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A surprising benefit to owning gold– especially now

By the year 41 BC, just a few years after the assassination of Julius Caesar, Rome was under the strict rule of a three-person dictatorship known as the Tresviri rei publicae constituendae.

Historians today refer to this committee as the Triumvirate, and it included a general named Aemilius Lepidus, as well as Gaius Octavius– who would eventually become Emperor Augustus.

But the leader of the group, at least at first, was Marcus Antonius, also known as Mark Antony.

Mark Antony was not especially popular. Many Romans rightfully suspected that Mark Antony had been involved in Caesar’s assassination. Plus he was sleeping with Caesar’s widow, Cleopatra.

But Antony’s power through the Triumvirate’s was absolute. He could raise taxes, establish new social and religious traditions, regulate daily life, seize private property, and even condemn people to death… all without any oversight or due process.

And he wasn’t shy about using this power to squash his opposition.

Antony put several of his political enemies to death– including the much beloved Cicero, who was trying to escape Rome when Antony’s goons killed him.

Antony also threatened to kill another Senator named Nonius. But unlike Cicero, Nonius managed to escape Rome… bring with him about $1.5 million worth of gold and jewels.

People in the ancient world knew that precious metals (and precious stones) were pretty much the only portable forms of wealth.

Human civilization at the time was completely agrarian, so most productive assets like land and crops were impossible to move. Gold was almost the singular option to move large sums of wealth, and it remained this way for centuries.

These days there are much better options. Many forms of wealth– financial securities, intellectual property, bank deposits, and cryptocurrency– are completely portable. So gold is no longer necessary as a way to move money abroad.

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

What You Need To Know About Physical Gold Supply And Demand

What You Need To Know About Physical Gold Supply And Demand

Much of the confusion regarding the gold price has to do with gold’s dual nature, being both a currency and a commodity. This confusion is removed when you realize that in terms of supply and demand dynamics gold trades more like a currency than a commodity.

The major difference between gold and perishable commodities is their stock-to-flow ratios, measured by the above ground stock divided by annual production. Gold has a very high stock-to-flow ratio, while commodities like wheat have a low stock-to-flow ratio.

Thousands of years ago people started using gold as money, because gold is immutable, easily divisible, and scarce. Gold is the most marketable commodity. Its long tradition as store of value means extremely little gold has been wasted over history. The vast majority of all the gold ever mined is still with us. Consequently, annual mine production adds about 1.7% to the above ground stock of gold.

Abobe_ground_gold_stock[1]Most above ground gold is held for monetary purposes. Jewelry is a store of value combined with esthetics and status.

At the time of writing the total above ground stock of gold is 205,000 tonnes and global mine output in 2021 accounted for 3,560 tonnes. The stock-to-flow ratio (STFR) is currently 58 (205,000 / 3,560). Gold’s high STFR and the fact that most above ground gold is held for monetary purposes is what makes it trade like a currency.

For a thorough understanding of gold’s price formation, let’s first have a look at supply and demand dynamics of a perishable commodity. Then we will discuss how this differs from the gold market.

Soft Commodity Supply and Demand Basics

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Russia, Ukraine Prove Gold Is Still the Best Safe Haven

Russia, Ukraine Prove Gold Is Still the Best Safe Haven

Image via Reuters/Ilya Naymushin

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Gold remains the best safe haven despite volatility, how geopolitical tensions are further compromising the bond market, and renowned money manager weighs in on new all-time highs for gold and silver.

Gold’s volatile week and why it matters little in the metal’s trajectory

Last week has been a volatility showcase that is rarely seen in the gold market. Russia’s invasion of Ukraine sent gold flying past its 2011 high and up to $1,976, the highest level in a year and a half. The very next day, gold posted considerable losses and ended Friday’s trading session around $1,890. This surge and immediate slump in prices frustrated and disappointed a lot of traders, but we should remember that, for most of us, buying gold is not a trade. It’s an investment.

Even so, there are many takeaways from these wild couple of days, and a few important reminders.

Until a few months ago, gold was rangebound between $1,750-$1,800. The difficulty of breaching the resistance was noted by many. Yet now, we are treating $1,890 as a kind of support. It reinforces the notion that gold is being pushed up by many factors, and that geopolitical tensions are just one of them (and a recent addition).

