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Gold Makes Its Grievances Heard
Gold Makes Its Grievances Heard
Gold is getting its revenge. Try as he might Mr. Tariff Man can’t dominate all the headlines all the time. Everyone once in a while something more important than the Trump Man-Baby Show should take center stage.
Gold has moved more than $50 in just under three trading sessions, blowing past near term resistance and, more importantly, reminding everyone just how quickly the reserve asset of the world economy can call bullshit on the proclamations and machinations of the morons who think they run the world.
You always know when you’re reaching the end of a bear market.
Last week I tweeted out:
I think we’re reaching Peak Gold Bearishness. If the dollar is an attractive safe-haven asset, which it isn’t, just a necessary evil after a decade of ZIRP, then of course this will weigh on gold. That doesn’t mean demand isn’t there.https://seekingalpha.com/news/3467311-gold-longer-attractive-complacent-market-says-wells-fargo-analyst#email_link …25:22 PM – May 28, 2019Twitter Ads info and privacyGold no longer attractive in complacent market, says Wells Fargo analystGold prices no longer look attractive based on the way the metal has reacted to recent economic events, says Wells Fargo’s John LaForge, noting that gold’s complacent reaction to market volatility isseekingalpha.com
When an analyst at Wells is looking at the day-to-day ticker of gold looking for silly and binary safe haven arguments to warn people off of gold, I know we’re nearly there.
This isn’t a complacent market. In fact, as I’ve pointed out in the past, it’s an incredibly volatile one.
You don’t have to be a whiz with numbers, or worse a quant working for a central bank, to see the differences here.
And the reason for this massive increase in volatility across all asset classes is Trump’s insistence on tariffs being the cure all for what ails America’s trade ‘imbalances.’
…click on the above link to read the rest of the article…
From Gold To Nothing: How 1971 Changed Everything In The Economy
From Gold To Nothing: How 1971 Changed Everything In The Economy
The monetary system is a major component of the whole economic system. Despite that, today we take it for granted and don’t even ask ourselves how it works and if it is the best solution available or the correct way to manage things.
Even though it appears to be stable, history shows that monetary systems changed periodically in the last century (20–30 years on average).
The main difference between our current monetary system and previous monetary system is that today it is entirely based on FIAT Currency, in contrast to older monetary systems that were backed by gold.
That means that what we call money is a government-issued currency that has zero intrinsic value and is not backed by anything.
From 1971, this kind of system allows central banks to literally control the economy and opened a new chapter in the world monetary system.
In this article, I am going to briefly explain why 1971 changed everythingand what are potential consequences of such a decision.
Since 1971 the world runs on FIAT currencies that are not gold-backed in any way. This changes everything.
Before digging into it, we have to review some history.
The Bretton Woods System and It’s Collapse
Towards the end of the World War II, peace was a real concern and it was clear that the world needed a new monetary system able to support the economy.
In fact, one of the major reason that led to World War II was the failure in dealing with economic problems after World War I.
Why It Was Needed And How It Worked
The Bretton Woods agreement was signed at a conference between allied nations in 1944.
…click on the above link to read the rest of the article…
Central banks are buying gold at the fastest pace in six years
Central banks are buying gold at the fastest pace in six years
Earlier this month the World Gold Council published its quarterly report– and it shows that central banks and foreign governments from around the world are buying up gold at their fastest pace in six years.
This is pretty big news, and it says a LOT about the future of the dollar.
Remember, central banks and foreign governments hold literally TRILLIONS of dollars of reserves… and traditionally they do this by buying US government debt.
It sounds strange, but to big institutions, banks, etc., US government debt is equivalent to cash. They use it as a form of money.
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More importantly, they hold US dollars because that’s the global standard: the US dollar has been the world’s primary international reserve currency for seventy five years.
So US debt is extremely liquid. In fact, the $22 trillion US debt market is the biggest and most liquid market in the world.
But foreign governments have started breaking with the tradition of buying treasuries.
As the World Gold Council’s report showed us, foreign governments and central banks have been buying a LOT more gold than in previous years.
Net gold purchases in Q1/2019 among foreign governments and central banks was nearly 70% greater than Q1/2018… and the highest rate of first quarter purchases in six years.
The Chinese in particular, have been stockpiling gold faster than ever, while at the same time, Chinese ownership of US treasuries as a percentage of total holdings has been gradually declining over the past years.
