Tag Archives: Gold

The Dollar’s Final Crash Down A Golden Matterhorn, by Egon von Greyerz

Produce enough of anything and you can drive i to worthlessness. That’s particularly easy with fiat currencies, and governments have done it throughout history. From Egon von Greyerz at goldswitzerland.com:

Was Richard Nixon a real gold friend who understood the futility of tying a weakening dollar to gold which is the only currency that has survived in history?

So was Nixon actually the instigator of the movement to FreeGold?

I doubt it. He was just another desperate leader who was running out of real money and needed to create unlimited amounts of fiat money. Although his fatal decision to close the gold window was clearly the beginning of the end of the current monetary system.

But although the decision was fatal, Nixon was clearly not personally responsible. What the world saw in August 1971 was just another desperate leader who realised that he couldn’t stick to the monetary or fiscal disciplines necessary to maintain a sound economy and a sound currency.

In history, Nixon should be seen as the rule rather than the exception. Since every currency has been slaughtered throughout history, one particular leader will also be required to be the executor.

So in 1971, history had elected Tricky Dick to be the inevitable destroyer of the dollar.

Nixon's lies
I don’t quite know what the definition is of “suspend temporarily” but 50 years seems to be pushing the limit!

And as regards the strength of dollar goes, we all know what happened to the “strength of the currency”! Please see the illustration of the dollar collapse further on in the article.

Continue reading→

Gold & Basel III’s Trillion-Dollar Question, by Matthew Piepenberg

As banks shift their paper and physical gold positions after Basel III’s effective date, what will be the effect on the gold price? From Matthew Piepenberg at goldswitzerland.com:

June 28th has come and gone, which means the much-anticipated Basel III “macro prudential regulation” to make so-called “safe” banks “safer” has officially kicked off in the European Union (as it will on July 1 for U.S. banks and January 1, 2022 for UK banks).

The trillion-dollar question for gold investors is now obvious: What next?

The short answer is:  Gold will rise, but don’t expect a straight line or zero discomfort/volatility.

The longer answer, however, deserves a bit more context, unpacking and plain-speak; so, let’s roll up our sleeves and start from the beginning.

What is Basel III?

Basel III is essentially a long-delayed, controversial and internationally agreed-upon banking regulation which now, among other things, requires commercial banks to change their “net stable funding ratio” for gold held as a tier 1 asset on their balance sheet from 50% to 85% to make banks “stronger and more resilient in times of crisis.”

(Hidden premise: Are the BIS and its regulated banks worried about another “crisis”?)

Translated into non-banker English, for each asset a bank buys, they have to insure “stable funding” (as opposed to repo money, demand deposits or excess leverage) to buy/lever more stuff…

Translated even more simply, banks can’t use as much “maturity transformation” or “duration mismatches”—i.e., leverage and short-term money for long-term speculation (arbitrage)—to buy and sell precious metals, among other things.

Basel III, in essence, is requiring banks to engage in longer (rather than shorter-term) lending, and in a nutshell, this makes it far more expensive for banks to own “unallocated” gold, as most of the gold they owned in the past was just tier 3 paperlevered to the moon.

Getting back to more banker-speak, Basel III is an open move that requires banks to de-lever (slow down) their trade in paper gold.

Continue reading→

Why Gold? by Adrian Day

Through history, the reasons to own gold haven’t changed much, and it’s usually been a good idea. From Adrian Day at internationalman.com:

At a time when many investors are calling gold “a relic,” and many younger ones, in particular, are buying Bitcoin instead, it is worth going back to fundamentals and looking at gold’s role as money over thousands of years. I am not here to attack Bitcoin. Rather, I am here to defend gold.

Gold has an advantage that Bitcoin does not have, that Bitcoin inherently cannot have, which is its age. Gold has survived and performed its job for literally thousands of years. We shall have to wait a little longer to say that Bitcoin is as good as gold.

