Confidence and stability:
Various analysts forecast gold prices as low as $ 700/ounce being the result of deflation, but ostensibly they have not considered the facts assessed in this essay. Gold is not just about deflation versus inflation visa versa. Nor is it about the US dollar vs. the euro or even supply vs. demand. It’s about fear and chaos vs. confidence and stability. Central bankers print money and expand the money supply. Gold used to back global currencies, keeping central bankers away from easy credit creation. Today, gold should rise as people lose faith in central bank-debased paper money. Gold provides confidence and credibility – the perception by individuals that their fiat currency is backed by something of value. Global gold demand now consumes more than miners around the world can produce.
Worse, the world’s monetary policy makers have opened the cash spigots. All major central banks together add almost three times more liquidity this year than they did in 2014, according to Credit Suisse Group AG analysts. The Bank of Japan accounts for $855 billion via quantitative easing and the European Central Bank assets increase is € 1 trillion. The global money supply is growing by $1.9 trillion or 18 %.
The Federal Reserve Bank – 100 years ago – of the crime cabal and legalised in existence by President Woodward Wilson in 1913 during a Christmas recess of parliament; in which the government from that moment on granted the crime cabal the monopoly powers over the country’s money supply that should have remained in government’s hands, making them economically the most powerful individuals on Earth.
Despite allegations of gold being a barbarous relic, central banks want it back. – Here are some recent examples of people buying gold for reasons other than inflation or deflation:
“Greek demand for gold coins from the UK Royal Mint has risen as a result of the country’s political and financial turmoil. They’re buying because, as Matthew Turner of Macquarie Bank put it, “The one thing everyone knows about gold is, it is a good thing to hold if your currency is about to devalue.”
After the Swiss central bank introduced a 0.75% negative interest rate on some deposits last month, investors bought more gold in lieu of holding Swiss franc cash deposits, according Vontobel Holding AG, a Swiss bank and wealth manager. “We keep noticing that gold is coming back into favor with investors,” said CEO Zeno Staub.
Other European countries have seen a spike in gold demand due to the massive QE effort undertaken by the ECB, and the anti-bailout party winning in Greece. German coin dealer Degussa reported “a 35% year-on-year increase in gold coin sales in January. The Austrian Mint said sales of Vienna Philharmonic gold coins rose 6% last month.”
A remarkable report on The Austrian State Gold from the Austrian Federal Court (ÖBRH) has just revealed, “that as of 2009, 56% of Austria’s gold reserves “held” at the Bank of England DID NOT PHYSICALLY EXIST!!! No wonder that Germany and The Netherlands among others began scrambling shortly thereafter to repatriate what was left of their own reserves at the BOE and The Fed!
Wakeup… Printing money is extremely inflationary, especially when the monetary base since 2008 already has more than tripled. Doing more of the same scares because someday all this monetary dilution will upset the market. The very real possibility is that paper currencies will not just be damaged; these will be destroyed. – History is very clear on this point: currency crises lead to flights into gold.
“You cannot create wealth out of little slips of paper.”
Ludwig von Mises
Keep in mind that true deflations cause a crisis – or are caused by a crisis -and for thousands of years; crises have pushed people into gold. True deflation will lead to higher inflation. If there comes a massive deflation, it will actually spur greater inflation.
But if Deflation wins first… what happens to gold if the economy first goes through a deflationary bust? – During periods of crashing stock markets, and falling standards of living, “investors fled to the only gold with liquidity they could own at the time.”
It is not exactly known what an ‘unchained’ gold price would have done during the Depression; history says it will retain its purchasing power in a deflationary setting regardless of its nominal price. In other words, while the price of gold might not rise or could even fall, it would still provide monetary protection against an unstable economic environment, especially when considered that most other assets would be in decline.
In a fiat system – like the entire globe uses today – central bankers will meet any deflation with an inflationary overreaction. And the worse the deflation gets, the more extreme overreactions will occur. Inflation will win in the end.
What top Fund managers think about Gold:
As to how long the central banks’ plate spinning can defer the consequences of the past 30-plus years of excess credit growth, as I never thought they would get this far without breaking a plate. However incorrect my timing has been over the past two years, though, I am beginning to doubt that they can last another 12 months. Twice in the last few months the stock market plates began to wobble, only to have Fed performers step in to steady the display. With the end of QE, a slowing global economy, a strengthening dollar, and the recent sharp drop in oil prices, deflationary winds are picking up, making their balancing act yet more difficult. Says Steve Henningsen, chief investment strategist answering the question: …central banks have kept the economy and markets propped up longer than some thought they could. How much longer do you envision them being able to do so?
