{"id":373,"date":"2015-03-11T13:01:45","date_gmt":"2015-03-11T12:01:45","guid":{"rendered":"http:\/\/finalwakeupcall.info\/en\/?p=373"},"modified":"2015-03-11T13:01:45","modified_gmt":"2015-03-11T12:01:45","slug":"gold-price-not-affected-by-deflation","status":"publish","type":"post","link":"https:\/\/finalwakeupcall.info\/en\/2015\/03\/11\/gold-price-not-affected-by-deflation\/","title":{"rendered":"Gold price not affected by Deflation"},"content":{"rendered":"

Confidence and stability:<\/strong><\/p>\n

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\u2019s about fear and chaos vs. confidence and stability.<\/strong> Central bankers print money and expand the money supply. Gold used to back global currencies, keeping central bankers away from easy credit \"building-confidence\"<\/a>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.<\/p>\n

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Worse, the world\u2019s monetary policy makers have opened the cash spigots. All major central banks together add almost three<\/em> 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 \u20ac 1 trillion. The global money supply is growing by $1.9 trillion or 18 %.<\/p>\n

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The Federal Reserve Bank \u2013 100 years ago – of the crime cabal and legalised in existence by President Woodward Wilson<\/a> 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\u2019s money supply that should have remained in government\u2019s hands, making them economically the most powerful individuals on Earth.<\/p>\n

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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:<\/p>\n

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\u201cGreek demand for gold coins from the UK Royal Mint has risen as a result of the country\u2019s political and financial turmoil. They\u2019re buying because, as Matthew Turner of Macquarie Bank put it, \u201cThe one thing everyone knows about gold is, it is a good thing to hold if your currency is about to devalue.\u201d<\/p>\n

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After the Swiss central bank introduced a 0.75% negative<\/em> 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. \u201cWe keep noticing that gold is coming back into favor with investors,\u201d said CEO Zeno Staub.<\/p>\n

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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 \u201ca 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.\u201d<\/p>\n

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A remarkable report on The Austrian State Gold from\u00a0the Austrian Federal Court<\/a>\u00a0(\u00d6BRH) has just revealed,\u00a0\u201cthat\u00a0as of 2009, 56% of Austria\u2019s gold reserves \u201cheld\u201d 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!<\/p>\n

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Destroyed currencies:<\/strong><\/p>\n

Wakeup\u2026 Printing money is extremely inflationary<\/a>, especially when the monetary base since 2008 already has more than tripled<\/em>. 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 th\"Paper<\/a>is point: currency crises lead to flights into gold.<\/p>\n

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\u201cYou cannot create wealth out of little slips of paper.\u201d<\/strong><\/p>\n

Ludwig von Mises<\/strong><\/p>\n

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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.<\/p>\n

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But if Deflation wins first<\/a>\u2026 what happens to gold if the economy first goes through a deflationary bust? – During periods of crashing stock markets, and falling standards of living, \u201cinvestors fled to the only gold with liquidity they could own at the time<\/strong>.\u201d<\/p>\n

It is not exactly known what an \u2018unchained\u2019 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.<\/p>\n

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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.<\/strong><\/a><\/p>\n

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What top Fund managers think about Gold<\/a>:<\/strong><\/p>\n

As to how long the central banks\u2019 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: \u2026central 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?<\/p>\n

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On the question, what are the most important factors gold investors should keep in mind now?<\/p>\n

Grant Williams:<\/strong> I think the key focus should be on two things: first<\/strong>, the difference between paper and physical gold; and second<\/strong>, on the continuing drive by national banks to repatriate their gold supplies.<\/p>\n

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Chris Martenson, PhD \u2026this bubble is really a bubble of faith, and its main derivative is faith-based currency. And it\u2019s 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.<\/p>\n

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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\u2019s 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\u2019t shut down, because the world needs and wants gold.<\/p>\n

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Central bankers\u2019 actions since 2008; inevitably, destroy the future purchasing power of fiat money<\/a>. 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.<\/p>\n

Last year provided another glaring example. \u201cRussia\u2019s 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.\u201d The price of gold rose against all currencies in 2014 – except the US dollar. \u201cGold 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.\u201d<\/p>\n

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Significant Market Event:<\/strong><\/p>\n

Alan Greenspan Warns: There will be a \u201cSignificant Market Event… Something Big Is Going To Happen\u201d – the former Fed chairman made it clear that the central bank is facing a serious problem<\/a> and one that will have significant ramifications in the future. He continued as follow:<\/p>\n

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\u201c\u2026that the debt load in the U.S. had gotten so great that there has to be some monetary depreciation.\u00a0Especially he said that the era of quantitative easing and zero-interest rate policies by the Fed\u2026 we really couldn\u2019t exit this without some significant \"cat-bond\"<\/a>market event\u2026 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.<\/strong>\u00a0He thinks something big is going to happen that we can\u2019t get out of this era of money printing without some repercussions \u2013 and pretty severe ones \u2013 that gold will benefit from.\u201d<\/strong><\/em><\/p>\n

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If a major market event as Alan Greenspan proposes is going to happen, then\u00a0wealth preservation should be a key priority of any preparedness strategy going forward.<\/p>\n

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If gold rises as result of excessive money printing – other resource assets in the energy and mining sectors will rise too.\u00a0What it boils down to is that the assets that are\u00a0necessary 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.<\/p>\n