And it’s not just China.
…click on the above link to read the rest of the article…
Golden Straws In The Wind
Golden Straws In The Wind
Life in the world of gold bullion is full of mysteries. Each mystery is like a straw in the wind, which individually means little, but tempting us to speculate there’s a greater meaning behind it all. Yes, there is a far greater game in play, taking Kipling’s aphorism to a higher level.
One of those straws is Russia’s continuing accumulation of gold reserves. Financial pundits tell us that this is to avoid being beholden to the US dollar, and undoubtedly there is truth in it. But why gold? Here, the pundits are silent. There is an answer, and that is Russia understands in principal the virtues of sound money relative to possession of another country’s paper promises. Hence, they sell dollars and buy gold.
But Russia is now going a step further. Izvestia reported the Russian Finance Ministry is considering abolition of VAT on private purchases of gold bullion.[i] We read that this could generate private Russian annual demand of between fifty and a hundred tonnes. More importantly, it paves the way for gold to circulate in Russia as money.
We should put ourselves in Russia’s shoes to find out why this may be important. Russia is the largest exporter of energy, including gas, pushing Saudi Arabia into second place. This means she is also the largest acquirer of fiat currency for energy. That’s fine if you like fiat currencies, but if you suspect them, then you either turn them into physical assets, such as infrastructure and military hardware, or gold. Russia does both.
Then there is China. China has started announcing monthly additions to her gold reserves. China is up to her neck in dollars, and the relatively minor monthly additions to her reserves really make little difference. However, the link between the gold exchanges in Moscow and Shanghai strongly suggest Russia and China are coordinating gold dealing activities.
…click on the above link to read the rest of the article…
Your Move, Gold Critics: Please Explain What Money Is
Your Move, Gold Critics: Please Explain What Money Is
Owners of Bitcoin have endured a wild ride in recent years. While the coin could fetch $900 when 2017 began, one year later its value briefly moved above $20,000. At present, one Bitcoin exchanges for roughly $5,000.
The coin’s substantial volatility ably explains why, at least for now, it’s not seen as a worthy substitute for the dollar. It more realistically exhibits the floating dollar’s worst qualities, many times over.
Indeed, imagine entering into a transaction in which payment would be made in the cryptocurrency. I’ll pay you 10 Bitcoin to remodel my kitchen. Ok, but which Bitcoin? The 2017 version, or the much more valuable coin of 2018? How about I pay you 10 Bitcoin now, and 10 in April of 2020 to add on a room to my house? Assuming continued volatility, someone’s going to be very unhappy next April.
So while Bitcoin fails in the present as a dollar replacement, its volatility instructs. Who among us would comfortably enter into a transaction in which the medium of exchange facilitating the transaction is bouncing around in the most erratic of ways? The question is rhetorical.
And it’s one that helps explain the ongoing desire among some monetary thinkers to relink currencies to gold. Gold didn’t emerge as the primary definer of money by coincidence, but instead because its value is so remarkably stable. The latter is an effect of gold’s unique stock/flow characteristics. While roughly 2,000 metric tons of the yellow metal are mined each year, there are already around 200,000 metric tons of gold above ground. Gold is the “constant” simply because any sales or discoveries of it are highly unlikely to alter its price in material fashion.
…click on the above link to read the rest of the article…
Fear of Inflation & Sterilization
Fear of Inflation & Sterilization
QUESTION: Mr. Armstrong; you were friends with Milton Friedman. Do you agree with his view that the Great Depression was caused in part by the Fed refusing to expand the money supply? Isn’t Quantitative Easing expanding the money supply yet it too has failed to create inflation. Would you comment on this paradox?
Thank you for your thoughtful insight.
P
ANSWER: Yes, this certainly appears to be a paradox. This results from the outdated theory of economics which completely fails to grasp the full scope of the economy and how it functions. This same mistake is leading many down the path of MMT (Modern Monetary Theory) which assumes we can just print without end and Quantitative Easing proves there will be no inflation. They are ignoring the clash between fiscal policy carried out by the government and monetary policy in the hand of the central banks. This is a major confrontation where central banks have expanded the money supply to “stimulate” inflation. Governments are obsessed with enforcing laws against tax evasion and it is destroying the world economy and creating massive deflation.
