The New RussAsian Gold Standard Is Coming

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Image via KingWorldNews

It appears it wasn’t that long ago that the U.S. dollar was not to be questioned, and the ruble and the yuan were in the gutter. Such was the strength of the U.S. dollar that President Trump voiced desires to weaken it against other currencies to give America some trade benefits. Not that long ago, either, the ruble was approaching toilet paper status due to oil price oscillations.

Somehow, we are now inching towards the very opposite. The mighty greenback, despite being the strongest it’s been in a while, has everyone concerned. Nobody needs a lot of convincing to hear out the notions of “dollar hyperinflation” or even “the death of the dollar”. On the other hand sit the ruble and yuan. The first is looking to become a global reserve currency by force, with the second no doubt wanting the same, but perhaps content to simply be in the picture for now.

How did we get here? For as many things are in this brew, it seems very easy to answer that question. The West has too long suffered from an over-reliance: on credit, on faith and the money printers that run on it, on Chinese goods, and most damagingly of late on Russian energy. In what seems like a span of a few hours, Russia used the Ukraine attack to send a message to the West: if you want Russian energy, pay in rubles. And so the ruble went from toilet paper to one of the stronger currencies as of right now. One could argue, certainly the most stable.

Behind every great nation lies a great gold hoard. If Russia and China usurp the U.S. dollar’s status, there is almost no question that it will be done through the use of gold bullion as tender. Unlike the West, neither of these two massive nations have spent the better part of a century convincing themselves that gold is outdated and Modern Monetary Theory is, well, modern.

Just as Russia surprised many with the Ukraine invasion, so too might many be surprised by a bid to place both the ruble and the yuan in the dollar’s place. Russia already said that it views the ruble or gold as money, almost foretelling what it plans on doing. China’s stance doesn’t need repeating.

What do their central bank gold reserves look like, then? For the longest time, we heard how the U.S. gold stockpile of over 8,000 tons makes other nations’ reserves seem negligible. Now, again, it seems we might be in for a surprise. Apparently, in a move that shouldn’t surprise anyone, the U.S. has been leasing out its gold bullion due to storage difficulties. In other words, it’s not “readily available.”

Some of our more dedicated readers will remember that, when China’s official gold hoard figure was 2,000 tons, speculations were rife that it’s closer to 4,000 tons. As it turns out, China could be sitting on 25,000 tons of gold, while Russia could hold a comparatively smaller 12,000 tons.

When push comes to shove, if these two titans make a real bid for the global financial system, how much will faith in the dollar carry it in absence of reserves? Will the U.S. trying to hold onto its position not be akin to Hungary or Poland attempting to usurp the greenback? Indeed, if they did, would we not ask how they expect to become the global reserve with such a small gold hoard?

Alasdair Macleod calls such a development a “financial nuclear event,” and that’s probably not an exaggeration. Virtually every fiat currency on the planet would be re-valued overnight, drastically downwards, while global central banks scramble to recover their gold bullion in an attempt to strengthen their currencies.

If this does indeed happen, well, those who already own gold will be much better off than those who waited too long.

The Fed Raised Interest Rates. Now What?

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Not only has the Fed raised interest rates, they want to keep on doing it through 2018. Can our economy sustain the ongoing increases?

The Fed Raised Interest Rates. Now What?

From Filip Karinja, for Birch Gold Group

This week, the Federal Reserve voted to raise interest rates a quarter of a percent to 0.5%, the first rate risesince 2006.

But this wasn’t the only bold announcement the Fed made. In a report released the same day, titled “Economic Projections“, they predicted that by 2018 they would raise rates to 3.3%.

It seems odd that they would come out with such a view on rates when, just last month, Janet Yellen said she would consider lowering rates into negative territory if the market was to fall considerably, like in 2008.

Considering the astronomic levels of our federal debt, having rates at 3.3% would be economic suicide; the United States simply would not be able to meet its obligations to its debt.

Interest rate target Federal Reserve The Fed Raised Interest Rates. Now What?

Projected Federal Reserve interest rate target (SOURCE)

So what does the Fed see changing in the next three years so positively — not only in the United States, but around the world — to be able to raise rates so sharply?