Nearly two-and-a-half millennia ago, Aristotle wrote his famous treatise on money. Money serves as a medium of exchange, a store of value, and a unit of account. In his treatise, Aristotle listed the characteristics of ideal money.

Money should be divisible, which is why we do not use fine art as money. It should be fungible, which is why we do not use real estate as money. It should be rare, which is why we do not use iron ore as money, and so on. Aristotle concluded that only gold has all these attributes and is the ideal form of money.

Continue reading→

The Geopolitics of Gold, by Alasdair Macleod

If the world goes gold, and there’s every reason to think it will, sooner or later, the Chinese will be sitting in the catbird seat. From Alasdair Macleod at goldmoney.com:

A number of events are coming together which are set to push gold prices higher. Besides a combination of continuing inflationary policies and massive future budget deficits undermining the dollar, by closing down derivative market activities new Basel 3 regulations appear set to deflect some demand into physical metals. Furthermore, liquidity in gold markets will contract, potentially making prices more volatile

This article looks at how these developments will affect the undeclared but very real financial and propaganda war being waged by America against China.

China is moving on, enlarging its own middle class which will benefit from a stronger yuan, much as the German and Japanese economies did between 1970—2000. Having dominated economic developments until now, the export trade is becoming less important. With this dependency lessening, the argument in favour of a coup de grace against the dollar by China revealing its true gold position is increasing.

In this article, China’s undeclared gold reserves are quantified, and we can be confident that China has at least 20,000 tonnes “off balance sheet”. For China to openly declare her gold position always was her final, almost nuclear option in the financial war waged against her by America. Unwittingly, by diverting demand from paper gold to physical bullion, Basel 3 may have brought forward that day by default.

Introduction

The imminent introduction of Basel 3’s net stable funding ratio is going to have a major impact on the global banking system, and it is a reasonable assumption that government agencies concerned with geopolitical implications will be considering it from that point of view. And nowhere is this more important than for gold, and by implication the dollar’s unrivalled hegemony.

Continue reading→

Russia’s $186 Billion Sovereign Wealth Fund Dumps All Dollar Assets, by Tyler Durden

The Russians know a bad deal when they see one. From Tyler Durden at zerohedge.com:

Following a series of corporate cyberattacks that American intelligence agencies have blamed on Russian actors, Russia’s sovereign wealth fund (officially the National Wellbeing Fund) has decided to dump all of its dollars and dollar-denominated assets in favor of those denominated in euros, yuan – or simply buying precious metals like gold, which Russia’s central bank has increasingly favored for its own reserves.

Finance Minister Anton Siluanov

Finance Minister Anton Siluanov made the announcement Thursday morning at the annual St. Petersburg International Economic Forum.

“We can make this change rather quickly, within a month,” Siluanov told reporters Thursday.

He explained that the Kremlin is moving to reduce exposure to US assets as President Biden threatens more economic sanctions against Russia following the latest ransomware attacks. The transfer will affect $119 billion in liquid assets, Bloomberg reported, but the sales will largely be executed through the Russian Central bank and its massive reserves, limiting the market impact and reducing visibility on what exactly the sovereign wealth fund will be buying.

“The central bank can make these changes to the Wellbeing Fund without resorting to market operations,” said Sofya Donets, economist at Renaissance Capital in Moscow. “This in some sense a technical thing.”

Jordan Rochester, currency strategist at Nomura International PLC, said, “This is a transfer of euros from the central bank to the wealth fund, we’ll then see the central bank the holder of the USDs and it’s up to them to manage it. No initial market impact.”

The news isn’t a complete surprise: The Bank of Russia, Russia’s central bank, has steadily reduced its dollar holdings over the last few years amid increasing sanctions pressure from the US and Europe. That trend continued through President Trump’s term.

Just a few days ago, we reported that the Russian parliament had just authorized the sovereign wealth fund to buy gold through the central bank. However, the central bank reports its holdings with a six-month lag, making it impossible to determine its current holdings.

