Rickards: "There Are Three Things Going On With Gold Right Now"

Tyler Durden's picture

Authored by Craig Wilson via Daily Reckoning blog,

Jim Rickards joined Kitco News and Daniela Cambone to discuss the latest news and analysis from gold markets, geopolitics and even bitcoin.  The Wall Street veteran took on the bigger picture facing metals investors and what could be just around the corner in a bubbling market.

Jim Rickards is the editor of Strategic Intelligence and is the New York Times best-selling author of The Road to Ruin. Rickards’ worked on Wall Street for decades and has advised the U.S intelligence community on international finance, trade and financial warfare.

When asked why certain geopolitical tensions have greater impacts on gold and hard assets than others Rickards remarked, “There are two things going on,

"... first is that the North Korean missile threat goes from high tension to back down again. This is a very serious threat and we are headed for war with North Korea. While I don’t know what it will take to not just get gold to go up but stocks and other sectors, ultimately markets are going to be impacted.”

 

People seem to have very short attention spans but that’s not how to think about it. It’s possible to see that Kim Jong-un is not deviating from his path to get nuclear weapons, the U.S will not allow it. There’s no middle ground there. It would be great if we could have diplomacy. I think we should also ratchet up sanctions on China. But I don’t see either of those happening.”

 

Don’t underestimate the extent to which gold is being impacted by hedge funds, leverage players, and others that are in the mix for the current high in gold. They don’t really care if it is gold, soybeans, etc. but it is simply another commodity. They receive a nice profit with tight profits, tight stops.”

 

“The bigger picture to look as here is that gold hit an interim low last December and has been grinding higher ever since.  Now gold is up over $200 an ounce and is one of the best performing assets in 2017. There’s a pattern of higher highs and shows a very positive occurrence.”

Gold and Weak Dollar Environment

The interviewer then shot back at Rickards asking whether the price and actions in the market always come back to the U.S dollar? The best-selling author and economist responded, “This all relates to currency wars. I think of gold by weight.”

When most people look at the cost of gold they relate it to the dollar. That gives the dollar a privilege to say that it is the way to count everything. It is also possible to count gold in euro, yen or even bitcoin. I think of gold as money. These are all just cross rates. When I see a higher dollar price for gold, I think of the dollar as being weaker. Likewise, if I see a lower price for gold it just shows that gold is constant and the dollar got stronger.”

 

There are three things going on right now in gold. There’s a fear trade, there’s technicals with supply shortages and ultimately a weaker dollar. If you want to know where the dollar price for gold is going, ask yourself where the dollar is headed. As the dollar gets weaker due to Federal Reserve Chair Yellen’s plan to tighten rates into weakness. We’re getting disinflation, not inflation and the desire from the Fed is a weaker dollar.”

When The Street’s Daniela Cambone prompted Rickards on the rally in gold and whether it would be rejuvenated he leveled,

I expect to see gold hit $5,000 and eventually to $10,000 an ounce. Maybe not tomorrow or a couple of years but that is the fundamental price of gold as money.

 

“In a recent conversation with legendary commodity investor Jim Rogers he indicated to me was, ‘nothing goes to that level without a 50% retracing before it resumes its path upwards.’ Moves happen very fast. The question is, what are the catalysts that could take it higher?”

Is Bitcoin Stealing Gold’s Thunder?

Speaking on catalysts and what could shake the gold market the interviewer then asked whether Bitcoin could have a significant impact. Rickards pushed back,

“Bitcoin is a very small market cap compared to gold. I don’t think it has much impact on gold and looks like a bubble right now.”

 

“As someone who has been around Wall Street a long time I’ve seen a lot of different tricks of the trade and frauds that come and go. I am seeing all of the various schemes in bitcoin right now. There’s good forensic evidence that there are people doing wash sales right now and the suckers don’t know they are getting sucked in. Gold is still the ultimate safe haven.

German Gold and ‘Weird’ Commodity Movements

Recently, Germany moved to reacquire its gold being held within the Federal Reserve system. Rickards latest analysis on the situation detailed that,

“In 2013 the central bank in Germany said it wanted its gold back from the UK, France and the US. Here’s the thing, Germany does not want all of its gold back.”

 

“As it is going through its election cycle, there are specific factions of the German government that are pushing to get German gold back to domestically being held. The German elections are in mid-September, it is not a coincidence that this happened just before that. It was to appease political dynamics as well as leasing development of gold.

Looking internally, the recent visit by Treasury Secretary Mnuchin to the US Mint in Fort Knox stirred many commodity investor analysts. Rickards offered,

“I was shocked to see the visit. It is rare and only the third time that a Treasury Secretary has visited since the 1930’s.”

 

“The other thing that is strange about the visit is that the monetary elites don’t want to pay any attention to gold. Several years ago Fed Chair Bernanke was asked about gold and he replied that it is given attention because of tradition. The reason that this official visit matters now is that when gold is being given public attention by government leadership, it enhances the value of gold as a monetary asset. They don’t want the general public to pay attention to gold. The question is, why did he do it and tweet out the visit?”