Here are the present day facts:

  • The global economy is beginning to contract, with many central banks already printing money like crazy and reducing rates into negative territory.
  • Retail sales have been falling short of expectations.
  • New housing has dropped off sharply.
  • The United States is becoming more polarized than ever — on politics, race, religion, etc.
  • The possibility of war in Syria and the Middle East region is ever intensifying, with nations taking turns dropping bombs all over the region.
  • Terrorism is increasingly spreading into the western world.
  • The threat of conflict with nations such as China, Russia, Syria and Iran is on the rise. Consider how Turkey shot down a Russian jet earlier this month.
  • Youth unemployment in Europe is reaching worrying levels.

For some reason, none of these factors seem to be weighing in on the Fed’s projections for the coming years. But ask yourself: How many of these problems do you think will be solved any time soon?

If you think any of this is overly cynical, take a look at this video, from Mr. Positive himself, motivational coach Tony Robbins. In it, he explains the nation’s debt problem and how there is no solution for it. Even if the rich were to be taxed a full 100% on earnings, it would not put a dent in the deficit.

Now, pretend you’re over two years in the future, in 2018. Would you guess that the debt will increase or decrease?

With the debt already so absurdly high, if the Fed moved rates out to 3.3%, the interest on this debt would be practically impossible to pay.

So put yourself two years in the future, and think about what it may hold for our nation. If you have any concerns, you may want to consider protecting your savings with some precious metals. Give us a call — we’re ready to help.

Is the bond market the next shoe to drop in Wall Street? Read why here.

photo credit: Perspectived, lines, madame #instaprol via photopin (license)

China’s Next Power Play For The Gold Metal

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CHINA IS TAKING ONE OF ITS BIGGEST STEPS YET TO SOLIDIFY ITSELF AS THE WORLD’S TOP GOLD CONSUMER. WHAT WILL THIS MEAN FOR THE FUTURE OF THE METAL?

China’s Next Power Play for the Gold Metal

This week, Your News to Know rounds up the most important news stories from the gold market. Stories include: China to launch gold benchmark in April, one chief economist remains optimistic on gold, and why gold makes for a great gift this holiday season.

CHINA DELAYS LAUNCH OF ITS GOLD BENCHMARK FOR APRIL

News of a yuan-denominated gold benchmark has been circulating for months. The launch was supposed to happen before the end of this year, but India’s Economic Times now reports that two sources close to the matter claim the benchmark will go live in April 2016.

“It will start in April with Chinese banks and some foreign banks,” one source inside a local bank said. “Jewellers, miners and banks could use this price as a benchmark.” The Shanghai Gold Exchange (SGE) has not yet made itself available to comment and has neither confirmed nor denied this.

The decision to launch a yuan-backed gold benchmark is seen as a power play, as China feels it should be a price-setter for the metal given its market weight. While a yuan fix won’t immediately rival those coming from London and New York, it stands to become a legitimate threat if the Chinese currency becomes fully convertible.

China recently made an unprecedented move of allowing foreign banks to trade yuan-denominated contracts on the SGE and also gave them import licenses, no doubt to increase the likelihood of these banks participating in the benchmark-setting process, which is another condition for its success.

ECONOMIST REMAINS OPTIMISTIC ON GOLD IN 2016

The most recent China Gold & Precious Metals Summit held in Shanghai saw many analysts express their view on what the future has in store for the yellow metal, especially in the wake of the recent rates hike.

As seen on Forbes, many of them expressed neutral or negative short-term outlooks, with a more positive long-term view. The factors that could weigh down on gold’s price in the near future included: lackluster sentiment by traders and investors, the absence of inflation, continuing strength of the dollar and the possibility of two to four additional rate hikes in 2016.

Yet not all analysts were bearish in the short-term. Martin Murenbeeld, chief economist for Dundee Capital Markets, remained optimistic, as he said he doesn’t expect any additional raises of interest rates in 2016. He added that some attendees even called for a ‘relief rally’ that would move gold’s price back above $1,200 before year’s end.