Continue reading→

Gold’s Middle Finger to Lying Currencies, by Matthew Piepenburg

Fiat currencies are crashing to their intrinsic value (zero) and gold will pick up the pieces. From Matthew Piepenburg at goldswitzerland.com:

Sensationalism, like central bankers and policy makers, has many faces, views and voices.

This may explain why so many want to hold their ears, hug their knees and beg the heavens for a beacon of guiding light amidst a 24/7 fog of info-cycle pablum masquerading as information.

Facts in a Fog of Sensationalism

With so many opposing ideas, movements, policies, parties, and personalities buzzing galvanically for attention, dollars or votes (in a world rightly or wrongly brought to its pandemic-accelerated knees), it’s becoming increasingly difficult to believe anything or anyone.

And this is likely because just about everything and everyone (from defective Fed chairmen to defecting royal princes and politicized prompt readers) has become, well—sensationalized.

Yet perhaps perspectives like mine are no exception. The title of my 2020 best-selling Amazon book on global markets, “Rigged to Fail,” sure sounds sensational, doesn’t it?

Was it just another doom & gloom scare-book with a catchy title for profitable “info-tainment”? Just another sensational voice joining the choir of omni-present crazy?

I’ll admit it’s a fair question.

But what if…

What if… these markets truly are rigged, and what if they (and economies) truly do fail? What if the evidence, rather than just the title, of that multi-chaptered observation is objective rather than, well…sensational?

Cynics (and I’m one of them) could say I’m plugging a book or exploiting a meme.

Fair enough.

But facts are stubborn things, and as Goethe wrote long ago: Some books are meant to show off what an author thinks he knows, while others (thankfully) are simply meant to be useful.

Continue reading→

Suffering a sea-change, by Alasdair Macleod

When interest rates really start to reflect the ongoing monetary inflation, it will blow the prices of most financial assets out of the water. From Alasdair Macleod at goldmoney.com:

here is an established theoretical relationship between bonds and equities which provides a framework for the future performance of financial assets. It would be a mistake to ignore it, ahead of the forthcoming rise in global interest rates.

Price inflation is roaring, and so far, central banks are in denial. But it is increasingly difficult to see how monetary policy planners can extend the suppression of interest rates for much longer. There can only be one outcome: markets, that is to say prices determined by non-state actors, will force central banks to capitulate on interest rates in the summer.

Hardly noticed, China is deliberately putting the brakes on its economy, which will cause an inflationary dollar to collapse, unless the US defends it by putting up interest rates. Deliberate? Almost certainly, as part of its strategy, China is taking the financial war with the US into the foreign exchanges.

Bond yields will rise, with the US Treasury 10-year bond leaving a 2% yield far behind. Equity markets will sense the danger, and it might turn out that the month of May marks a peak in financial asset values — following cryptocurrencies into substantial bear markets.

Introduction

There is an old stock market adage that you should sell in May and go away. It has already proved its worth in the case of cryptocurrencies, with Bitcoin more than halving at one point, and Ethereum losing 57% between 10—19 May. A sea-change in cryptocurrencies’ market sentiment has taken place.

As for equities, it could also turn out that 10 May, which so far has marked the S&P 500 Index’s high point, will mark the beginning of their decline. But it’s too soon to tell. However, we do know that following the unprecedented dilution of the major currencies’ purchasing power since March 2020 commodity prices have increased substantially, global logistics are fouled up and consumer prices are rapidly rising everywhere, a combination of events which is bound to lead to higher interest rates. But as is usually the case in times like these, central bankers and market bulls are wishing this reality away.

Continue reading→

Money As the Greater Depression Deepens, by Doug Casey

Own physical gold and silver not as a speculation against increasingly worthless currencies, but because they are real money. From Doug Casey at internationalman.com:

money

We talk a lot in these pages about what to do with one’s money, but I question whether most subscribers (forget about the public at large) have an adequate grasp of the basics. Without it, much of what we say may seem capricious or outlandish, crazy ideas readers tolerate only because we’ve been so right about the big trends. But the basics in speculating and investing are like the basics in martial arts: Just remembering them isn’t enough; they need to be second nature. That means reviewing and practicing over and over.

