Gold And US Dollar Hegemony

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GOLD AND US DOLLAR HEGEMONY

The US dollar is the world’s reserve currency. That isn’t likely to change anytime soon.

All currencies are substitutes for real money, i.e. gold.  And because all governments inflate and destroy their own currencies, any potential alternatives to the US dollar are as bad or worse.

That doesn’t stop the dollar bashing, of course. In a general long-term sense, the condemnation is well-deserved. After all, the US dollar, under the care and watch keeping of the Federal Reserve Bank of the United States, has lost more than ninety-eight percent of its purchasing power.

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Investors, Speculators, Gamblers, Instigators

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Investors, speculators, gamblers, and instigators – four types of  ‘investors’. Which one are you?

Nowadays, it seems that anyone who owns anything fancies themselves to be an investor.

However, does buying a fractional unit of bitcoin in an online trading account qualify someone as an investor?

Are fanciful dreams of striking it rich by running with the social media herd the foundation of fundamental investing? Maybe there is more to it than that. Let’s take a look.

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Gold Prices Then (3/2020) And Now (3/2021)

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GOLD PRICES THEN

A year ago this past week marked the onset of the Covid-19 Pandemic. It also was the last full week of trading in the financial markets preceding crashes in all markets and a near-complete, albeit temporary, shutdown of economic activity.

Subsequent rebounds in stocks, bonds and real estate took valuations to levels as high  or higher (much higher for stocks and gold) than before the turbulence took hold. Some might refer to those valuations as nose-bleed levels, although the summit for peak ascension is always moving when the effects of inflation are factored in.

Gold had its day in the sun, too.

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Powell And Yellen – Team Fed

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POWELL AND YELLEN…

Flashback 11/21/2017:

“President Trump nominated Jerome H. Powell as the new Chairman of the Federal Reserve Bank. Don’t look for much to change. And Janet Yellen’s announcement that she will resign from the board upon Mr. Powell’s induction as board chair is pretty much a non-event.” (see New Fed Chairman, Same Old Story)

Currently, comments by Jerome Powell last week regarding inflation and its effects spooked some investors and analysts.  Investors in leveraged Treasuries were dealt a severe blow when yields spiked and bond prices fell. Others have claimed that the sky is falling and that inflation is all around us.

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Gold And US Treasuries – Punctures In The Everything-Bubble

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GOLD AND US TREASURIES 

The price of gold early Friday morning this past week touched $1720. At that level it was down $350 per ounce from its high point of $2070 last August.

The size of the decline is not unusual at face value. But, in light of the expectations for hugely higher inflation rates and much higher gold prices that have dominated the headlines over the past year, the drop might signal a cause for concern among gold bulls.

Meanwhile, eyes are fixed on interest rates for US Treasury bonds. During the same six-month period (August 2020 – February 2021) during which the price of gold fell by seventeen percent, the price of the 20-year US Treasury bond fell by twenty percent. That IS a huge deal, as it corresponds to sharply higher interest rates from less than 1% last August to as high as 2.26% just the other day.

The rush to proclaim correlation between interest rates and gold has resumed. Also, warnings and predictions of much higher inflation from around the globe are increasing.

As we have said on several occasions, there is no correlation between gold and interest rates (see Gold And Interest Rates – There Is No Correlation).

This can be seen on the charts below. The first chart (source) is a history of gold prices over the past fifty-six years and the second chart (source) is a history of interest rates over the same time period…

GOLD PRICES 1965-2021

 

10 YEAR US TREASURY RATE 1965-2021

During the 1970s, the price of gold rose from $40 per ounce to an intraday peak of $850. All throughout that time, the interest rate on the 10-year US Treasury bond rose higher and higher; from approximately 4% to 12.5%.

However, during the years 2000-2011, while the price of gold rose from $250 to $1900, interest rates on the 10-year US Treasury bond dropped from 6% to 2%.

The two decade-long periods provide contradictory results for the argument that lower interest rates are correlated to higher gold prices.

And for those who argue that the higher rates we are currently seeing are an indication of significantly higher inflation, then why is the gold price declining?

The higher interest rates are possibly a market reaction to the brutal effects of infinite credit creation and interest rate manipulation by the Federal Reserve.

The entire world economy is funded with cheap credit and most economic activity is dependent on it.  The prices for all financial assets misrepresent and grossly exaggerate any underlying fundamental value.

Higher rates might trigger a credit collapse so severe that any asset could decline in price by fifty percent or more.

As for gold, it would also decline – to a level commensurate with whatever strength the US dollar attains.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT  and  ALL HAIL THE FED!

Gold To Monetary Base Ratio Says No Hyperinflation

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A fundamental tenet regarding money and inflation is that ongoing money creation by governments and central banks (Federal Reserve) cheapens the value of all money (US dollars) in circulation and leads to a loss of purchasing power. The loss in purchasing power shows up in the form of higher prices for all goods and services.

As long as the amount of money that is created

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Barrick And Buffett – What About The Banks?

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BARRICK AND BUFFETT…

The roundtrip is now complete and the entire voyage took less than a year. When Berkshire Hathaway acquired nearly 21 million shares of Barrick Gold in Q2 of 2020, people took notice.

Buffett’s about face and sale of almost 9 million shares of Barrick the following quarter (Q3) seemed incongruous. The remaining 12 million shares were sold in the fourth quarter of 2020, and Berkshire Hathaway is now devoid of any holdings in the gold arena.

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Bubblicious Asset Prices, Debt Dependency, Economic Collapse

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BUBBLICIOUS ASSET PRICES 

The words bubbly and delicious might be more descriptively accurate when talking about champagne. However, it is not too difficult to imagine giddy salivation among the owners of Bitcoin, or Tesla stock.

And, while some might be more stringent in their terms of definition and applicability, investors in stocks, bonds, real estate, etc. – pretty much anything with a $ sign in front of it – might want to rethink the current state of affairs as it pertains to valuation of their financial assets.

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Janet Yellen Re: Cryptocurrencies and Terrorists

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JANET YELLEN RE: CRYPTOCURRENCIES AND TERRORISTS

In comments made during her confirmation hearing last month, Secretary of Treasury Janet Yellen said that transactions in cryptocurrencies, such as Bitcoin, were used “mainly for illicit financing” and suggested that lawmakers and regulators curtail their use due to terrorism concerns.

Here are the statements she made in response to a question from Sen. Maggie Hassan, who asked Yellen during her confirmation hearing on Tuesday about the dangers of terrorists using cryptocurrencies:

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Stimulus Doesn’t Always Stimulate – Pushing On A String

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STIMULUS DOESN’T ALWAYS STIMULATE 

The word stimulus has become an oft-repeated term, sometimes overused. We are referring to the non-biological meaning below.

According to the dictionary,  stimulus is “a thing that rouses activity or energy in someone or something; a spur or incentive”.
Besides spur and incentive, other synonyms for stimulus are boost, impetus, prompt, provoke, etc.

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