Douglas Groh, another presenter at the summit, was pessimistic on the dollar rather than gold: “He argued that buying low, as in buying right now, is what investment is all about,” Murenbeeld reminisced.

As the conference was held in Shanghai, there was no shortage of Chinese presenters who were bullish on gold and bearish on the greenback. Murenbeeld quotes Lu Dongshang from the Shandon Zhaojin Group Co. saying that the “U.S. dollar and U.S. dollar assets is ‘futureless’; the ‘overlord’ status of the U.S. dollar is being challenged, and the U.S. monetary system will experience a complete crash”, encouraging Chinese investors to turn to gold instead.

WHY LAWRIE WILLIAMS FEELS GOLD IS A GREAT GIFT FOR THIS FESTIVE SEASON

According to Lawrence Williams, gold is the perfect gift for this festive season. After all, in Christian tradition, gold was one of the three gifts that baby Jesus received, and Williams reminds us it has held up much better than the other two (frankincense and myrrh) over the years.

Members of virtually every religion and even those of little faith have always had a deep-seated appreciation for the metal. The reason Chinese and Indian religious festivals stand out from the crowd is the two countries’ enormous populations – a small amount of per capita consumption adds up to a massive national total.

With how quickly China’s economy is growing and with signs of improvement for India as well, these two countries are sure to remain the most prominent connoisseurs of the metal. More and more Chinese people are ‘dragged into’ the middle class, as evidenced by Chinese consumers spending more on their “Singles’ Day” than U.S. citizens did over the entire Black Friday/Cyber Monday weekend. Compared to Westerners, Asians are far more likely to allocate some of their ‘spending money’ to gold in one of its many forms.

While gold is no less prominent in the West, it’s certainly less favored, as Western investors have a taste for the quick returns that could potentially come from equity markets. Yet many are now worrying how much time the stock bubble has left, bringing Williams to another reason why gold makes a stellar gift for these (and any other) festive times. Aside from its past and present appeal, at its current price of $1070 per ounce, the metal’s potential for value growth is “inordinately strong”. A single event could be sufficient to remind Westerners of gold’s safe-haven appeal, in turn allowing it to regain its fondly-remembered upwards momentum from a few years back.

Is China Headed For A Serious Socio-Economic Crash?

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NOW THAT THE IMF WILL INCLUDE CHINA’S YUAN IN ITS BASKET OF CURRENCIES, WHAT ARE THE REPERCUSSIONS FOR THE WORLD ECONOMY AND YOU?

Chinas collapsing Is China Headed for a Serious Socio Economic Crash?

From L Todd Wood, for Birch Gold Group

The Communist Party of China still is a totalitarian government. Many people around the world forget this fact. The world’s second largest economy is run by a committee of dictators, where the people aren’t free and neither are the securities markets.

It is for this reason that the inclusion of the offshore version of the renminbi, the yuan, into the International Monetary Fund’s Special Drawing Rights, or SDR, may not be the panacea for China that their leaders think it will be.

You have to think about the marriage of the yuan’s rise to a convertible, global reserve currency, with the dramatic slowdown, or crash, of the manufactured, Chinese economic miracle. Although China has allowed some capitalistic thought and practice into its economic fiber, the economy is still “managed” — hence the term, managed capitalism.

This means that the markets are not truly allocating capital; on the contrary, China is still issuing five-year economic plans. In short, all China has done over the last several decades — in addition to making things cheaply and exporting them — is misallocate capital to keep its billions of people working, and to prevent social unrest.

Now, the decades of building ‘ghost cities’ are coming home to roost.

The Economic Times reports, “Now, with increased convertibility the yuan may be used for two purposes; one to attract more investment and two to enhance flight of capital to safer and more stable economies. It can also trigger off conversion of hoards of black money to safer havens…Therefore, inclusion of the yuan in the IMF’s basket of currencies may not be a good thing if things turn bad for China.”

In other words, with the yuan becoming a convertible, international currency, money can flow into China as well as go out. Only a small portion of the Chinese population is benefiting from the Chinese “economic miracle.” It is not sustainable.

