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

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.”

Comments

zorba THE GREEK Tugg McFancy Fri, 09/01/2017 - 21:34 Permalink

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. 

In reply to by Tugg McFancy

rosiescenario zorba THE GREEK Sat, 09/02/2017 - 15:04 Permalink

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.

In reply to by zorba THE GREEK

TheReplacement Tugg McFancy Fri, 09/01/2017 - 22:47 Permalink

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.

  

In reply to by Tugg McFancy

ali-ali-al-qomfri Fri, 09/01/2017 - 20:20 Permalink

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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)

surf2liv Fri, 09/01/2017 - 20:36 Permalink

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. 

DC Beastie Boy FreeShitter Fri, 09/01/2017 - 21:35 Permalink

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!

In reply to by FreeShitter

blahzay FactDog Fri, 09/01/2017 - 21:43 Permalink

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.

In reply to by FactDog

PhiPhi blahzay Fri, 09/01/2017 - 22:24 Permalink

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? 

In reply to by blahzay