While gold can benefit from the kind of uncertainty we saw last week, it’s far from necessary. The so-called “geopolitical play” isn’t a necessary force for gold’s price to continue climbing. Wells Fargo highlighted that even central bank rate hikes probably won’t slow the metal’s move to $2,000 this year.

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

Central Banks Rush to Protect Themselves from Incoming Disaster

Central Banks Rush to Protect Themselves from Incoming Disaster

Image courtesy of European Central Bank

The times, they are a-changin’, as Bob Dylan tells us.

On the global economic stage, the U.S. isn’t the dominant economic superpower that it once was. This conclusion comes from the declining popularity of dollars among global central banks.

Around the world, national central banks stockpile “reserves” in order to back up the value of their own national currency. Here’s how Investopedia explains monetary reserves:

  • The currency, precious metals, and other assets held by a central bank or other monetary authority
  • Monetary reserves back up the value of national currencies by providing something of value that the currency can be exchanged or redeemed for by note holders and depositors
  • Reserves themselves can either be gold or denominated in a specific currency, such as the dollar or euro

In a sense, holding any asset as part of a nation’s monetary reserves is a vote of confidence in it (which is a big reason central banks own tons of gold bars).

Here’s the concern: according to International Monetary Fund (IMF) data, the U.S. dollar (USD) has been hobbling along at a 26-year low in terms of its share of global reserve currencies.

Wolf Richter explained the specifics: “The global share of US-dollar-denominated exchange reserves declined to 59.15% in the third quarter, from 59.23% in the second quarter.”

The world is losing faith in the dollar as a safe, stable store of value. Take a look at the history of the USD share of global reserve currencies since 1967 on the chart below.

Take special note of how high the share was in 1977 (85%) before inflation spiraled out of control. Then note how much of that share disappeared by 1991:

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Analyst Reveals His Gold Prediction Secret: It’s All About Oil

Analyst Reveals His Gold Prediction Secret: It Is All About Oil

© Public domain, via National Institute for Occupational Safety and Health

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Gold to rise alongside oil, buying the platinum’s dip, and the tale of a unique 54-pound gold brick.

Gold should follow oil as the latter skyrockets in price

It’s well-known that when gold soars, silver invariably follows. This kind of close correlation could soon be established between gold and another commodity that has been soaring recently: oil. Many might not be familiar with the gold-to-oil ratio, which tracks how many barrels of oil are necessary to buy an ounce of gold.

Here’s the summary of this argument:

The gold to oil ratio is an important indicator of the global economy’s health. Because gold and crude oil are both denominated in US dollars, they are strongly linked. That is because as the US dollar rises, commodities priced in USD fall, and vice versa. As the dollar drops, commodities generally go up.

Since fuel prices play a huge rule in inflation calculations (the Consumer Price Index is about 1/3 energy prices), higher oil prices means more inflation. Inflation drives gold-buying, and additional demand drives gold prices higher. Further, Kitco contributor Rick Mills argues, spikes in oil prices stunt economic growth. And economic pessimism is usually very good for gold.

A little bit more about the gold to oil ratio… Its historical average is 16, but it has been on quite a ride as of late. It hit a high of 91 last April due to the shutdowns, and has since returned to a more reasonable 25. It’s still way off its average, and a proper return would have to come from either falling oil prices or rising gold prices.

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

Peter Schiff: There Is No Ceiling on Inflation

Peter Schiff: There Is No Ceiling on Inflation

Gold closed out the week before Christmas above $1,800 an ounce, despite rising bond yields. The $1,800 level has been viewed as a ceiling for the price of gold. In his podcast, Peter Schiff said people need to start thinking of $1,800 as a floor. And he said they will once they realize there is no ceiling on inflation.

We got the personal income and spending data for November last week. Incomes grew at a slower pace than projected — 0.4%. Meanwhile, spending was up 0.6%. Obviously, if spending is outpacing income, the difference has to come from somewhere. It appears Americans are dipping into their savings to cope with rising prices. The savings rate declined to 6.9%. That is the lowest level since December 2017.

We also know that consumers are turning to debt to make ends meet, with credit card balances growing at a fast pace.

The savings rate shot up and Americans paid down their credit cards when the government showered them with stimulus. Peter said it appears the stimulus has run out.