On the question, what are the most important factors gold investors should keep in mind now?
Grant Williams: I think the key focus should be on two things: first, the difference between paper and physical gold; and second, on the continuing drive by national banks to repatriate their gold supplies.
Chris Martenson, PhD …this bubble is really a bubble of faith, and its main derivative is faith-based currency. And it’s global. Bubbles take time to burst roughly proportional to their size, and these nested bubbles the Fed and other central banks have engineered are by far the largest ever in human history. As always, bubbles are always in search of a pin, and we cannot know exactly when that will be or what will finally be blamed. All we can do is be prepared.
Gold at $ 1.200 /ounce is already at its cost of production. Even at $1,100 gold, – about half of the primary gold producers lose money. The reason is because the World Gold Council’s all-in sustaining cost metric excludes taxes and interest payments – among other items. Adding those in, many companies are pushed into the red when gold averages $1,100. But the sector won’t shut down, because the world needs and wants gold.
Central bankers’ actions since 2008; inevitably, destroy the future purchasing power of fiat money. Some kind of currency crisis will hit the market, perhaps sooner than later. There are many examples of what happens to gold during a currency crisis.
Last year provided another glaring example. “Russia’s inflation rate was 11.4% in 2014, and the ruble fell a staggering 46.5% – but gold in rubles rose 73%. In other words, Russians gained more with gold than they lost in ruble purchasing power.” The price of gold rose against all currencies in 2014 – except the US dollar. “Gold was up in the euro, Japanese yen, Swiss franc, Canadian dollar, British pound, Australian dollar, New Zealand dollar, Chinese Renminbi, Indian rupee, Swedish krona, Brazilian real, Israeli shekel, and South Korean won.”
Significant Market Event:
Alan Greenspan Warns: There will be a “Significant Market Event… Something Big Is Going To Happen” – the former Fed chairman made it clear that the central bank is facing a serious problem and one that will have significant ramifications in the future. He continued as follow:
“…that the debt load in the U.S. had gotten so great that there has to be some monetary depreciation. Especially he said that the era of quantitative easing and zero-interest rate policies by the Fed… we really couldn’t exit this without some significant market event… By that I interpret it being either a stock market crash or a prolonged recession, which would then engender another round of monetary reflation by the Fed. He thinks something big is going to happen that we can’t get out of this era of money printing without some repercussions – and pretty severe ones – that gold will benefit from.”
If a major market event as Alan Greenspan proposes is going to happen, then wealth preservation should be a key priority of any preparedness strategy going forward.
If gold rises as result of excessive money printing – other resource assets in the energy and mining sectors will rise too. What it boils down to is that the assets that are necessary to keep the monetary system operating will always have value, and that is especially true in a situation where the U.S. dollar happens to be crashing.
Alan Greenspan, the man who is essentially the architect responsible for domestic monetary policy under four U.S. Presidents has now said that a significant market event will take place when the Fed is eventually forced to exit their monetary easing and zero-interest rate policies.
Irrefutable evidence has been discovered that Alan Greenspan was charged with destroying the un-backed fiat monetary system and taking down the banking cabal starting all the way back in the early 1960’s. – Ultimately, it will lead us back to a true and honest Gold Standard.
Explaining today’s gold trade, “whenever the price of gold in the futures market starts to rise, massive uncovered shorts are suddenly dumped on the market. As the shorts dramatically increase the supply of future contracts all at once, the supply overwhelms demand, and the price of gold is driven down despite the fact that the demand for gold in the physical market is strong.” – Remember, the price of gold is determined in the futures market in which contracts are largely settled in cash and seldom in gold. – The physical market is where gold bullion is purchased, not paper claims on gold for speculation.
Gold is a refuge in times of uncertainty. With yen, dollars, and euros all being created at a faster rate than goods and services are being produced, with both stock and bond prices at bubble levels, gold is definitely an attractive refuge. Confidence in gold would pull money out of the rigged markets for financial instruments and make it more difficult to maintain the appearance that all is well.
Issuing lies about happy jobs reports, and growth figures simultaneously attack the gold prices downward, and are intended as encouragement to remain invested in financial paper and to continue to hold the ‘over-printed’ currencies. – Actually gold “should” be higher. – The stock market “should” be lower. – Most governments “should” be bankrupt. – And the dollar “should” be worthless. – But what “should happen” has a funny way of not happening at all. Not that that disproves anything. In fact, if those “should happens” are correct, then the longer they don’t happen – the more likely it is that only one thing will happen: disaster.