Finally, speaking on the mounting complexity of issues facing the American government Rickards warned that gold could be well positioned for the remainder of Fall. Rickards sets up,

We’re coming up against a debt ceiling and budget train wreck. The US budget is at D-Day at the end of September. Separately, the Treasury is literally running out of cash. The government will have to raise the debt ceiling for the Treasury and it will need to, at the very least, pass a continuing resolution.”

 

The Treasury has a trick up its sleeve. In 1973, the gold on the books of the Treasury is officially valued at $42.22 per ounce. It would be possible to go mark it to the market just like a hedge fund does. The Treasury could raise the value to a raised price and that difference between $42.22 and the heightened amount would only require a certificate to the Fed for money.”

 

“That is all under the Gold Act of 1934. The move could open up hundreds of billions of dollars out of thin air just by remarking gold. While I am not saying this is going to happen, it is an option that they have available.”

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GatorMcClusky's picture

Why are all of these guys Legendary? Legends in their own minds.

sincerely_yours's picture

the 3 things are:
1. buy it
2. buy it
3. buy it

Tugg McFancy's picture

You forgot

4. buy my newsletter

5. buy my book

zorba THE GREEK's picture

Bitcoin is being manipulated to go up so as to take upward pressure off of gold. then they will pull the plug and take all the money and people will be left with "shitcoin". Gold and silver are the real deal and silver is the better bargain because it was easier to suppress and is still below the cost to mine it. If you ain't holding it, you don't got squat. 

Silver Savior's picture

Some of those shitcoins are actually doing pretty good but at the end of the day it's all about PMs.

BaBaBouy's picture

Dow/GOLD $22K

Bitcoinz tops out at $10K

SILVER... Ah, forgetaboudit...

The Real Tony's picture

Dow 5,000 and GOLD $5,000 a one to one ratio. That should be the next move for gold and the Dow.

Free_Market_Mafia's picture

Amen! 

Cash is worthless because they are printing it to zero worth. 

Bitcoin is worthless because it is all 1's and 0's? What is its inherant worth? 

Stocks and Bonds are pieces of paper. 

Only assets I will heavily invest in are hard assets! Real assets! 

 

Conscious Reviver's picture

JR's a little spooky to me. No more close-up shots please. The doo-lap is not helping.

This line of his from above is bs.

"They don’t really care if it is gold, soybeans, etc. but it is simply another commodity."

Bear Sterns was long gold in 2008 and got destroyed for it.

sinbad2's picture

Which is exactly what the Chinese are doing, they are swapping their US dollars, as soon as they get them for metals, land, in fact any real asset.

Joyboy's picture

if 1 and 0 are worthless why are you using 1 and 0 ? Internet, gadgets and so on.

all that pc does is calculates 1 and 0. Worthless? Think a little bit okay? Electricity is useless ? Go back to the cave maybe..

1 and 0 are priceless! 

divingengineer's picture

Electricity, pffft!
Nothing but electrons!

Joyboy's picture

If 1 and 0 are worthless why are you using it? 

1 and 0 are priceless!

It's like saying air is worthless, cmon think man. 

JonNadler's picture

we use  them boy, we use  them, we just wouldn't put all our wealth into them

Socratic Dog's picture

Seems obvious to me that bitcoin etc are just the current iteration of Dutch tulips.  Essentially worthless, but if you can convince enough people they're worth a fortune, then a fortune you will make.  It's a scam, no more, no less.

This Satori fella is doubtless a jew.

rosiescenario's picture

The price of silver needs to get north of $20 / oz for most mines to be cash flow positive. There is no exploration nor new mine development work going on now because of the price. Existing mines are being depleted. Silver is used in solar panels and electonic products and the demand appears to be going up. While the TBTF banks have managed to suppress the price of silver for years, we are now at a point where either the price of it must go up to enable supply or the producers of the goods using silver are not going to have enough. That situation may also make the CME prices irrelevant,...if you need silver for your product and it is in tight supply then you are simply going to pay what the silver refiner demands.

Argos's picture

Yes, but at least he makes it obvious.  Oh, and you left out, "I was involved in that," and always, "the economic war games at the Pentagon."

TheReplacement's picture

North Korea is simple.

  1. Cut the crap.
  2. Inform South Korea, Japan, and Taiwan, privately, that we won't back provocation nor any other stupidity. 
  3. Inform China, privately, that if North Korea kills a single US Citizen that Bejing and surrounding environs becomes a glass factory of historic proportions. 
  4. Inform the world that China has previously stated that they want hegemony in Asia.  Careful what you wish for - the North Korea problem is all yours.
  5. Remove US troops from South Korea.
  6. Be patient as absolutely nothing of consequence to the lives of US citizens happens.

 

 

StolenFuture's picture

Steps 1-3 are unnecessary. China knows where the problem is located, if not what to do about it.