Obviously, Americans have now exhausted that windfall. They’ve depleted that savings war-chest that was built up with stimulus money, and now it’s gone. And so, they’re having to go into debt.”

Consumers have a double problem. They’ve run out of savings and consumer prices keep going up. That is robbing people of their purchasing power.

That robber is the government, because it’s the government that’s creating the inflation that is causing the cost of living to go up. But the cost of living is going up, yet consumers have even less savings to afford that increase in the cost of living.”

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

Gold and silver prospects for 2022

Gold and silver prospects for 2022

It has been a disappointing year for profit-seeking precious metal investors, but for those few of us looking to accumulate gold and silver as the ultimate insurance against runaway inflation it has been an unexpected bonus.

After reviewing the current year to gain a perspective for 2022, this article summarises the outlook for the dollar, the euro, and their financial systems. The key issue is the interest rate outlook, and how that will impact financial markets, which are wholly unprepared for the consequences of the massive expansions of currency and credit over the last two years.

We look briefly at geopolitical factors and conclude that Presidents Putin and Xi have assessed President Biden and his administration to be fundamentally weak. Putin is now driving a wedge between the US and the UK on one side and the pusillanimous, disorganised EU nations on the other, using energy supplies and the massing of troops on the Ukrainian border as levers to apply pressure. Either the situation escalates to an invasion of Ukraine (unlikely) or America backs off under pressure from the EU. Meanwhile, China will continue to build its presence in the South China Sea and its global influence through its silk roads. Less appreciated is that China and Russia continue to accumulate gold and are ditching the dollar.

And finally, we look at silver, which is set to become the star performer against fiat currencies, driven by a combination of poor liquidity, ESG-driven industrial demand and investor realisation that its price has much catching up to do compared with lithium, uranium, and copper. The potential for a fiat currency collapse is thrown in for nothing.
2021 — That was the year that was

This year has been disappointing for precious metals investors. Figure 1 shows how gold and silver have performed since 31 December 2020.


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Inflation and Gold: What Gives?

In the last Supply and Demand update, we discussed some different theories which attempt to explain what causes the gold and silver prices to move. We mentioned the:

“…attempt to hold up a famous buyer of metal, while ignoring the thousands of not-famous sellers who sold the metal to said famous buyer.”

Since then, Ireland has bought gold for the first time in over a decade. And predictably, most voices in the gold community see this as a bullish sign.

By the way, we did not see any data about the prices paid on what dates, but the articles on December 1 mention a series of buys over a few months. Assuming a few means two, it looks like Ireland may have paid more than the current price.

The Different Theories on What Moves Gold and Silver Prices

Back to the common bullish view of Ireland’s wisdom, what of the opinions of the 64,300 people who sold their gold to Ireland (assuming the average seller sold an ounce)? Surely, these people believed the price will go down?

Famous and Anonymous Price Movers

There are two competing theories for how to interpret the conflicting views when one market participant is famous and the other is a bunch of anonymous people. One is the “famous buyer” theory, and the other is the “incompetent bureaucrat” theory. The latter was used to explain the sale of half of Britain’s gold between 1999 and 2002.

How could we have known that the UK government was foolish to sell back then, and the anonymous 12,699,250 buyers were right? Whereas today, the Irish bureaucrats are right, and the 64,300 sellers are wrong?

This is just a bias towards bullishness.

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

 

Evil is the Root of All Fiat Money

EVIL IS THE ROOT OF ALL FIAT MONEY

“So you think that money is the root of all evil. Have you ever asked what is the root of all money?”
-Ayn Rand

Money used to be a stable medium of exchange and a store of value but that was in the days when there were sound monetary principles, mostly backed by gold or silver.

Since 1913 and especially 1971 there is no discipline and no morals when it comes to the issuing of money as unlimited amounts of fake fiat money is printed at will.

In today’s fiat money world, there is only one answer to Rand’s question “What is the root of all money?”, namely:

“Evil is the root of all fiat money.”

– Egon von Greyerz

On the IMF (International Monetary Fund) website there is an article stating that “Money is something that holds its value” – Hmmm…..

The meeting of bankers and politicians on Jekyll Island in November 1910 laid the foundations for the Federal Reserve Bank. Three years later in 1913 the Fed was founded.