In 1920, Britain legislated a return to the gold standard at the prewar parity to take effect at the end of a five-year period. That took place in 1925. Britain based its decision in part on the assumption that gold flows to the United States would raise price levels in Britain and limit the domestic deflation needed to reestablish the pre-war parity. In fact, the United States sterilized gold inflows to prevent a rise in domestic prices. In the 1920s, the Federal Reserve held almost twice the amount of gold required to back its note issue. Britain then had to deflate to return to gold at the pre-war parity. Milton saw that the Fed failed to monetize the gold inflows, fearing it would lead to inflation.
…click on the above link to read the rest of the article…
Here’s why the Federal Reserve rejected the safest bank in America
Here’s why the Federal Reserve rejected the safest bank in America
In the spring of 1692, an energetic young Scotsman named John Campbell started a new business in central London.
Campbell was a goldsmith, and his business sold jewelry and other crafted metals like plates and silverware.
But Campbell’s new company had another business line as well: banking. And the company he started eventually became Coutts & Co., a bank that still exists today in the UK.
Since the dawn of the Bronze Age thousands of years ago, metal workers (‘smiths’, from the word ‘smite’– to strike) were prominent, highly valued members of society.
Smiths were instrumental in construction, architecture, science, warfare, and art.
And they also provided some of the world’s earliest banking services.
For most of human history, money was metal– primarily gold and silver. And people knew that storing large quantities of gold and silver in their homes made their wealth prone to theft.
Goldsmiths already had tight security in their shops due to their significant inventories of precious metals.
So it was commonplace for other residents in town to store their own gold with the local smith, piggybacking on his security, in exchange for a nominal fee.
This was banking in its most traditional form: customer paid a fee to store wealth at a goldsmith’s shop.
By the time John Campbell set up his bank in the late 1600s, however, times had changed. Goldsmith-bankers had begun making loans… keeping only a small portion of their customers’ gold on reserve in the vault, and loaning out the rest at interest.
This is essentially the same model of banking that still exists today.
Giant institutions control trillions of dollars that we depositors dutifully provide to them.
…click on the above link to read the rest of the article…
One Day the Volcano Will Erupt – Precious Metals Supply and Demand
One Day the Volcano Will Erupt – Precious Metals Supply and Demand
Keynesian Rot
The prices of the monetary metals rose $11 and ¢27 last week. The supply and demand fundamentals is the shortest section of this Report [ed note: we are excerpting the supply-demand section for Acting Man – readers interested in the other part of the report can find it here].
The eruption of Mt. St. Helens in 1980 – prior to the cataclysmic event, numerous small earth quakes and steam venting from fissures warned that something big was about to happen, even if no-one suspected the actual magnitude of the outbreak. The eruption was so powerful that a fairly large chunk of the mountain went missing in the proceedings. There are always accidents waiting to happen out there somewhere, and the modern-day fiat money system is clearly one of them. There will be warning signals before it keels over – in fact, the final cataclysm usually happens fairly quickly, while the period that leads up to it tends to be a drawn-out affair. [PT]
This is because the actual data can be seen in a simple chart for each metal. If central banks were really buying mass quantities of gold in anticipation of a new gold-based global monetary system, or India were really importing all marketable gold, or the mainstream American public were desperately trading its dollars for gold, or China were really buying up all the physical gold to prepare for a gold-backed yuan (while selling paper gold, natch)…
…then the data would show this.
Mount Saint Helens was quiescent for a long time, until all of a sudden in 1980 it went wild with activity. There was an earthquake, then steam venting, then the side of the mountain began to bulge, then a second earthquake triggered that side to collapse. Then the volcano finally exploded.
…click on the above link to read the rest of the article…
The Trend Continues: Romania Introduces a Bill to Repatriate its Gold Reserves
The Trend Continues: Romania Introduces a Bill to Repatriate its Gold Reserves
The trend is accelerating, just as I predicted it would.
Countries all over the globe are growing anxious, as the geopolitical atmosphere of the world continues to heat up, threatening to hit a boiling point.
Central bankers and government officials who see the world through an unfiltered, non-rose-tinted lens are well aware of this, and are beginning to take the necessary actions required to protect themselves and their homelands.
China, Russia, India, Poland and Turkey are just a few of the countries that have made no secret of their plans for long-term accumulation of precious metals, in a hope to diversify their national reserves out of the U.S. dollar and into hard money.
