London’s Gold Bankers Cancel Annual Dinner Over Omicron Variant

The London Bullion Market Association canceled its annual dinner this week over concerns about the new coronavirus variant, signaling the potential for wider disruption to the corporate events calendar.

The black-tie event for gold bankers, refiners and traders was due to take place Wednesday at London’s Natural History museum. Instead, an online seminar will be held, replacing an in-person version that was to precede the dinner.

“This decision has been made due to tightening Covid-19 restrictions in the U.K. and around the world following the discovery of the new ‘Omicron’ variant,” LBMA Chief Executive Officer Ruth Crowell said in a statement. “This decision has not been taken lightly and is a judgment we feel is in the best interests of all attendees given the current circumstances.”

There had been hopes that mass vaccination would allow in-person events to resume after the pandemic decimated industry gatherings over the past two years. The LBMA was twice forced to cancel its annual conference, while the London Metal Exchange Week was scaled down.

The emergence of the new mutation -- dubbed omicron -- has sparked a global race to understand how quickly it spreads and how existing vaccines will respond. First identified in Botswana and South Africa, cases have now been found in several countries, including the U.K., Canada and Australia. Governments across the globe stepped up restrictions on travel as the World Health Organization warned that omicron could fuel a fresh surge in infections.

By Eddie Spence  

Source: Yahoo

Why Isn’t Gold Going Up with Inflation?

Many voices in the gold community are making a simple point. Look at the prices of oil, copper, and other commodities. They are skyrocketing. The mainstream explanation—shared by Keynesians, Monetarists, and many Austrians—is that the cause of this skyrocketing is the increase in the quantity of what is called “money”. 

The price of gold has not been going up. The inference is that it should be going up (note the word “should” is very dangerous in trading). The default assumption is there can only be one possible explanation: price suppression. We aren’t going to debunk, yet again, this conspiracy theory. Our definitive proof is in our response to Ted Butler. Nor address, yet again, the fact that the dollar is not money, nor is it an objective measure of the height of assets, most especially gold. 

Our point today is to present the reason why the price of gold has not gone up with the price of oil and other commodities.  

The Non-Monetary Causes of Inflation 

The prices of commodities, and manufactured goods alike, have been rising due to non-monetary forces. This is difficult to grasp from inside the mainstream paradigm, which holds that purchasing power is intrinsic to money. If prices are up across the board, then people think the currency has necessarily gone down.

But, of course, there can be a case when goods genuinely become scarce. That is, a case when the money has not gone down, when it really is prices that have gone up. 

For example, suppose the government bore down on every kind of productive activity from drilling and mining, to shipping and trucking, even to employing people. And the government outright stopped much of it. And what it did not stop entirely, it restricted and limited to a fraction of its previous level. 

Wouldn’t you expect goods to become scarcer? 

Non-Monetary Government Interference Causes Inflation

The above precisely describes what the government has done. And not only in the US, but all over the world. Trade wars and rising nationalism have played havoc with supply chains. Companies have been forced to seek local substitutes for better and/or cheaper goods made by firms in jurisdictions that their government has taxed, restricted—and threatened to do worse. In addition, it has forced companies to hoard components lest they be caught without a critical ingredient and be unable to complete their products. 

The automakers have run short of the chips they need to make cars. 

So called “green” policies have stopped production of the most useful forms of energy, while at the same time forcing industries to use that no-longer-produced-locally form of energy. For example, natural gas in Britain. Add trade war and nationalism to the toxic mix, and Britain is struggling to find enough natural gas to import. Prices of energy and even food will skyrocket. 

Lockdown Whiplash Causes Inflation 

Lockdown whiplash compounds this problem. Shipping and logistics all over the globe are messed up in numerous ways, some obvious and some not. Containers and even ships are often not in the locations where they are needed. So, manufacturers are piling up goods in warehouses, unable to send them to customers. This is the obvious part. 

One non-obvious distortion is that so many containers have gone to the ports in Los Angeles, that every truck chassis has a container on it and every inch in the terminal areas is stacked to the maximum with containers. The ports are not allowing trucks to offload an empty container, even if they are picking up a full one. So, containers stack, trucks are idled. And the problem grows. 

Contributing factors in this mess include local zoning regulations that allow trucking lots to stack only two containers high. Also, some blame goes to a law that prohibits non-union trucks (including owner-operators) and therefore stops trucking capacity from coming in to help work off the extra container volume. And green regulations have disincentivized trucking companies from buying more trucks. It goes on and on. As does the crisis. 

Along with the price of in-demand goods that come on ships, the cost of sending a container across the ocean has skyrocketed.

Central Planning of Ports and Transportation Causes Inflation 

Did we mention that government central planning of ports and transportation infrastructure has restricted capacity, and interfered with efficiency in many other ways? For example, slowing the adoption of new technologies in the ports. The net result is that the government has added many useless ingredients to shipping and logistics, the cost of which is included in many of the things we buy at retail. 