From that moment on, private bankers were running the US monetary system including the printing of money. But the British pound, backed by gold until 1931, was the global currency of choice until then.

CURRENCY SYSTEMS ARE EPHEMERAL

The Bretton Woods Agreement in 1944 established a new currency system based on the dollar. From that time, all major currencies were pegged to the US dollar and the dollar itself was pegged to gold at $35 per ounce. The dollar thus became the world’s reserve currency bolstered by big gold reserves. These were accumulated gradually from the early 1900s to the late 1940s. The US received payment in gold during WWII from its sales of arms and other supplies.

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Latest Treasure, Fed and BIS Reports Confirm: All Twisted Paths Lead to Gold

Latest Treasury, Fed and BIS Reports Confirm: All Twisted Paths Lead to Gold

 

Gold-O-Mania is Coming

GOLD-O-MANIA IS COMING 

Scylla and Charybdis

The buoyancy of markets in recent years has lulled central bank heads into a false conviction that they had saved the world after the 2006-9 Great Financial Crisis.

But central bankers continue to navigate like drunken sailors between the evil forces of Scylla and Charybdis as in Homer’s Odyssey.

Few of the bankers have understood that printing unlimited and worthless paper money will not allow them a pass the strait of Messina without major, or more likely catastrophic, damage to the world economy.

As exuberance continues to dominate intoxicated stock market investors, they haven’t yet noticed that all is not well on the perilous seas.

Still, most markets continue to respond positively to the printing press rather than to the underlying fundamentals.

Printing presses don’t create real value, instead they create bubbles full of worthless air. But sadly intoxicated investors confuse air, which is free and has no value, with real, intrinsic values.

To take an example, what is the intrinsic value of Bitcoin or BTC? How should BTC be valued?

Does the $60,000 price today reflect the real value or was the 10 cent price 10 years ago more correct?

BITCOINOMANIA

Are we today seeing Bitcoinomania similar to Tulipomania in the 1630s?

If not, can someone tell me at what price Bitcoin is fully and properly valued?

The Bitcoin aficionados will tell us that BTC is modern money and superior to any other currency. Well maybe they are right, but history must prove that. The 11 year history of Bitcoin is hardly sufficient to prove that it will fare better than any other money. We must remember that so far in history no currency has ever survived in its original form except for gold.

And the 5,000 year history of gold as money certainly makes it superior to all fiat currencies as well as cryptocurrencies.

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

Rising Fundamentals for Gold and Silver

The Different Theories on What Moves Gold and Silver Prices

For example, the Quantity Theory school attempts to relate the quantity (or change in quantity) of dollars, to each commodity. Generally, this theory predicts rising prices based on the reasoning of “more dollars chasing the same or fewer ounces of gold and silver.” The problem is that the new holders of these new dollars are not necessarily bidding up gold and silver (our thorough rebuttal to this is here).

The Conspiracy School thinks that there is a shadowy cabal, a price-manipulation cartel that decides what the gold and silver prices will be (our thorough rebuttal to this is in our Thoughtful Disagreement with Ted Butler).

Other schools attempt to compare mine production with industrial and jewelry demand. Or attempt to hold up a famous buyer of metal, while ignoring the thousands of not-famous sellers who sold the metal to said famous buyer. We should not make too much ado over a move of metal from one corner of the market to another (as we’ll discuss below).

Gold and Silver Fundamental Analysis:Contango, Backwardation and the Basis

None of these schools describes the fundamentals of the gold and silver markets, much less predicts the price moves. To look at the fundamentals, one must look at the gold and silver bases. The basis, to oversimplify slightly, is futures price – spot price. This shows the fundamentals, because a market in scarcity (as oil has been recently) has a lower price for future delivery than for immediate delivery. In other words, buyers prefer their oil now rather than later. And this preference is expressed as a higher price for delivery now, vs. later…

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Venezuelans Turn to Gold Nuggets as the Local Currency Implodes

Venezuelans Turn to Gold Nuggets as the Local Currency Implodes

nug

The Venezuelan government recently lopped off six zeros from its hyperinflating currency, the bolivar. The highest denomination currency note of 1 million bolivars, worth less than $0.25, was replaced by a one-bolivar note. At the same time, a 100-bolivar note, worth about $25.00, was introduced as the new highest denomination of the bolivar. The currency conversion was designed to spare the government the embarrassment of having to issue a 100-million bolivar note to enable people to purchases everyday items without having to carry around bundles of notes, given that the price of a loaf of bread had risen to 7 million old bolivars. Of course, the arbitrary scaling down of the denomination of the currency will not slow inflation, because the new currency notes can be printed just as cheaply as the old. The bolivar has already lost 73 percent of its value in 2021 alone and the IMF estimates the annual inflation rate will reach 5,500 percent by the end of 2021.

