We had planned on writing about China’s emergence as the world’s new superpower, while the United States keeps sliding into Third World status, but we cannot escape the more cogent political implications/ramifications of the diverging paths between the two countries. Actually, the United States has turned direction from a positive influence to a negative one with almost all other countries in the world. There is no other country aggressively pursuing war and human rights violations more than the United States is, today. The US has engaged in perpetual warfare with one country after another in the Middle East: Iraq, on totally false pretenses, [Weapons of Mass Destruction]; Afghanistan, [seeking control […]
Author Archive: Hard Assets Alliance
Conventional wisdom suggests that higher rates are bad news for gold. However, as detailed in a recent special report by the World Gold Council, an environment of rising rates is not necessarily a death sentence for the yellow metal. In fact, excluding the high real-rate environment of the late 1970s and the early 1980s, US real rates have actually exerted little influence on gold prices.
Grant Williams, chief investment strategist for Mauldin Economics’ Bull’s Eye Investor, recently published a piece in his weekly newsletter Things That Make You Go Hmmm. At its core, the article gives a different take on the recent downturn in gold markets.
In the short term, prices cannot be predicted with any real accuracy. But if one takes a longer view, there are factors that can and should be considered. We all know the arguments about inflation and quantitative easing, but let’s take a look at a more basic price driver: the supply of physical gold.
Across the globe, fiat currencies are being printed with wild abandonment as debt-addicted governments try to inflate their economies out of the ongoing crisis. In the United States, the Federal Reserve has tried it all, employing numerous asset-purchasing programs that have yet to spur any sort of meaningful recovery in the “real” economy.
The announcement of 2 new gold funds represents the latest in a steady stream of bullish signals to emerge from China lately. Still, it is important to recognize that physical bullion will continue to drive the international gold market due to the fact that ETF holdings represent just 1% of the entire 175,000 tonnes of the above-ground gold stock.
Don’t be fooled by what happened in the futures market. The retreat in the gold price is a buying opportunity for physical metal. And those who do so will be in strong company. The bottom line for me can be summed up by Zhang Bingnan, secretary-general of the China Gold Association: “The dumping recently of holdings in gold exchange-traded products by overseas investors may not prove to be a wise move.”
As one can see in the chart, total public debt in the United States recently crossed the proverbial Rubicon and now equals 104.95% of GDP. Though some would argue that a healthy dose of debt is necessary to foster economic growth, the US’s unsustainable public debt exceeds the same debt measures of crisis-stricken Cyprus and fragile Spain, where public debt as a percentage of GDP have been most recently estimated at 85.8% and 84.2%, respectively.
For the Western debt-addicted countries, years of profligate spending have more or less sealed their economic fates. Faced with economic uncertainty, governments will search for new ways to plunder the productive members of society. These may include capital controls, more onerous regulations, or wealth confiscation, either explicitly or by way of the printing press. Amid all of the doom and gloom, there are still opportunities to be seized.
It’s no secret that demand for gold has always been strong in the East. But since gold’s mid-April correction, the move from Western economies to Eastern ones has picked up steam. Part of the reason is that Western governments own more gold than their Eastern counterparts, especially as a percent of total reserves. But the Eastern world is also seeing more inflation and is more wary of political promises and assurances.
The chart depicts the explosion in Chinese gold imports from Hong Kong since January 2012, during which China imported an astonishing 1,206 tonnes of gold – 20% more than the nation’s latest official gold holdings of 1,054 tonnes. In the first quarter of 2013 alone, China imported 372 tonnes from Hong Kong, or nearly what was imported through the entire first half of 2012.
1. The Expansion of Quantitative Easing in the Developed World. 2. Currency Wars. 3. Precious Metals On Sale.
Germany recently announced its plan to bring home part of its massive gold reserves. While Germany’s announcement is no longer front-page news, it is important to consider the reasons behind this move, and the message being sent to investors by central banks around the globe – gold is money. So fasten your seatbelt, this around-the-world tour is about to begin.
In September gold rose above its 200-day moving average so it moved officially in an uptrend. It did so after eleven months of sideways consolidation, moving in a fixed range. Today, the trend is still intact. The key question is if this is the next phase of the gold bull market? Is gold back? Hard Assets Alliance think this is just the beginning for gold and silver. We may see some consolidation or even a pullback due to potential seasonal weakness, or some “price fatigue” after such a big advance, but our bullishness has little to do with seasonality or short-term price surges. Here’s what supports our outlook: Source: Hoisington Investment Management Company This […]