It’s not an accident that we usually make good investment calls; the selections arise from a constant awareness of the basics. So I want to briefly review those fundamentals. Let’s start with gold. We’re very gold-oriented around here.

You undoubtedly have a good position in gold. Many of your friends are aware that you’re a gold bug, and more than a few of them question your wisdom. Are you able to give them a succinct and cogent explanation not just for why gold is cyclically a good speculation, but why it’s money? I’ll wager the answer in many cases is, “No.”

I say that because when I give a speech, I often offer a prize to the audience member who can tell me the five classical reasons gold is the best money. Quickly now; what are they? Can’t recall them? Read on, and this time, burn them into your memory.

Continue reading→

Keep It Simple: Gold vs. a Mad World, by Matthew Piepenburg

Everybody should own some precious metals, not as speculations against currencies, but as protection—a medium of exchange and a store of value—should fiat currencies collapse. From Matthew Piepenburg at goldswitzerland.com:

Psychologists, poets and philosophers have written for centuries that many who have eyes refuse to see, and many who can think, refuse to think clearly–all for the simple reason that some truths, like the sun, are just too hard to look straight into.

Or as others have said more bluntly: “Truth is like poetry—everyone [fricking] hates it.”

When it comes to bloated markets, debt orgies and helicopter money, the rising fun of such “stimulus” is embraced, yet the template for its equally market-tanking, social-destroying and currency-debasing consequences are simply ignored.

The same is true when it comes to the “great inflation debate,” which is simply no longer a debate but a neon-screaming reality playing out in real time and growing more pernicious before eyes otherwise blinded by calming Fed-speak and bogus inflation scales.

Each passing day, the evidence of the inflationary cancer beneath the smiling surface of our still rising markets and “recovering/opening” economy increases, and thus, like it or not, the inflation topic just won’t and can’t be over-stated enough.

In short: Here I go again with the inflation thing…

From the Grocer to Buffet: Inflation is Obvious

Extreme US “stimulus,” vaccine rollouts, Europe’s eventual reopening, and rising commodity costs are accelerating the inflationary tailwinds which everyone from grocery store clerks and home builders to Warren Buffet can no longer deny or ignore.

As facts rather than theories confirm, commodity prices have surged from steel to copper, or corn to lumber while precious metals steadily rise against COMEX price fixers, CPI lies and other unsustainable boots to the neck of a coiled gold market positioned for big moves into late 2021 and beyond.

Continue reading→

Market Weekly: The Pivot to Gold Has Begun, by Tom Luongo

Buying either gold or cryptocurrencies is a vote of no confidence in governments, their central banks, and their fiat currencies. From Tom Luongo at tomluongo.me:

For the past few weeks I’ve incurred the wrath of what I’m now calling “Gold-Only” bugs for constantly haranguing them about bitcoin and cryptocurrencies. These are the folks which state only gold can beat the central banks.

I’ve made my position very clear, in a world of digital money and accelerating technology there is room for both assets as stores-of-value for different types of investors and taking a ideological position for either is stupid as well as arrogant.

Like all things, there are reasons why putting all of your eggs in one basket in markets as cocked-up and purposefully manipulated as these is simply bad asset management. Risk is, ultimately, not someone else’s problem no matter how much Wall St. tries to convince of this otherwise.

Risk is your problem.

The gold and crypto communities have been at each other’s throats for months now, as bitcoin continued rallying off the Coronapocalypse low from last March while gold peaked in August and has ground out a truly demoralizing eight-month bear market.

The envy coming from Gold-Only bugs has them missing one of the great opportunities for wealth creation in anyone’s lifetime. You don’t have to love bitcoin to make money from it. Just like you can hate Facebook but own its stock and cash it in when it’s too expensive versus another asset, say… I don’t know? Gold?

But that inverse relationship is finally changing. Bitcoin and gold are getting back into phase. And it’s right on schedule.

Continue reading→