Clock Crasher's picture

Legendary failure of Long Term Capital Managment.  Eclipsed only by a legendary bailout. 

Bastiat's picture

$50,000 to balance the UST debt.  Forget what it would take to back the currency (even just the US currency).

Greenspazm's picture

I can remember when Riktards was banned on ZH expressly due to his co-inventorship of "too big to fail" in the LTCM fiasco. That must have been ZH 1.0. How times have changed in ZH 2.0.

Clock Crasher's picture

That legendary comb over tho.

omniplastic's picture

Not sure why he thinks the Fed raising rates will weaken the dollar.  It should have the opposite effect.  Not to mention the bigger elephant, unloading the balance sheet, which one would think we drive up interest rates, default loans, contract the dollar supply, and strengthen the dollar, relative to gold and other currencies.  

HRClinton's picture

Dju know that some people are making money no gold, by uicing it up, and then hammering it?

 

meterman's picture

HR - Are you saying that the GOLD HUCKSTERS are dishonest? Oh My!

Jim in MN's picture

DOW:GOLD 1:1 @ 5000

But, when?

Clock Crasher's picture

We're in the pipe.  Five by five.

-Aliens

holdbuysell's picture

From experience, there was a time that ZH provided the inline video for exactly what you quoted.

Those were the days.

Here's the video to your quote, in hopes that ZH still has the bandwidth to act.

https://www.youtube.com/watch?v=fOZk--oZdQk

Raffie's picture

Anytime now.

Bewteen now and when the sun turns into a red giant and consumes Earth.

So... there ya go... also would go silver over Gold

Pope Clement's picture

Au contracts, it probably would be be quite pleasant in all latitudes pole to pole beneath the red glowing magnetosphere. The red giant Betelgeuse could have many habitable worlds inside its glowing magnetosphere. See www.thunderbolts.info for details....

ali-ali-al-qomfri's picture

Margin Call
We’re calling all accounts to let you out into the world
Margin Call
Turn all of the printers on at every Federal Reserve
Margin Call
One last call for alcohol so finish your whiskey or beer
Margin Call
You have to go home because you can't trade here .

 

(Closing Time –Semisonic)


vato poco's picture

i know who i waaaaant to take me home: the golden babe what gets no respect

Clock Crasher's picture

Only person to call gold to-the-day is Bo Polny.

And he devolved into a misserable joke.

 

zstard's picture

LOL, along with the Shemitah of 2015. Silver to $600 by August? I wish I had a nickel for every wasted minute.

PitBullsRule's picture

Rickards is cool as a cucumber.  

Bastiat's picture

The man who taught the Pentagon to manipulate markets.

surf2liv's picture

No one knows for sure..but one thing is clear..

Bitcoin is rising because they want out of Jew Money Fiat..

I went down to local bank People's 5year CD yielding 1.5%..Go ahead goy take your 1.5%

Imagine all the people around the world Venezuela Cyprus China USA  Argentina, after being effed by central bankers..all countries coming together to agree bitcoin is money if we all collectively agree to trust each other ..  The elites will find a way to smash this trust..but lets hope not.

 

Clock Crasher's picture

The other thing we know for sure is that people are buying bitcoin with the express aim of multiplying their stock piles of fiat money. 

...using fiat "currency" aka bitcoin.

sinbad2's picture

"if we all collectively agree to trust each other"

 

Yeah the world tried that at the end of WWII, everybody signed up at Bretton Woods, then the US double crossed the world.

You would have great difficulty getting the world to trust the US again.

DC Beastie Boy's picture

Hell yeah! I've been in and out since $70 riding it up.

Wish I still had my 3000 LTC back in the day.

I'm guessing LTC at .25 btc long term. If you remember when BTC first ran to $1000 and LTC topped out at $45, let's say $50. So 20x 1 Ltc = BTC I'm thinking LTC runs to $250.

Call me crazy but they called me that when I was mining BTC on my overclocked PC in 2010!

FactDog's picture

 He is an old fool who does not understand that BTC is the new gold.

 

In fact; way better than gold.

PitBullsRule's picture

There are people that loan money to Venezuela, there are people that smoke cigarrettes, there are people that pay other people to punch big holes in their ear lobes and put hoops in the holes.  

So why shouldn't those people buy bitcoin?

sinbad2's picture

People can and should be allowed to buy bitcoin, but the US Government will in time call them traitors, or terrorists, and seize their assets.

blahzay's picture

BTC is worthless.  A single EMP and poof goes BTC not to return.  The EMP is almost inevitable; ... or say a major earthquake.  In any case electronic money is worthless.  Only papper, silver, gold, salt, food and whiskey will be worth a damn.  Stock up boys and girls and don't forget your armor.

PhiPhi's picture

Care to explain how a single EMP can take out a worldwide distributed network?  As long a BTC owner holds his coins in his own wallet and records his public and private keys on paper nothing is lost to him accept temporary access from his current EMP'd location.  Be nice if some of the BTC detractors boned up on the subject before spouting off, who knows you might even like it?