Western nations and South Africa have already reached peak gold. There is a real possibility that it will happen globally soon. The fact that peak gold may take place at a time when the world is engaged in a peak fiat paper and electronic money creation experiment bodes very well for gold’s long term outlook. This should lead to much higher gold prices in time and gold’s inflation adjusted high of $2,500 per ounce remains a realistic long term price target. Peak gold has yet to be considered and analysed by the international financial community or factored into markets.
Enter the Golden Dragon ... China is moving closer to positioning itself as the physical gold trading hub of the world and the world’s gold price discovery centre. It is a natural progression for the largest economy in the world and for the world’s largest gold buyer, importer and indeed producer. The Shanghai Gold Exchange (SGE) is launching its yuan denominated international bullion trading exchange next month.
The farcical process and complete lack of transparency would have to make any fair minded person concerned about the new LBMA Gold Price. The Gold Anti Trust Action Committee (GATA) will allege that the LBMA and the western bullion banks are engaged in a rebranding and repackaging exercise in order to maintain a cosy gold and silver cartel of bullion banks and ultimately control over precious metal prices.
This is especially the case in Ukraine where the currency has lost more than half of its value versus gold (see chart above and below). Gold in Ukraine Hrvynia is up 70% since the start of 2014. People who own gold in Ukraine would laugh at you, if you said that gold is not a safe haven. As would people in many countries in South America, the Middle East and Africa.
Interestingly, the FT also reports that there may be significant buying of silver in the coming days: “Indeed, there are already rumours in the market place that some big silver producers and consumers are preparing to pepper the market with orders.” This creates the possibility of the short squeeze that many market participants and silver analysts have been expecting for some time.
Fed Vice Chairman Stanley Fischer delivered his first speech on the global economy in Stockholm, Sweden yesterday. Fischer headed Israel’s central bank from 2005 through 2013 and is now number two at the Federal Reserve in the U.S. after Janet Yellen. Fischer’s comments that the U.S. is “preparing a proposal” for bail-ins is at odds with FDIC and Bank of England officials who have said that bail-in legislation could be used today and "I mean today ... "
He also warned that all countries would have to face up to mounting debt levels and said that central bank’s ultra loose monetary policies were not the answer. King echoed the IMF’s Lagarde recent declaration that the world needs a “global economic reset”.
Gold is nearly 2% higher this week and its technical position has further improved (see key charts). On Wednesday, gold broke out of bullish descending wedge chart pattern that has formed in recent months. Another buy signal for gold came when gold rose above the 20 EMA and 50 EMA (exponential moving averages). Also positive is the fact that the price momentum oscillator (PMO) has turned up, indicating that a positive momentum shift has occurred.
Bank of England plans to make bondholders and depositors bear the cost of bailing out failing banks has led Moody’s to downgrade its outlook on the UK banking sector. Depositors in some Cyprus banks saw 50% or more of their life savings confiscated overnight. Moodys largely ignored, as did much of the media coverage of their report, the real risk that bail-ins pose to people’s life savings and companies capital, the likely negative impact of this on consumer sentiment and employment in already fragile economies.
The White House has previously said that talks between Russia and Iran were a matter of "serious concern". Currency wars are set to escalate as the petro dollar’s decline continues. U.S. and European Union sanctions against Russia threaten to hasten a move away from the petro dollar that’s been slowly occurring since the global financial crisis.
In the physical markets, buying remained subdued in the seasonally quiet summer period. Gold and silver bullion coin buyers have secured their allocations and there is very little new entrants into the bullion market which has contributed to falling demand recently. Data from the U.S. Mint showed that gold coin sales in July fell about 40% from a month ago.
The summer months frequently see seasonal weakness as has been the case in recent years and since gold became a traded market in 1971. Gold and silver often see periods of weakness in the summer doldrum months of May, June and July.
The stealth phenomenon that is silver stackers or long term store of value buyers of silver coins and bars continues and is seen in the record levels of demand for silver eagles from the U.S. Mint. Silver stackers are those who are more informed about the fundamentals of the silver market and are concerned regarding systemic and monetary risks ...
“But long term...and economic law says, if you keep printing a lot of paper money, the value of the dollar and currency will go down, and things and most prices will go up and indeed gold always goes up against that currency” - Ron Paul
Aggressive buying of gold and particularly silver by Russia will likely lead to defaults on the COMEX gold and silver futures exchanges and potentially an international monetary crisis. As sanctions, economic war and currency wars intensify we expect Russian and Russian ally buying of gold and selling of dollars to intensify ...
