While cryptocurrencies have been stealing the headlines recently with record highs amid ‘inflation hedge’ narratives, commodities have put in a strong performance amid supply chain shocks and unprecedented demand interference (monetary/fiscal policy). As everything from copper to crude and aluminum to zinc has soared, one metal has lagged…
But, as Bloomberg reports, two of the biggest names in Canadian mining – the former chiefs of Goldcorp, David Garofalo and Rob McEwen – predict investors will catch on soon that global inflationary pressures are far less transitory and more intense than central bankers and hedonically-adjusted consumers price indexes suggest.
When that realization sets in, gold’s inflation-protection appeal probably will send prices to $3,000 an ounce, from about $1,800 now, according to Garofalo. Such a run-up would be a “down-payment” to McEwen’s $5,000 long term prediction.
“I’m talking about months,” he said.
“The reaction tends to be immediate and violent when it does happen. That’s why I’m quite confident that gold will achieve $3,000 an ounce in months not years.”
McEwen warns that the global monetary and debt expansion to cope with the pandemic, as well as secondary drivers associated with supply disruptions, will have people turning back to traditional methods of protecting wealth.
“It’s not just the dollar,” he said.
“All currencies are buying less than what they were buying a year ago. So I look at that as an unprecedented development at least in our lives that is going to affect the value of fiat currencies around the world.”
We have seen this kind of delayed response before…
As Peter Schiff recently noted, the knock on gold and silver has always been that you forgo interest. Higher interest rates increase the opportunity cost of owning the metals. For example, if interest rates are 10% and you own gold, you’re giving up 10% interest on the money you have in the yellow metal. But when rates are negative, it doesn’t matter.
If they’re negative 2% or negative 10%, nobody wants a negative yield. So, as long as yields are negative, you want to get out of bonds. It doesn’t matter how negative. Once you’re losing, it’s a loss.”
Ultimately, a negative rate environment, no matter how negative, should be bullish for gold and silver.
The other tailwind for gold and silver is traders still expect the Federal Reserve to respond to inflation by tightening monetary policy – and thus raising interest rates.
Oil prices are rising as a result of inflation. Gold should also be rising as a result of inflation. It should not be falling because investors expect the Fed to fight inflation. Again, if the Fed could fight inflation, they’d be fighting it right now. The reason they’re not fighting it, the reason they’re pretending that it’s not a problem, and so there’s no need to fight it, is because they can’t. But they’re never going to admit that. That would be a complete disaster. So, they have to pretend that it’s transitory, that it’s not a real problem, but also pretend that if it ever becomes a real problem, well, they’re going to do something about it. But of course, they can’t do anything about it. So, they won’t.”
But while price has lagged, there are plenty that are using this ‘cheapness’ to back up the truck.
Gold demand in China was up in September, as the country approaches a peak gold-buying season. September is typically a strong month for wholesale gold demand in China as it leads up to an important holiday season. October is traditionally a big month for gold jewelry sales during the seven-day National Day Holiday in early in the month. Both gold withdrawals from the Shanghai Gold Exchange (SGE) in September and gold imports in August were up, a sign that the Chinese gold market continues to recover after it was hit hard by the coronavirus pandemic.
Rising local premiums also signal growing demand for gold in China. The local gold price premium rose for the third straight month in September, averaging US$7.5/oz. That was $1.70 higher month-on-month.
So, it appears the Chinese (and the Russians) get it and Peter Schiff thinks the markets will figure this out eventually.
In an inflationary environment – and we are in the most inflationary environment we’ve ever been in – the riskiest things you can own are bonds. And it doesn’t matter what bond you have. Treasuries are no safer than the riskiest junk bond when the threat is the loss of purchasing power to inflation. The real safe haven in this environment is gold. And as soon as investors understand the difference between gold and Treasuries, they will then start moving into gold as a safe haven, and they will not be deterred in their buying of gold when bonds go down because they will expect bonds to go down. When you’re looking to remove inflation risk from your portfolio, you sell bonds, including Treasuries, and you buy gold and silver.”
Its universality and 4,000 year-old history mean gold is better positioned than crypto-currencies as a hedge against an inflationary environment that “will have deep and meaningful impacts on our capital,” Garofalo concluded.