Anti-pipeline policy has limited the flow of oil from Canada. Too many ships waiting offshore LA has meant they are drifting or attempting to anchor outside the limited number of anchor slots. One such attempt severed an oil pipeline. This will not only further reduce the flow of energy to where it is needed, but probably serve the anti-energy demagogues and politicians with a ready-made excuse to ban the next pipeline that comes up for permitting. 

What Your Dollars Are Buying More of Now  

The dollar is buying as much as it did before. It’s just that many of the things it is buying are not things that consumers know about or want. For example, the dollar is buying lots of extra idle time for each container, and lots of extra handling. It is buying an above-market “rent” by union trucking shops, who secure this uneconomic rent by laws against non-union truckers. It is buying extra salaries and fuel burned by ships who are not idle, they are burning fuel to remain in position too far offshore for their anchors to reach the bottom. It is buying all sorts of extra labor, tanker trucks, permits, road taxes, and administrative costs to move energy by whatever channel is least constrained at the moment, in a world where constraints are shifting around and growing. 

It is paying for warehousing of chips and other critical components that used to arrive just-in-time. It is paying for food and shelter and clothing and Xboxes for millions of people who once worked, but now find it convenient to get paid not to work. 

The list goes on. 

None of these issues is a loss of value of the dollar. The problem is not inside the dollar, it is not that the dollar has shrunk. The problem, contra Milton Friedman, is non-monetary. Friedman famously declared that “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” But in this case, it’s nothing to do with the quantity of dollars. 

The True Cause of Inflation Right Now 

The cause is a barrage of production-killing regulations. If the government wanted industry to produce less, to make goods scarcer, to drive up the cost of living and force down the standard of living—then it could not have devised a more effective plan. And it gets away with it all the more easily, because people blame the Fed and the purchasing power of the dollar. 

The purchasing power of the dollar makes a perfect scapegoat. If this is the root cause, then what does every voter, wage earner, and retiree on fixed income do? He blames greedy corporations, greedy bosses, and greedy COLA committees for not giving him a raise. He thinks this is a grand conspiracy by which the rich get richer, at his expense. 

The socialist revolutionary sees the misplaced anger, and grins dryly, “good, good”. 

What About the Price of Gold and Non-Monetary Inflation? 

Meanwhile, those who bought gold based on the promise that gold keeps up with inflation are also upset. Not at greedy bosses, but at greedy bullion banks. Whom they are convinced are selling gold short, in order to keep the gold owners from realizing their just profits. 

But, seen in the light of the above discussion, that promise of gold and inflation is not even wrong. Of course, the government-imposed costs embedded in everything from oil to imported bicycles have nothing to do with gold. Gold is not shipped by ship. 

Gold is money, and it is the only way to measure the dollar. The price of the dollar, measured in gold, was 17.16 milligrams on Friday. The price of the dollar is not falling, as government-created shortages are not a monetary phenomenon. That is not to say, that it cannot become a monetary phenomenon. If this crisis forces enough companies to go out of business and default on their debts, then it could cause a banking solvency crisis. That could cause people to dump dollars, to hold money. Money is what you hold when you don’t want to be a creditor. Money is gold.  

Gold Price Fundamental Analysis – Gold Basis 

In the meantime, the price of gold has gyrated back and forth several times in the last five months. The peaks are around 18mg and the valleys around 17. Along with these price changes, there has been a corresponding change in the fundamentals. 

Lows in the dollar around 17mg correspond to lows in the cobasis (continuous) around -0.6%. And when the dollar hits its high (keep in mind, that moves in the dollar are opposite the moves in the price of gold, in dollars, that everyone is familiar with), the cobasis hits its high around -0.4%. Though it is notable that in August, we had a low cobasis of -0.5% which then shot up, along with the rising dollar, to -0.3%. 

These are pretty subtle changes, but it shows that lower dollar (i.e. higher price of gold) goes with less scarcity. And higher dollar (i.e. lower price) is causing greater scarcity of gold. 

In other words, all this price action, which may be upsetting to those trying to trade gold to make dollars, is just leveraged speculators positioning and repositioning themselves in the futures market. 

Silver Price Fundamental Analysis – Silver Basis

In silver, the pattern is similar with a key difference.

There is less pronounced movement within a range, though it’s there. And of course the magnitude is bigger as a percentage. The low in the range is about 1.2 grams to 1.44 grams, or 20%. Compare to 1mg in gold, which is 6%. 

The take-away is that there really is not much of a fundamental change in the market through this. There just is not the shortage, much less panic, that some gold analysts proclaim. Nor the massive dumping of mass quantities of futures (this would cause a big leap up in the cobasis). 

By Keith Weiner  

Source: Monetary Metals

UK Royal Mint’s first Goddess Lakshmi gold bar goes on sale for Diwali

The bar, retailing at 1,080 pounds, is described by the Royal Mint as reflective of its ongoing commitment to diversity and inclusion and an expansion of diverse cultural celebrations in the country

The UK Royal Mint’s first bullion bar range featuring Goddess Lakshmi as a celebration of Diwali went on sale on Tuesday.

