Home » Posts tagged 'precious metals' (Page 2)

Tag Archives: precious metals

TABLE OF CONTENTS:

Introduction The West is Losing its Gold Pricing Power The East on a Gold Buying Spree Conclusion

An important change has unfolded in the global gold market. The East has been driving up the gold price, predominantly in late 2022 and the first months of 2023, breaking the West’s long standing pricing power.

Gold bazaar in Turkey. Pricing power in the gold market has recently shifted to the East.

Until recently, Western institutional money was driving the price of gold in wholesale markets such as London, mainly based on real interest rates. Gold was bought when real rates fell and vice versa. However, from late 2022 until June 2023 gold was up 17% while real rates were more or less flat, and Western institutions were net sellers. Most likely, Eastern central banks, and Turkish and Chinese private demand, lifted the price of gold.

Introduction

For about ninety years, up until 2022, there was a pattern of above-ground gold moving from West to East and back, in sync with the gold price falling and rising. Western institutions set the price of gold and bought from the East in bull markets. In bear markets the West sold to the East. For more information read my article: The West–East Ebb and Flood of Gold Revisited.

If we zoom in on the period from 2006 through 2021 the main reason for Western institutions to buy or sell gold was the 10-year TIPS rate, which reflects the 10-year expected real interest rate (“real rate,” in short) of US government bonds.

The physical gold price was predominantly set in the London Bullion Market and to a lesser extent Switzerland. Gold trade in London can be divided in three categories:

…click on the above link to read the rest…

Hedging the End of Fiat

August 28, 2023

Hedging the End of Fiat

It is slowly coming clear that the fiat dollar’s hegemony is drawing to a close. That’s what the BRICS summit in Johannesburg is all about — rats, if you like, deserting the dollar’s ship. With the dollar’s backing being no more than a precarious faith in it, it is bound to be sold down by foreign holders. Being only fiat, it could even become valueless, threatening to take down the other western alliance fiat currencies as well.

How do you protect your paper wealth from this outcome? Some swear by bitcoin and others by gold.

This article looks at what is likely to emerge as a replacement currency system, and concludes that from practical and legal aspects, bitcoin and the entire cryptocurrency industry will fail with fiat, while mankind will return to gold, as it has always done in the past when state control over currency fails

Introduction

It is gradually dawning on market participants that the era of fiat currencies is drawing to a close. Monetarists, who first warned us of the inflationary consequences of the expansion of money and credit were also the first to warn us that the slowdown in monetary expansion would lead to recession, and since then we have seen broad money statistics flatline, with bank lending beginning to contract. This is interpreted by macroeconomists as the end of inflation, and the return to lower interest rates to stave off recession.

Unfortunately, this black-and-white interpretation of either inflation or recession but never both has been challenged by bond yields around the world which are rising to new highs. And the charts tell us that they are likely to go considerably higher. Consequently, conviction that inflation of producer and consumer prices will prove to be a temporary phenomenon is infected with doubt.

…click on the above link to read the rest…

Why the dollar is finished

July 23, 2023

Why the dollar is finished

Last week in my Goldmoney Insight, I analysed the rationale for a new gold backed trade settlement currency on the agenda of the BRICS summit in Johannesburg on 22—24 August. This article is about the consequences for the dollar-based fiat currency regime.

There is strong evidence that planning for this new trade settlement currency has been in the works for some time and has been properly considered. That being so, we are witnessing the initial step away from fiat to gold backed currencies. Without the burden of expensive welfare commitments, all the attendees in Johannesburg can back or tie their currency values to gold with less difficulty than our welfare-dependent nations. And it is now in their commercial interests to do so.

We have been brainwashed with Keynesian misconceptions and the state theory of money for so long that our statist establishments and market participants fail to see the logic of sound money, and the threat it presents to our own currencies and economies. But there is a precedent for this foolishness from John Law, the proto-Keynesian who bankrupted France in 1720. I explain the similarities. That experience, and why it led to the destruction of Law’s livre currency illustrates our own dilemma and its likely outcome.

It’s not just a comparison between fiat currency and gold. America’s financial position is dire, more so than is generally realised. The euro is additionally threatened with extinction because of flaws in the euro system, and the UK is already in a deeper credit crisis than most commentators understand.