Count on more money printing. Central Banks print so much money enabling them to buy all the sovereign debt for most of all nations. They printed far too much and there aren’t enough newly issued sovereign obligations around! Consequently prices of troubled sovereign debt have been bid unrealistically high bringing interest rates to its extreme low.
Proof: Germany sold last week five-year government bonds. What stands out, though, is that Germany sold those 3.28 billion euros worth of bonds at a negative yield of around -0.08 percent. That means bond investors literally lined up at the German Treasury, and said, “I buy 10,000,000 euros of your bonds, and at maturity… after five long years from now … you give you back € 9,992,000.” Think about it. Would you literally pay someone to borrow your money – to receive less after five years? Does this make common sense? Of course not! But buyers are the brain dead – Central Bank – institutions around the world, and doing it anyway. The reason? There is far too much money printed in order to keep sovereign lending cheap, and meanwhile big business lend cheap money to buy back their own shares for fat bonuses as their share price climbs higher.
Nonetheless this rate-cutting frenzy is bad news for anyone living on a fixed income. About one-third of European sovereign debt has a negative yield. Other financial experts estimate worldwide even $3 trillion in government bonds with negative nominal interest rates. The demand for ‘safe’ government bonds is greater than the supply – hence the negative yields. But how safe is locking your capital into a guaranteed loss – the so-called ‘return-free risk’? There’s always the likelihood – that new money will push bond yields further negative. – Understanding this ridiculous situation; it’s much better to own gold; it’s a much safer currency of which central banks can’t simply print more. Gold with zero yields is far better than negative rates.
Moreover currency wars are still raging on, and won’t stop anymore, as it has become the ultimate race to the bottom, which is quite bullish for gold. The precious metal is stealing headlines as global central banks race to destroy their currencies. Record-low interest rates make gold a wonderful alternative currency. Gold pays no interest – so it has become more attractive now government paper has zero or negative yields. Bloomberg tracks $2 trillion worth of securities that trade at negative yields. European bond buying is so aggressive that even poor Portugal is paying just 1.89 percent to borrow money for 10 years. The country’s bonds just rallied for 12 straight days, something that hasn’t happened in a decade.
Another view on negative interest rates: As the European Central Bank embarked on ‘QE’ bond purchases, John Authers from the FT, uses five centuries of data to show that Dutch yields have never been negative before, even during many periods of deflation. He concludes that negative yields are probably due to QE, not fears of deflation.
One hundred per cent of all loans are securitised and sold as investments – derivatives. Lenders make their money on loan fees, as happened before 2008 in the real estate, but as defaults rise the securitized loans and associated derivatives will likely require a bailout as is 2008 for the securitized home mortgages. But this time there wouldn’t be enough money around for such bailouts.
Anyone looking at these prospects must be scared to death and consequently being drawn into buying gold, but a rising gold price would bring down the fiat currencies and, thus, this still must be prevented. Attentive readers will now have understood that Central Bankers unwillingly have set their own trap!
In other words, those who have rigged the monetary system know that it is a house of cards.
As a matter of fact Gold bullion is up more in every other major currency than it is priced in US Dollars. “Since Jan. 1, gold enjoyed gains of as much 15% priced in rubles and Swiss francs.” And now the euro hit its lowest level since 2003, falling to nearly 1.10 against the dollar, a >22% decline since last May when he euro scored almost 1,40 against the US dollar. Mind you the ones that bought gold in euros last May, have got now over 20% gain! – “When the crisis hits, or if the Fed opens the money spigots before that, the dollar price of gold should head higher, to your benefit. Gold analysts predict eventually a gold price far above $5,000.” Compared to today’s manipulated low price of $1,200/ounce is an attractive entry point.
Be careful with buying shares in gold mines, as there is a scenario where gold miners are nationalised.
So, owning physical gold ahead of this development will serve you well.
Gold reserves are the amount of gold in the ground a company can mine for a profit. With gold prices at around $1,200 today, many gold producers’ mines are losing money on every ounce of gold they produce. And when a mine becomes unprofitable, the gold is no longer included in a company’s total gold reserves. And when gold prices stay at or below $1,200 for a long time, many miners might even consider closing the mine and losing those reserves for good.
RMB: the New – Gold backed Currency?
China literally advertises its currency overseas, with the slogan “RMB: New Choice – The World Currency”. They know that the future belongs to them and they’re flaunting it. The renminbi’s importance in global trade and as a reserve currency is increasing, with renminbi trading hubs popping up all over the world, from Singapore to Zurich, London, Luxembourg, Frankfurt and Toronto. Multinational companies are now issuing bonds in renminbi, and even sovereign governments are issuing debt denominated in renminbi, including the UK. Almost every major global player is positioning itself for the renminbi to become the dominant reserve currency.