The wealthy in China are hauling boat loads of cash out of the country as fast as possible. They know it is a ponzi scheme and they don’t want to be the last ones holding the empty bag. The convertibility of the yuan will allow this massive capital drain to increase.

Investors are going to be wary of a system where the sellers of securities in a market downturn are arrested and put in jail, where company intellectual information is stolen and there is not a level playing field in regard to competition with local firms. But that’s not all China has to worry about.

China could be headed for serious social unrest as well. There are millions of people, effectively serfs, who are disenfranchised from the wealth that has been created. They are angry. Their land is being taken for a factory, a city, a wealthy person’s palace. The ghost cities in China are surrounded by ghettos filled with people whose land was stolen to build the empty metropolis.

To summarize, China is headed for a serious socio-economic crash with all of the negative effects that will entail.

The problem to you and me is that this will damage the global economy as well. You can’t have a collapse of the world’s second largest economy and not have outsized, collateral damage.

The fact that wealthy Chinese people will be able to remove billions of dollars in stolen wealth from the system, while a collapse happens, will only add gasoline to the proverbial fire.

The bigger the economic bubble, the bigger the consequences when it pops. China is history’s biggest. The world’s financial system is teetering on many levels. All the more reason to make sure you have a properly diversified portfolio, one that includes more than just the paper assets that could be worth no more than the paper they’re printed on.

China has also been drastically hoarding gold. Read about it here.

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These 4 Factors Holding Back Gold, Will Likely Start Benefiting The Yellow Metal

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With all the speculation surrounding gold prices, one report claims that it likely has nowhere to go but up. Read why here.

These 4 Factors Holding Back Gold, Will Likely Start Benefiting the Yellow Metal

This week, Your News to Know brings you the most relevant news stories about the state of the gold market and the overall economy. Stories include: Why gold might finally be nearing a bottom, 3 reasons to be bullish on gold in 2016, and Lawrie Williams’ take on gold in 2016.

THE CASE FOR WHY GOLD COULD FINALLY REACH ITS BOTTOM

In a recent email interview with Myra Saefong of MarketWatch, George Milling-Stanley expressed his thoughtson the road ahead for gold. Milling-Stanley is no stranger to precious metal and its dealings, being the head of investment strategy at State Street Global Advisors.

Much of the interview revolves around a single question: Could gold finally be nearing its bottom? Milling-Stanley believes that it might very well be and provides some solid arguments in favor of this.

Ever since 2013, gold has been bouncing back and forth inside a price range of $1,050-$1,350. It has thus far been unable to break past the upper limits of this range despite record sales of bullion coins – Milling-Stanley believes four factors are preventing a breakthrough, each of them being equally effective: The dollar’s strength, the continued absence of inflation, the strength in U.S. equities and complacency in the face of risk. The latter became especially pronounced in the wake of attacks in Paris, as gold remained in the same spot despite its status as a safe-haven asset. For the time being, gold is locked within its range, but eventually each of these four factors will change favorably for the metal.

And what about the lower end of the range? Milling-Stanley doesn’t think the metal can go much further down, insisting it’s near its bottom and dismissing the possibility of an interest rates hike having any lasting impact: “There may be a short-term, knee-jerk downward move when higher interest rates become a reality, but I do not expect higher interest rates to exert any sustained downward pressure on gold prices,” he says. The main reason for this is simple: The current gold price already takes a rates hike into account as if it had already happened.

For gold to dip past $1,050 in any relevant way, significant weakness would have to occur in internal market fundamentals (the balance between supply and demand). “It is difficult to imagine where such weakness might occur,” Milling-Stanley notes, adding that any of the aforementioned four factors becoming more pronounced is similarly “hard to envisage”.

3 REASONS TO BE BULLISH ON GOLD IN 2016

Despite HSBC’s recent bearish stance on gold, the firm is now calling for a bounce back in 2016. As reported by Jonathan Ratner on Financial Post, chief HSBC precious metals analyst James Steel has given us three good reasons to get more bullish on bullion.