Introduction

On 7 July, news leaked out and was then confirmed by Russian state media that the BRICS meeting in Johannesburg would have a proposal on the agenda for a new gold-backed currency to be used exclusively for trade settlement and commodity pricing…

…click on the above link to read the rest…

Modern Currency Policy: Nations Compete, Citizens Suffer

June 28, 2023

Modern Currency Policy: Nations Compete, Citizens Suffer

Below we consider how modern currency policy may not be so good for, well, the people…

This is why gold inevitably enters the conversation, for unlike policy makers, this old pet rock garners more trust.

Gold, of course, loves chaos, tanking currencies and cornered, debt-soaked nations, the numbers of which rise with each passing day.

We see currency debasement as mathematically and historically inevitable, though we have no clue (no one really does) as to the precise date, trigger or time the already teetering fiat money systems fall over the global debt cliff.

We only know that the $300+T cliff is here, and that nations are racing toward it at historical speed, with equally historical consequences.

Physical gold holders, however, enjoy a certain and calm advantage: They don’t need to be precise timers; simply patient owners.

As for more signs of the move toward weakening currencies in general, and a weakening USD in particular, let’s look at some more history and current facts.

Hot vs. Financial Wars: Today’s Evidence, Tomorrow’s Polices

As headlines change with daily Western biases regarding the military war in Ukraine, America’s financial war with the East (i.e., China) will continue into the next generation.

It’s no secret to me, or many others, moreover, that the war in the Ukraine is a US proxy war against Russia, in which Ukraine (and its citizens) are merely a convenient battering ram against Putin.

That’s just my opinion, but we’ve seen this “freedom” movie before. Many times, and in many countries, none of which ended with much “freedom” …

But as to financial wars, they too are just an extension of politics by another means, and with the growing waves of de-dollarization rising in speed and height following the predictable ripple of effects of the 2022 sanctions against Russia…

…click on the above link to read the rest…

If You Can’t Hold It, It’s Not Really Yours

March 14, 2023

If You Can’t Hold It, It’s Not Really Yours

The failure of Silicon Valley Bank and Signature Bank reminds us of a very important truth — if you can’t hold it in your hand, you don’t really own it.

That’s why it’s wise to hold at least some of your wealth in hard assets like gold and silver that are in your direct possession or at least stored in a secure, allocated, segregated, and insured storage facility.

The FDIC insures bank deposits up to $250,000. If you have more than that in a financial institution, you could lose everything above that limit if a bank fails.

Depositors at SVB and Signature Bank lucked out. The government has made provisions to cover uninsured deposits. But there’s no guarantee that will happen when the next bank goes under.

And even if you don’t have more than $250,000 in the bank, you could easily find yourself locked out of your account. Just last week, a computer glitch caused money in some Wells Fargo accounts to disappear.

There are also more nefarious reasons you could lose access to funds. The Nigerian central bank recently limited bank withdrawals in order to incentivize people to use its new central bank digital currency. In 2017, India faced cash shortages when the government declared that 1,000 and 500 rupee notes would no longer be valid with just a four-hour notice. And during its crisis, the Greek government shuttered banks and seized some bank deposits.

Most people assume “that can’t happen here” in the US. But as we saw over last week, the US banking system is vulnerable to collapse.

…click on the above link to read the rest…

Gold Or Silver?

January 21, 2023

Gold Or Silver?

You want both, obviously, but how much of each and why?

At first glance, gold and silver seem pretty fungible. They’re both hypnotically pretty. Their prices tend to rise and fall according to the same financial/political forces. They’re both seen as real money by a tiny (very wise) fraction of the population and as atavistic relics by the vast, ignorant majority. And – most important – they will both preserve their owners’ purchasing power when today’s fiat currencies evaporate like the fever dreams they always were.

So you definitely want some (and maybe a lot) of each. But gold and silver are not identical. They have different strengths and weaknesses in various “monetary reset” scenarios. And their prices don’t move in lockstep. Sometimes one is cheap relative to the other.

So how much of each should we own now, and how quickly should we plan to load up the truck? The answer is different for each person, but a few things are generally true.

The gold/silver ratio
The relative prices of gold and silver tend to fluctuate within a broad but discernable range. This gold/silver ratio is expressed as the number of ounces of silver it takes to buy an ounce of gold and tends to rise and fall along with the emotional state of precious metals investors. When those investors don’t foresee imminent inflation or other monetary disruptions, they gravitate towards gold’s safety and stability, and shy away from silver’s volatility. Gold’s price rises relative to silver’s, producing a high gold/silver ratio.

When investors expect rising inflation or other kinds of currency instability, they buy precious metals generally, but gravitate towards silver’s greater upside potential. Gold and silver both rise but the gold/silver ratio falls as buyers push silver’s price up more quickly than gold’s.