Gold as Money:
Over centuries, gold had proven be useful. It may not be perfect money. But it was the best yet discovered. Some crypto currency, such as Bitcoin, may eventually prove more useful. But that is for the future to decide. For now, gold works. “Fiat,” or paper, money does not. Economically spoken, since the supply of gold is limited, consumer prices tend to remain stable. The supply of credit is also limited, because the currency is limited. When demand for credit increases, the price of it – the interest rate – goes up. And the credit-fueled boom comes to an end.
But… now there is the solution that could make gold the perfect money the world is waiting for; a new development about Karen Hudes spoke a some month ago, when she mentioned the Aurum currency, are notes literarily backed by gold. – Apparently a small country is going to adopt this currency as legal tender.
The gold money is developed by a company called Valaurum with a technology that’s making it possible to carry and exchange gold in the exact same manner as you do today with paper currency bills in your wallet. But most exciting is this: a small sovereign central bank is deep in negotiations with Valaurum to replace its existing national currency with Aurum notes, creating a true precious-metals backed monetary system.
Gold is, “The safest currency in the world. This is true because gold is not backed or guaranteed by any single nation, Gold is pure wealth, and needs no nation to guarantee its value. Gold is so safe that it doesn’t need to pay interest whereas every other currency needs to pay interest. For instance, who would own roubles or Aussie dollars if they didn’t pay interest? The less safe a currency is the more interest that currency must pay to buyers.
One advantage that gold and silver possess is that they can’t degenerate into nothingness they can’t become worthless. Historically, every fiat currency has ultimately become worthless, valueless. No fiat currency in history has ever survived.” Wrote 90-year-old newsletter veteran Russell.
- “I warn you that politicians of both parties will oppose the restoration of gold, although they may outwardly seemingly favor it. Also those elements (Crime Cabal) here and abroad who are getting rich from the continued American inflation will oppose a return to sound money. You must be prepared to meet their opposition intelligently and vigorously. They have had 15 years of unbroken victory.”
- “But, unless you are willing to surrender your children and your country to galloping inflation, war and slavery, then this cause demands your support. For if human liberty is to survive in America, we must win the battle to restore honest money.”
- “There is no more important challenge facing us than this issue — the restoration of your freedom to secure gold in exchange for the fruits of your labors.” – Congressman Howard Buffett 1948.
Like Father like Son?
Remarkable contradiction or lie (?): His son Warren Buffett and founder of Berkshire Hathaway investments fund, speaks publically about his two most significant beliefs: First, he loved and admired his father’s wisdom for doing what is Right for the country. Second Gold is a barbaric non-income generating, worthless asset that has no place in an investor’s portfolio and that the only value in gold lies in the stubborn willingness to protect its value.
Buffett’s advice usually is wise. But what he fails to acknowledge is that gold is real money… and a great way to diversify cash as central banks around the world destroy fiat money. Ray Dalio, founder of Bridgewater – the world’s largest hedge fund – says that Buffett is “making a big mistake” in regard to gold. Buffett fails to mention that gold has risen from $40 an ounce in 1971 to more than $1,200 an ounce today… a gain of nearly 3,000%.
The Production Process and Technology of Aurum bills:
Being able to hold gold in the form of paper bills is significant for several reasons:
Second, it enables the potential for everyday transactions should the world ever return to a precious metal-backed monetary standard.
It answers the challenge: How will you pay for your groceries with gold? With an Aurum, it’s now easy.
Whether Valaurum’s product emerges as the winning horse or not, the world definitely needs this type of solution as it conveniently is fractional physical metal that now can go mainstream.
The new gold backed world currency will arrive soon:
You want to know how it will look like? Here the answer from Karen Hudes:
“The gold will be pressed very thin and put between a plastic envelope which will act just like paper currency, except that the value of the gold will be equal to the stated value of the currency.”
Who Smashed Gold?
HSBC the Custodian for GLD is closing all of their gold vaults in London, top trends forecaster in the world called the news from Andrew Maguire “ground-breaking and earth-rattling.” Gerald Celente then stunned by exposing why this will shake the very foundation of the gold world. “It should be a shock and it’s big news as is the rest of Andrew Maguire’s insights. What is so important about HSBC closing down all 7 of their London gold vaults is that the Spyder Gold Trust, ticker symbol GLD, the custodian of that GLD gold is none other than HSBC….