It is not surprising, then. that all but the poorest Venezuelans have abandoned the bolivar as a medium of exchange, let alone a store of value or unit of account. US dollars are the exchange medium of choice in Caracas and other large cities, while the Colombian peso dominates along the Colombian border, particularly in the regional city of San Cristobal. The Brazilian real is current along the southern border with Brazil and the euro and cryptocurrencies have also found niche uses.

What is wonderfully surprising is the spontaneous emergence of a pure gold currency in a remote region of southeastern Venezuela around the towns of Tumeremo and El Callao. The region abounds with precious metal ores and has a long history of luring prospectors and miners seeking their fortunes…

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

With Stagflation Ahead, How Will Gold Respond?

How Will Gold Price Perform During Stagflation?

Photo by Zlaťáky.cz

Analysts think stagflation might be the boost gold needs right now

The gold market continues to experience strange action, having most recently fallen to $1,720 only to bounce back to $1,760 by Friday’s time. It was a repeat of the week before, where strong selling pressure was met with a lot of buyers.

Kitco interviewed a number of market analysts for their take on the bigger economic picture and how gold will respond. Daniel Ghali, a commodity strategist at TD Securities, told Kitco that the headwinds gold seems to be facing come primarily in the form of the markets pricing in scenarios that may or may not happen:

What’s been driving gold these days is market pricing of Fed’s exit. Both the tapering and a potential rate hike on the horizon were being priced in. As a result of that, we’ve seen substantial repricing of the Treasury markets, and that has been primarily weighing on gold.

Even though it has been consistently pointed out that the Fed is poorly positioned for either tapering or rate hikes, the markets seem determined not to be surprised.

Ghali thinks the re-emergence of the threat of stagflation, a mixture of rising prices and a static or weakening economy, could be a wake-up call to market participants. Indeed, there seems to be little to support the idea of any kind of economic strength that would cause the Fed to act in a hawkish manner, and worries over inflation are by now ubiquitous.

Walsh Trading co-director Sean Lusk reiterated that gold ended the week with a bullish note:

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

Peter Schiff: Gold Will Explode; The Dollar Will Implode When the Markets Figure This Out

Peter Schiff: Gold Will Explode; The Dollar Will Implode When the Markets Figure This Out

Peter Schiff says gold will explode and the dollar will implode when the markets figure out the Fed is crying wolf when it comes to monetary tightening.

The Federal Reserve wrapped up another meeting without making any changes to its current extraordinary, loose, inflationary monetary policy. But the central bank did hint that it may start tapering its quantitative easing program “soon.”

That was enough for the markets. They continue to expect the Fed will tighten monetary policy and fight surging inflation. Gold sold off after the FOMC statement came out, dropping about $10.

The gold market has battled these headwinds for months. Every time the Fed hints at tightening, gold sells off. Every time inflation numbers come in hot, gold sells off. This doesn’t make sense. Why would investors sell an inflation hedge during an inflationary period? Because they honestly think the central bank can and will sweep in and successfully fight inflation.

But as we have said over and over again, the Fed cannot possibly tighten in this economic environment. In an interview on RT Boom Bust, Peter Schiff said even if the Fed does begin to taper, it will eventually reverse course and ultimately expand QE.

It knows the only foundation this bubble economy has is the Fed’s easy money policies. And I don’t think they have any actual plans to taper. And even if they just kind of feign the process by beginning it, they’ll never complete it because soon after they start the taper, again, if they even ever start, they’re going to have to reverse the process. Because ultimately, the Fed Fed is going to expand the QE program and start to buy a lot more government Treasuries and mortgage-backed securities in the future than it’s doing right now.”

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

Olduvai IV: Courage
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Olduvai II: Exodus
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