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Alan Greenspan, the man who is essentially the architect responsible for domestic monetary policy under four U.S. Presidents\u00a0has now said that\u00a0a significant market event will take place when the Fed is eventually forced to exit their monetary easing and zero-interest rate policies.<\/p>\n

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Irrefutable evidence has been discovered that Alan Greenspan was charged with destroying the un-backed fiat monetary system<\/a> 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.<\/strong><\/p>\n

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Explaining today\u2019s gold trade, \u201cwhenever 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.\u201d – Remember, the price of gold is determined in the futures market<\/em> in which contracts are largely settled in cash and seldom in gold. – The physical market<\/em> is where gold bullion is purchased, not paper claims<\/em> on gold for speculation.<\/p>\n

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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.<\/p>\n

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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 \u2018over-printed\u2019 currencies. \u2013 Actually gold \u201cshould\u201d be higher. – The stock market \u201cshould\u201d be lower. – Most governments \u201cshould\u201d be bankrupt. – And the dollar \u201cshould\u201d be worthless. – But what \u201cshould happen\u201d has a funny way of not happening at all. Not that that disproves anything. In fact, if those \u201cshould happens\u201d are correct, then the longer they don\u2019t happen – the more likely it is that only one thing will happen: disaster.<\/strong><\/p>\n

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Sovereign debt:<\/strong><\/p>\n

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\u2019t enough newly issued sovereign obligations around! Consequently prices \"Sovereign<\/a>of troubled sovereign debt have been bid unrealistically high bringing interest rates to its extreme low. <\/strong><\/p>\n

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Proof: Germany sold last week five-year government bonds. What stands out, though<\/a>, is that Germany sold those 3.28 billion euros worth of bonds at a negative yield<\/a> of around -0.08 percent<\/a>. That means bond investors literally lined up at the German Treasury, and said, \u201cI buy 10,000,000 euros of your bonds, and at maturity\u2026 after five long years from now \u2026 you give you back \u20ac 9,992,000.\u201d 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 <\/a>money to buy back their own shares for fat bonuses as their share price climbs higher.<\/p>\n

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Nonetheless this rate-cutting frenzy is bad news for anyone living on a fixed income. About one-third of European sovereign \"piles-of-money.png\"<\/a>debt has a negative yield. Other financial experts estimate worldwide even $3 trillion in government bonds with negative nominal interest rates. The demand for \u2018safe\u2019 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 \u2018return-free risk\u2019? There’s always the likelihood \u2013 that new money will push bond yields further negative. – Understanding this ridiculous situation; it\u2019s much better to own gold; it\u2019s a much safer currency of which central banks can’t simply print more. Gold with zero yields is far better than negative rates.<\/strong><\/p>\n

\u00a0<\/strong><\/p>\n

Moreover currency wars are still raging on, and won\u2019t 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\u2019s bonds just rallied<\/a> for 12 straight days, something that hasn\u2019t happened in a decade.<\/p>\n

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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.<\/em><\/p>\n

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One hundred per cent of all loans are securitised and sold as investments<\/a> – 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\u2019t be enough money around for such bailouts.<\/p>\n

Anyone looking at these prospects must be scared to death and consequently being drawn into buying gold, but a rising gold \"house_of_money.jpg.size.xxlarge.letterbox\"<\/a>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!<\/p>\n

In other words, those who have rigged the monetary system know that it is a house of cards.<\/strong><\/p>\n

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As a matter of fact Gold bullion is up more in every other major currency than it is priced in US Dollars. \u201cSince Jan. 1, gold enjoyed gains of as much 15% priced in rubles and Swiss francs.\u201d 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 \"EUCRISIS\"<\/a>almost 1,40 against the US dollar. Mind you the ones that bought gold in euros last May, have got now over 20% gain! \u2013 \u201cWhen 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.\u201d Compared to today\u2019s manipulated low price of $1,200\/ounce is an attractive entry point.<\/p>\n

Be careful with buying shares in gold mines, as there is a scenario where gold miners are nationalised<\/a>.<\/p>\n

So, owning physical gold ahead of this development will serve you well.<\/p>\n

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Gold reserves are the amount of gold in the ground a company can mine for a profit<\/strong>. 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.<\/p>\n

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RMB: the New \u2013 Gold backed Currency?<\/strong><\/p>\n

China literally advertises its currency overseas, with the slogan \u201cRMB: New Choice – The World Currency<\/a>\u201d. They know that the future belongs to them and they\u2019re flaunting it. The renminbi\u2019s importance in global trade and as a reserve currency is increasing,\u00a0with 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.<\/p>\n

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Gold as Money:<\/strong><\/p>\n

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 \"Gold<\/a>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 \u2013 the interest rate – goes up. And the credit-fueled boom comes to an end.<\/p>\n

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But\u2026 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. \u2013 Apparently a small country is going to adopt this currency as legal tender.<\/p>\n

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The gold money is developed by a company called Valaurum with a technology<\/a> that\u2019s 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.<\/p>\n

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Gold is, \u201cT<\/em>he 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.<\/em><\/p>\n

\u00a0<\/em><\/p>\n

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.\u201d Wrote 90-year-old newsletter veteran Russell.<\/em><\/p>\n

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