I, along with many others in the precious metals community, believe that the reason for this is that they can see the writing on the wall and are well aware of what is coming down the road.
They know that the U.S. dollar will not be the reserve currency of the world forever, and from their actions, I believe they know that precious metals will once again take center stage, playing a vital role in the next successor to the throne.
Joining the growing ranks of concerned countries is Romania, a holder of 103.7 tonnes of gold. Or rather, a country that believes they hold 103.7 tons of gold.
As I have stated numerous times, if you don’t hold it, you don’t truly own it.
Physical possession of a significant portion of your precious metals is vital in these times of growing unrest.
Waking up to this reality, Chamber of Deputies President Liviu Dragnea and Senator Serban Nicolae of Romania have proposed a bill to force the National Bank to repatriate 95 percent of Romania’s gold reserves, which are largely held abroad.
…click on the above link to read the rest of the article…
Gold Rising Because it Protects Against Government – Martin Armstrong
Gold Rising Because it Protects Against Government – Martin Armstrong
Legendary geopolitical and financial analyst Martin Armstrong continues to be bullish on America. Armstrong contends, “The U.S. economy has been the only thing holding up the world. People do not realize what is the difference between the U.S. vs. the rest of the world? China respects it, and they are starting to move in the proper direction. . . . The United States has the biggest consumer market, which is why everybody wants to sell here. China now realizes the mistake. China is going to turn inward and try and develop its own consumer market.”
Things are not looking good for the long term viability of the euro. Armstrong says, “Because Europe is a basket case, the likelihood of the euro going to completely fall apart is actually quite high. What did the euro do? It basically replaced 28 currencies. So, the diversity has been shot.”
Armstrong also points out, “Gold has been rallying right along with the U.S. stock market. This is what I said all along. Eventually, towards the end, they have to align. Why? Because at that stage of the game, it’s us against government. So, tangible assets rise.”
Armstrong says global debt is what you need to watch. Armstrong further contends, “Debt is a real problem. . . . People need to realize the problem is in government and not in the private sector. Interest rates will start to rise, and that is what we are looking for going out of the year 2020. You also have all this crazy stuff going on in Congress. . . . Real hatred has developed. It’s incredible. Before, if whoever you voted for lost, you accepted it and moved on. I mean people don’t accept it anymore. So, what is this stuff ‘Trump is not my President’?
…click on the above link to read the rest of the article…
The Utterly Unbelievable Scale of U.S. Debt Right Now
The Utterly Unbelievable Scale of U.S. Debt Right Now
– Last week, the United States national debt ticked above US$22 trillion for the first time, an amount equivalent to $67,000 per U.S. citizen
– The U.S. federal government owes more money than any other institution in the history of human civilization and it’s just getting worse
– Below, a few factoids about just how eye-wateringly, bone-chillingly large the U.S. debt has become
– The U.S. debt is now higher than the combined market value of the Fortune 500 and just with the money it spends on interest, the U.S. could run Canada or Mexico
– Debt from one Trump term could pay for another WWII and all the gold ever mined would only pay off the debt accumulated under Obama
– All the gold in the world mined since the dawn of time adds to about 190,040 tonnes or 6.7 billion ounces. At the current per-ounce price of about $1,300, the world’s goal hoard worth over $8.5 trillion would be not enough to pay off the U.S. debt accumulated between 2009 and 2016
by Tristan Hopper in National Post
Gold bars worth a small fortune that would only cover a few hours’ worth of U.S. debt accumulation
U.S. debt is now higher than the combined market value of the Fortune 500
The Fortune 500 list includes all the recognizable titans of American business from Apple to Amazon to Exxon-Mobil to the list’s ranking 500th spot, the uniform and laundry company Cintas. Taken together, they basically constitute every major consumer, media, industrial and entertainment product in the United States. If you are the average westerner, the Fortune 500 is responsible for most of your wardrobe, your diet, your home and your leisure pursuits.
…click on the above link to read the rest of the article…
Central Banks Buy Gold Bullion Hand Over Fist, Most Purchased Since 1967
Central Banks Buy Gold Bullion Hand Over Fist, Most Purchased Since 1967
Cryptocurrencies have been crushed, the stock market looks poised for a slowdown and the world stands on the edge of a cliff, as geopolitical tensions flare across the globe, waiting for a spark to ignite the flames.
