That’s because central banks have cut interest rates so low that non-risky assets now can`t outperform inflation.

Bloomberg recently reported that almost a third of all the sovereign debt held by developed economies is negative yielding. That`s more than $7 trillion worth of assets guaranteed to lose money if held to maturity. Against a backdrop like that, it’s not hard to see gold’s appeal.

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

Gold Prices Disprove Krugman

August 7, 2015

Gold Prices Disprove Krugman

Recently Krugman wrote an op ed ridiculing Ron Paul titled, “The Old Man and the CPI.”(In case you don’t get the reference, he’s alluding to Hemingway.) Ron Paul has responded in this video, but I want to focus on Krugman’s complains about gold bugs:

Ron Paul has been making the same prediction year after year — in fact, he’s been making this prediction at least since 1981!— and has been wrong year after year. It’s hard to think of a doctrine that has been as thoroughly refuted by events as goldbug economics. For a while gold prices did go up, although not for the reasons the goldbugs thought, but now even that has gone into reverse. So why would anyone pay money for this guy’s analysis?

This has been quite the cause for celebration among progressive economists. (I won’t link to some of the lesser lights and reward them for their smugness.) And it’s true that a simple story relating the Fed’s balance sheet to the price of gold doesn’t work out very well:

In the chart above, total Fed assets (red line, left axis) are plotted against the price of gold (blue line, right axis). People who thought the price of gold would move in lockstep with the Fed’s QE programs were sitting pretty during QE and QE2, but then things turned around with QE3. It almost looks as if the commencement of QE3 (when the red line started stairclimbing up) was the catalyst for making gold plunge about $600 an ounce.

Nonetheless, suppose someone bought into the warnings of Ron Paul (and guys like me) when Bernanke began his unprecedented monetary inflation, back in late 2008 / early 2009, and began buying gold as a hedge. Depending on when exactly you got in, gold was selling for anywhere from $700 – $900 an ounce.

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

In Gold We Trust 2015

June 26, 2015

In Gold We Trust 2015

The Gold Standard of Gold Reports is Back

As every year around this time, our good friends Ronald Stoeferle and Mark Valek, the managers of the Incrementum Fund, have published their annual “In Gold We Trust” report, the extended version of which can be downloaded below.

Untitled-1

This year’s report is slightly longer than the 2014 report and discusses practically the entire breadth of gold-related topics, including highly instructive excursions into economic theory, monetary history and an extensive discussion of current political and economic trends.

For the past few years, gold investors certainly had little to write home about. In dollar terms, gold has essentially been going nowhere, with a slight downward bias. Actually, the past three years in the USD gold price look a bit like the past 18 years of “global warming”.

And yet, a lot depends on one’s home currency. Gold’s sideways trend in dollar terms actually represents a small victory, given the strong rally in the dollar in 2014. As a result, gold price charts actually look quite encouraging in terms of most non-dollar currencies. In fact, its performance in euro and yen terms over the past 18 months has been none too shabby.

Moreover, as Ronnie and Mark point out, gold has held up extremely well in a disinflationary environment in which many commodities such as crude oil have been obliterated. As our readers know, we believe that the underlying bid that is supporting gold is from people who are looking at the third huge asset bubble blown by loose monetary policy within the past two decades and are feeling increasingly queasy. It can’t hurt to hold some insurance – and sooner or later it will be essential.

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

CEO Of Rosneft Compares Oil Market Manipulation Which “Doesn’t Reflect Reality” To Gold Price Rigging

February 17, 2015

CEO Of Rosneft Compares Oil Market Manipulation Which “Doesn’t Reflect Reality” To Gold Price Rigging

It was a little under two years ago when, when oil and gas prices were both surging, Obama decided to punish the evil speculators whose fault the rise of oil was when he announced he would “give the Commodity Futures Trading Commission authority to increase the amount of money that a trader must put up to back a trading position. The administration officials said such authority could help limit disruptions in energy markets.” Needless to say, Obama did not punish the world’s central banks for flooding the globe with excess liquidity, which by definition would end up in less than “productive” ventures such as barrels of oil.

Over the weekend, it was the opposite, when instead of blaming speculators for soaring prices, none other than the CEO of Russia’s largest publicly-traded oil company, Rosneft, in not so many words, accused speculators of sending the price of oil plunging. Which is actually a narrow read of what he said, and one we don’t agree with.

What we most certainly do agree with, is his broader message, namely that financial speculation has made a mockery of physical supply and demand and “distorted oil markets, prices do not reflect reality. They are driven instead by financial speculation, which outweighs the real-life factors of supply and demand. Financial markets tend to produce economic bubbles, and those bubbles tend to burst. Remember the dotcom bust and the subprime mortgage crisis? Furthermore, they are prone to manipulation. We have not forgotten the rigging of the Libor interest rate benchmark and the gold price.”

Yes indeed, the CEO of an oil major just used gold rigging as an example of the same commodity manipulation that gold longs have been complaining about for years if not decades.

Here is Igor Sechin full Op-Ed in the FT:

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

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