Last year 22 central banks, situated largely to the east of Germany, bought the largest amount of gold since 1967, the year the London Gold Pool collapsed. The gold repatriations by many European countries of the last few years are another sign that we are reaching the end of four decades of monetary calm. This could bring about the largest monetary changes since the closing of the gold window by U.S. President Richard Nixon in 1971.
The United States wants its fiat dollar system to prevail for as long as possible. It has every interest in preventing a "rush out of dollars toward gold," as happened in the 1970s. Since then bankers have been trying to exercise control over the precious metal's price. This war on gold has been ongoing for almost 100 years but gained traction in the 1960s with the forming of the London Gold Pool, whose members included the US, UK, Netherlands, Germany, France, Italy, Belgium, and Switzerland. Full Story
By: Stefan Gleason, Money Metals Exchange - 17 July, 2019
President Trump moved recently to nominate an avowed sound money advocate, Judy Shelton, to the Federal Reserve Board. That triggered a flurry of superficial and derisive references in the controlled media to Shelton’s past support of a gold standard.
For example, CBS News described her as “a believer in the return to the gold standard, a money policy abandoned by the U.S. in 1971.” According to the story, “mainstream economists believe it's a fringe view.”
As the “mainstream” media portrays sound money advocates, we apparently are nostalgic for the monetary system that existed all the way up until 1971. Full Story
It was reported by Bloomberg that Deutsche Bank clients – mostly hedge funds – are pulling $1 billion in capital per day from the collapsing bank. Still no details have emerged on the how the “bad bank” holding company will be funded or what will go into it. What we do know is the original proposal for a bad bank was for $43 billion in bad assets. That number has bubbled up to a proposed $74 billion. In truth, no one knows for sure the degree to which DB’s derivatives holdings are radioactive. Disgraced former CEO, Anshu Jain, admitted that near the end of his failed tenure. Full Story
However, we abandoned this approach due to a problem that the falling interest rate—which is going on just about 40 years!—causes assets to rise in value. The Fed cannot print real wealth of course (though people certainly feel richer!) But its falling interest rate causes asset prices to rise. And this gain in nominal dollar value is misleading, the perceived gain in wealth is illusory.
Unfortunately, belief that this is real wealth is reinforced by two factors. One, is simple confirmation bias and wishful thinking. Everyone sees the rising value of their properties or shares and wants to believe they are richer. Two, the purchasing power paradigm encourages them to think of the liquidation value of their assets divided by the cost of living. They think to measure the dollar as the inverse of consumer prices. So if consumer prices are not rising too much, but asset prices are skyrocketing, they feel richer. Full Story
Any public debate over increasing the federal debt ceiling will be especially awkward for Republicans. Getting caught voting for trillions more in borrowing is not a good look – especially after years of screeching about deficits when the Democrats were in control.
However, regardless of what happens in the weeks ahead, the size of Federal deficits and debt probably can’t be swept under the rug for too much longer. America is one recession away from serious trouble. Full Story
After gold broke above a critical resistance level, held for the past five years, precious metals’ investors are now wondering, “what’s in store for silver?” While gold surged from $1,340 to $1,440 in just one week last month, silver only went up a mere $0.70. Thus, the Gold-Silver ratio increased from 89/1 to 94/1, in the same five-day period.
So, the BIG QUESTION many precious metals investors are asking, “Is silver going to follow gold’s move higher?” And, in several price trends in the past, silver does follow gold higher but also outperforms the yellow metal in the later stage. Full Story
Once again Fed Chair Jerome Powell was in the spotlight with his testimony before congress highlighted by his ongoing feud with President Donald Trump. The feud is unprecedented. Deutsche Bank was also in the spotlight this past week and is featured in our Chart of the Week.
The markets soared once again to new all-time highs even as it is occurring against the backdrop of a slowing global economy, trade wars and more. Divergences are popping up everywhere. We feature the broadening top and even a huge ascending wedge that appears to be forming in the market. The peaks may have been achieved as we push along the top of the channel. Our recession watch spread widened this past week as 10-year yields rose and 2-year yields fell.
Gold and the precious metals all rose as expectations rise for a Fed rate cut at the July FOMC. And finally oil prices rose with tensions in the Gulf and a hurricane threatening the Louisiana coast. Full Story
The 4 big concentrated silver longs, which I have been writing about for nearly a month, further reduced their net long position by 3882 contracts to 62,707 contracts. The only reporting category to have liquidated enough (or any real) number of contracts in the reporting week were managed money traders, proving conclusively that managed money traders held a significant percentage of the very strange concentrated net long position in COMEX silver. How else could I have expected managed money long liquidation by the 4 concentrated longs on Monday? Full Story
This month the economic expansion brought to you by your Federal Reserve and by US government largess becomes the longest expansion in the history of the United States! That’s something, right? Something? Let’s take an honest look at what we now call great.
By “the longest expansion” we mean the longest period in which US GDP has been growing without a recession. Now, that’s something to crow about, right?
Not so fast for many reasons. It’s also been the most anemic expansion on the books, and it’s not too hard to see why it’s been the longest, having nothing at all to do with a great economy. It has cost us far more than any expansion (by an order of magnitude) because we’ve piled up ten times the national debt over any amount we accumulated during previous expansions. Full Story
I can no longer count how many times I have been told that “squiggly lines cannot predict the market.” Yet, anyone who has tracked us over the long term knows how successful we have been at predicting many major market turns and targets with these “squiggly lines.” In fact, we have done so in many markets including metals, equities, Forex, bonds, etc.
The issue that many have with our work is a matter of naivety. You see, if someone does not understand what we do, then they assume that it must be luck or voodoo. Many people have a hard time believing something if they do not understand how it works. But, that stems from a weakness in their own understanding or ability to open their minds to something beyond their current knowledge base, rather than a weakness in our methodology. Full Story
Modern Monetary Theory, which has been getting much attention lately, is so controversial mainly because it is misunderstood.
It is misunderstood first because it is not a theory at all but a truism.
That is, MMT holds essentially that a government issuing a currency without a fixed link to a commodity like gold or silver is constrained in its currency issuance only by inflation and devaluation. Full Story
The Bank for International Settlements' has just published its statement of account for June and it indicate that the bank is still actively trading gold swaps, which the bank uses to gain access to gold held by commercial banks. But recent activity appears to be much reduced from the second half of 2018. Full Story
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