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I don’t really care about the fiat to gold comparisons. I do not care because I have no plans on converting my PM’s to fiat except for a tiny bit once hyperinflation kicks off to pay off my mortgage and this is strictly for personal reasons as I promised certain naysayers in my family that one day I’d pay off my home with a single coin and I hate being wrong. Apart from that, I keep stacking and I do not worry about what some outside agency says that it is worth.
Just know that the federal government has already allowed mortgage holders to re-write mortgages without the approval of the homeowner in case of just such a scenario. Can’t believe this was actually covered by the mainstream in an article, but I did read it some time ago. Be careful how long you wait to execute your plan (unless of course all the criminals have already been executed).
I disagree with the article. FIAT currency is a confidence game – and the powers that be cannot allow another competitor to embed itself in the minds of those as a safe-haven from inflation against fiat.
No, they will keep shorting the paper futures market, changing the rules, shorting it some more changing the rules again, etc., etc., to keep the animal spirits from taking hold of the AG and AU markets.
We’ll read an identical article about the metals next month and the month thereafter and so it will repeat until:
1) The paper futures market fails;
2) Miners start shuttering mines due to their inability to operate profitably;
3) Some country advisory to the US opens up their own gold call window “We’ll purchase as much as anyone has for US $10k an ounce” creating massive arbitrage opportunities that would force TBTB to react.
Don’t get your hopes up, and keep stacking.
Fuck the money printers.
EDIT – I am not too sure about #2 on my list above. I could very easily see the government subsidizing AG and AU mining to keep the mines running and at a loss.
It has to move with purchasing power (real estate), so it is due a correction to about 3k as soon as confidence in those real estate prices firms up.
The word “manipulation” never shows up in these articles, but is the 800 pound gorilla in the room, as far as making any predictions go.
Still, with gold being the only commodity that isn’t rising with inflation, maybe the manipulators realize that their hand is being too exposed if they do not open the valve a little more for an upward trend.
Why would they care? Their undertakings have been done in an open and notorious manner for some years now. They don’t care about seeming obvious. They care about suppressing the price to prevent the average idiot from purchasing PMs.
Keep the price supressed. If it were at it’s true value most of us wouldn’t be able to add to our positions. Strange, but they are doing us of lesser means a favor. The day will come when we will shine. Unfortunately at that point survival will be more difficult. Trust in the LORD and he will give you the desires of your heart. Psalm 37:4
What a clever Psalm.
Nobody is buying gold. Crypto on the other hand…
The “Pet Rock” was the best-selling gift for Christmas one year when I was a kid. Lemmings will lemming.
Does APMEX accept pet rocks as payment for gold?
Fuck your lemming coment, insult as a refuge for the incapable, is an unfavorable place to dwell.
The FiveEyes, along with the 14 Eyes and CyNah can easily gut bitcoin with a pen and telephone.
I know when I look at gold and silver and platinum that there is a difference. I know that when I speak to those who use these raw materials in a manufacturing process that there is a critical difference and that they are NOT interchangeable. I know that from an extraction from the earth standpoint they are not the same, do not exist in the same amounts in the earth’s crust, and therefore have different values simply because of their rarity.
But please tell me what makes Bitcoin different from Etherium, Dogecoin, or any of the rest. Its not as though everyone takes Bitcoin as payment (though more do than the others for sure). Its not as though any of them have more utility in the manufacturing process than the other. When the power goes out or the government shuts down the internet (and they will), which of these “currencies” will everyone be able to use?
I’ve got the critical precious metals (gold, silver, copper, lead, brass), and truly have no intention of adding anything “virtual.”
Crypto is internet money.
Gold is not.
ETH is programmable crypto.
Bitcoin is not.
For years I have extolled the importance of crypto as it relates to this 4th and the coming financial system paradigm shift.
Gold will always be a reserve asset.
Gold will never be a payment method again.
Crypto in some form will be the foundation of the next financial system. The battle will be over who runs it, Centralized CBDC vs. Decentralized private issue.
Is that a real question?
When they’re ready, CBDC will be all. And there will be a short window to transition away from the rest.
There are other currencies than the dollar, and they occasionally fail. Then a reissue is done where there is a short window to convert. This is not mysterious stuff.
There is a Legal Maxim that states:
“Everything can be valued in Money, but Money is valued in Nothing.”
The “Valuation” put on Everything is Mammon, not so much the money itself.
You and Me have a Monetary Value to the Government.
At any time, the Government could drop the price of Gold to its Statutory price of just a little over $42.
That would mean the same thing as actual Confiscation as it Confiscates the Value of the metal.