The first comes in the form of emerging-market demand: Together, China and India account for nearly two-thirds of global gold consumption and are expected to further increase their buying in the future. Steel reminds us that emerging-market investors are sensitive, staying away when gold nears $1,300 and flocking to it as it moves around $1,100.

The second reason is the expected rally of the euro versus the dollar, as gold has been known to have an inverse relationship with the greenback. Despite a possible rates hike, the dollar stands to weaken either due to a shortened tightening cycle by the U.S. central bank or a reversal of its tightening policies caused by low inflation or weak growth.

Lastly, Steel forecasts that gold exchange traded funds (ETFs) will become net buyers again after three years of selling, and also expects net positions in areas such as the COMEX to rise.

LAWRENCE WILLIAMS ASKS: WHAT WILL GOLD DO NEXT YEAR?

As retail holiday events take their turns ahead of the fast-approaching 2016, Lawrence Williams asks an important question: What will the yellow metal do next year?

On Sharps Pixley, he contrasts the view of analysts in a negative-tone within a Wall Street Journal (WSJ) article with any number of different situations that could benefit the metal. One important point to remember: The dull and pessimistic prediction seen on WSJ still isn’t bad for gold at all.

The bank analysts polled by WSJ generally agree that gold should have a flat upcoming year with an average price of $1,114 an ounce, but seemingly fail to acknowledge that this ‘bleak’ outlook is actually an improvement over the current situation and seemingly guarantees a slightly-better year for the metal.

But what if things take a turn for the unexpected – could gold go much higher than intended? Demand has certainly been on the increase, with both India and China (the world’s largest consumers of the metal) seeing record imports. Central banks further drive demand for physical gold up by buying what Williams estimates could be 400-500 tons a year. When coupled with low prices that are halting mining operations, this heightened demand from around the globe will have to cause a supply squeeze eventually, although this realization still isn’t doing much for gold prices.

Gold has been doing great in plenty of currencies other than the one it’s valued in by most investors: The dollar. For gold to rise against the dollar, the value of the greenback would have to fall, but Williams doesn’t find this to be such an unlikely scenario; given the big balance of payments deficit and the adverse effects a higher dollar would have on the domestic economy, the Fed might not want it increasing in value any further. Consequently, the Fed might actually take steps to keep its currency under control.

Other than the Fed acting against the dollar, any one out of a number of possible ‘black swan’ events could go off at any moment and cause bullion demand to spike: Another national debt default or a geopolitical conflict taking a turn for the worse are just some examples of possible catalysts for gold’s ascension. Whichever the case, Williams believes that gold should do just fine in 2016.

photo credit: Gold Bars in Golden Bullion Shop via photopin
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What The Heck Should I Be Doing With My Money

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IN TODAY’S WORLD, “ON FIRE WITH RISK”, HOW CAN YOU POSSIBLY SAFEGUARD YOUR SAVINGS? ONE FORMER FINANCIAL PRO OFFERS HIS OPINION ON THE KEY TO SUCCESS.

feel lost What the Heck Should I Be Doing With My Money?

From L. Todd Wood

Having been a financial professional most of my adult life, I can remember many instances at a lunch, a dinner party or after a speech, where I was asked, So where should I put my money? I have found that most people – even hyper-successful businessmen or women – are clueless when it comes to handling their personal accounts. I’ve talked with executives who own a few million shares of their own stock tell me, since they also own a dozen penny stocks, they’re savings are diversified. I have to laugh at those.

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Gold Was The Second Best Currency In 2014

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IN FUTURE YEARS, WHEN THE DOLLAR REVERTS TO THE AVERAGE, WHAT WILL HAPPEN TO YOUR SAVINGS THEN? THIS IS A PERFECT CAUTIONARY TALE FOR WHY GOLD IS SO VALUABLE IN YOUR PORTFOLIO.

GOLD Gold Second Best Performing Currency 2014 12262014 lg Gold Was the Second Best Currency in 2014

Given the strength of the U.S. dollar, it is surprising that gold has held its own in 2014. Even though the yellow metal lost some of its value last year, it still outperformed all major world currencies except for the U.S. dollar.

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