…click on the above link to read the rest…

Lawrence Lepard: Fighting the Broken Monetary System

November 30, 2022

Lawrence Lepard: Fighting the Broken Monetary System

Gold’s Climb Amidst Wisdom’s Decline

November 25, 2022

Gold’s Climb Amidst Wisdom’s Decline

As the latest headlines from the FTX implosion remind us yet again of a politicized and rigged market riddled with deception, gold’s climb becomes easier to foresee.

But first, a little philosophical musing…

Modern Policy: High Office, Low Wisdom

I have often referred to La Rochefoucauld’s maxim asserting the highest offices are rarely, if ever, held by the highest minds.

Nowhere has this been more apparent than among the halls of the physically impressive yet intellectually vacant Eccles Building on Constitution Ave in Washington DC, where a long string of Fed Chairs have been un-constitutionally distorting free market price discovery for over a century.

The media-ignored levels of open fraud and inflationary currency debasement which passes daily for monetary policy (namely monetizing trillions of sovereign debt with trillions of mouse-clicked Dollars) within the FOMC would be comical if not otherwise so tragic in its crippling ripple effect to the Main Street citizen.

From Greenspan to Powell, we have witnessed example after example of error after error and gaffe after gaffeon everything from mis-defining inflation narratives as “transitory” to re-defining a “recession” as non-recessionary.

And all this while the Fed (and its creative writing team at the BLS) simultaneously and deliberately fudges the math on everything from misreported CPI data to artificial U6 employment statistics.

Pondering the Philosophically Nobel Amidst the Administratively Dishonest

To any who have pondered the philosophical pathways (as well as elusive definition) of wisdom (from the ancient Greeks to the pre- and post-modern Europeans, romantic Emersonians, tortured Russians or enlightened Confucians), one common trait of wisdom through time, culture and language is the ability to admit, and then learn from, error–as any man’s journey is one riddled with countless opportunities for teachable error.

…click on the above link to read the rest…

Gold Establishment Supports Central Bank Secrecy instead of Exposing it

November 9, 2022

Gold Establishment Supports Central Bank Secrecy instead of Exposing it

This week, the World Gold Council (WGC), which is a gold market development organization representing 32 of the world’s gold mining companies, published the latest quarterly edition of it’s well-known “Gold Demand Trends” research publication.

In the latest edition, which is titled “Gold Demand Trends Q3 2022”, the World Gold Council claims that during Q3 2022, “central banks continued to accumulate gold, with purchases estimated at a quarterly record of nearly 400 tonnes.”

And for my Next Trick

According to the WGC:

“Global central bank purchases leapt to almost 400 tonnes in Q3 (+115% q-o-q). This is the largest single quarter of demand from this sector in our records back to 2000 and almost double the previous record of 241t in Q3 2018.

It also marks the eighth consecutive quarter of net purchases and lifts the y-t-d total to 673 tonnes, higher than any other full year total since 1967.”

Specifically, the World Gold Council claims that Q3 2022 central bank gold demand was 399.3 tonnes, which is a massive 340% higher than Q3 2021.

**The infamous 399.3 tonnes of gold in question – Source WGC GDT Q3 2022**

Sounding impressive enough, the world’s financial media not surprisingly ran with the soundbite, publishing articles with headlines such as “Record central bank buying lifts global gold demand, WGC says” and “Central bank gold purchases set an all-time high” and “Central banks are buying gold at the fastest pace in 55 years”.

Until that is, you read a bit further and see that the World Gold Council added a caveat for Q 3 2022 central bank gold demand, saying that for “Q3 net demand includes a substantial estimate for unreported purchases”.

**Rabbit out of a Hat – Central bank gold demand data?**

Wait, what was that? The Q3 gold buying from central banks includes “a substantial estimate for unreported purchases”?…

…click on the above link to read the rest…

A surprising benefit to owning gold– especially now

May 25, 2022

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

March 29, 2022

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.

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

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

Russia, Ukraine Prove Gold Is Still the Best Safe Haven

March 7, 2022

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

January 9, 2022

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:

U.S. Dollar share of global reserve currencies

Source

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

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

December 29, 2021

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

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

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

December 27, 2021

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…

Tag Archives: precious metals

Content

Post categories

Economic Links

Energy/Resource Links

Environmental Links

Geopolitical Links

Liberty Links

News Links

Other Links

Survival Skills

Post Archives by Category

Introduction

Post navigation

Latest Posts