The smart money knows it, and they are starting to move. This includes Central Bankers, which are buying the king of metals, gold bullion, hand over fist.
As I stated at the start of this year, I believe 2019 will see significant accumulation in the precious metals market, which will finally break out of the horrible sideways trading pattern we have been in for years.
As many of you know, gold has been stuck in an abysmal trading pattern, moving slightly above $1300 only to be crushed back down toward the $1100 mark.
This comes in spite of the fact that we now face the most geopolitical uncertainty we have seen in decades.
However, not everyone has been unaware of these dangers.
Central Banks spent 2018 accumulating precious metals in a monumental way, increasing their holdings by the most in one year since 1967. Quietly accumulating while the rest of the financial world happily ignores the alarm bells going off all around them.
Recently, the World Gold Council stated that the world consumed 4,345.1 tonnes of gold throughout 2018, up from 4,159.9 tonnes in 2017.
The chief driver of this move higher was Central Banks, which bought 651.5 tonnes throughout 2018, a staggering 74 percent increase over 2017, and as previously stated, the largest increase since 1967.
Sadly, Western Central Bankers are still asleep at the wheel and were not the main contributors to this increase.
As I have been reporting on for years, countries such as Russia, India, China, Poland, Kazakhstan and Turkey were the main purchasers of gold bullion throughout 2018.
…click on the above link to read the rest of the article…
Italy’s Gold enters the Political Fray. But who really owns it?
Italy’s Gold enters the Political Fray. But who really owns it?
Italy’s unpredictable political situation continues to throw up surprises with a controversial claim in national newspaper La Stampa this week that the country’s coalition government wants to sell part of Italy’s gold reserves to cover spending plans and to prevent the need to increase VAT in a forthcoming Italian budget.
While the claims by La Stampa are not really based on anything new, they still managed to cause an international media frenzy as they came a few days after Italy’s governing coalition launched verbal attacks on Italy’s central bankers and financial regulators.
Note that Italy claims to be the world’s third largest sovereign gold holder behind the US and Germany, with claimed monetary gold holdings of 2451.8 tonnes. Interestingly, unlike most countries where sovereign gold is owned by the State but managed by the country’s central bank, the Italian gold is officially owned by Italy’s central bank, Banca d’Italia (Bank of Italy), and not owned by the Italian State.
The Banca d’Italia furthermore claims that 1199.4 tonnes of the gold (or roughly half), is stored in the Bank’s gold vaults under it’s Palazzo Koch headquarters building in Rome, with most of the other half stored in the vaults of the Federal Reserve Bank of New York (FRBNY), and a small balance kept the Bank of England in London, and in an account of the Bank for International Settlements (BIS) in the vaults of the Swiss National Bank (SNB) in Berne, Switzerland. But without any documentary evidence or independent auditing or verification of any of its gold, especially the foreign held gold, these claims are impossible to verify.
…click on the above link to read the rest of the article…
Fables, Fairy Tales and the Gold Standard
Fables, Fairy Tales and the Gold Standard
President Trump often tweets about the strength and health of the U.S. economy, and two weeks ago, he tweeted that the U.S. economy was the Gold Standard throughout the World.
The fact that Trump capitalized the words “Gold Standard” may have piqued the interest of those who believe in sound money principles. Trump has in fact spoken in the past about a return to the Gold Standard, and some of the issues surrounding this are summarized in an October 2018 article: Trump Puts Gold Standard On The Table.
A simple interpretation of Trump’s tweet means that the U.S. economy is the envy of the world, the benchmark by which other economies measure themselves.
Nevertheless, Trump’s tweet can be viewed as valid in another way, whether this interpretation was intended or not. When the U.S. dollar was de-linked from the value of gold in 1971, the U.S. dollar and its economy became the Gold Standard. The U.S. dollar is the primary reserve currency throughout the world, and therefore almost everything bought or sold in the world has a reference point to the value of the dollar.
The value of the dollar is related to the health of the U.S. economy, and the U.S. economy, absent a “real” gold standard, IS the monetary standard throughout the world.
We are not suggesting that Trump will help navigate the world back to a Gold Standard, and any political, strategic or tactical discussions on that point are above our pay grade. In fact, we prefer to summarize our understanding of the gold market by way of two children’s stories.
Fables and Fairy Tales
…click on the above link to read the rest of the article…