The “Lakshmi” bar, a 20 gram gold bar with the Hindu Goddess of Wealth engraved intricately into the precious metal, was designed by Royal Mint designer Emma Noble and follows a close collaboration with the Shree Swaminarayan Temple in Cardiff on its intricate design.

The bar, retailing at 1,080 pounds, is described by the Royal Mint as reflective of its ongoing commitment to diversity and inclusion and an expansion of diverse cultural celebrations in the country.

“With gold being a traditional and auspicious gift during the Diwali festival, we wanted to develop a product that incorporates both beauty and tradition, but with a modern twist,” said Andrew Dickey, Divisional Director for Precious Metals at the Royal Mint.

The bar, which can be bought from the official Royal Mint website and features an Om symbol on its gift packaging, follows the success of the Mint’s 1 gram and 5 gram gold bars in henna-inspired packaging launched last year which proved incredibly popular in the lead up to Diwali.

The bullion bar will also be blessed at the Shree Swaminarayan Temple’s Diwali ceremony as part of their “Lakshmi Poojan”, attended by Royal Mint representatives on November 4.

“It’s wonderful to see an international brand such as the Royal Mint taking such a considered and active approach to celebrate the Hindu culture within their product range,” said Nilesh Kabaria, from the temple. “I love the intricate detail that Emma has been able to include on such a small surface, and on my recent visit to see the bar being struck, I was amazed to see the final version with every detail in perfect harmony,” he said.

By PTI  

Source: Indianexpress

‘Big Short’ Billionaire John Paulson Prefers Gold Over Bitcoin Because “There’s A Very Limited Amount Of Investable” Bullion

And yet he doesn’t understand Bitcoin; it looks like he’s married to his gold bags. And he can’t put a short on crypto either because “there's unlimited downside” to them, and he doesn't want this trade to outdo his “greatest trade” made a decade ago.

Billionaire John Paulson, who netted $20 billion from the 2008 ‘Big Short' crisis, says cryptocurrencies are a bubble that will “eventually prove to be worthless.”

While Paulson made it big by betting against the U.S. housing market more than a decade ago, the same can’t be said of the crypto market, where the easiest trade seems to be long or going ultra-long.

Things don't seem to be going well with his firm. According to Bloomberg, he turned his hedge fund into a family office last year after assets dropped from their peak of $38 billion in 2011 to about $9 million in 2019, and “he found himself managing mostly his own money.”

Much like Paulson, ‘Big Short’ fame hedge fund manager Michael Burry also described Bitcoin as the “greatest speculative bubble of all time” in March and then three months later, following the big sell-off. He said the crypto-asset would collapse, but since then, BTC has retraced sharply and is back to make its way to $50k.

Now, in an interview with Bloomberg, Paulson, 65, dismissed crypto assets, saying, “I wouldn’t recommend anyone invest in cryptocurrencies.”

This makes sense that he is invested in gold and believes the precious metal “does very well in times of inflation,” noting the last time the billion was parabolic was in the1970s when there were two years of double-digit inflation.

He further explains why exactly gold does parabolic, which is basically “a very limited amount of investable gold.”

‘As inflation picks up, people try and get out of fixed income. They try and get out of cash. And the logical place to go is gold, But because the amount of money trying to move out of cash and fixed income dwarfs the amount of investable gold, the supply and demand imbalance causes gold to rise.”

And yet, he doesn’t get Bitcoin. He could very well be married to his gold bags.

According to him, when it comes to cryptocurrencies, they are “a limited supply of nothing,” and they have “no intrinsic value.” “So to the extent there's more demand than the limited supply, the price would go up. But to the extent the demand falls, then the price would go down,” he said.

Paulson added that crypto assets “will eventually prove to be worthless” and will go to zero once the exuberance wears off or liquidity dries up.

Given his confidence in cryptos going to zero, it would make sense that Paulson would put a big short on them. But not according to the billionaire because “there's unlimited downside” to them.

“Even though I could be right over the long term, in the short term, I'd be wiped out. In the case of Bitcoin, it went from $5,000 to $45,000, It's just too volatile to short.”

By BitcoinExchangeguide

Source: BitcoinExchangeguide

Gold Demand Trends Q2 2021

Strong consumer demand recovery and Q2 gold ETF inflows were not enough to offset heavy Q1 outflows.

Gold demand (excluding OTC) for Q2 was virtually in line with Q2 2020 at 955.1t (-1%). That took H1 demand to 1,833.1t, down 10% y-o-y.

Q2 jewellery demand (390.7t) continued to rebound from 2020’s COVID-hit weakness, although remained well below typical pre-pandemic levels, partly due to weaker Indian demand growth. Demand for H1, at 873.7t, was 17% below the 2015-2019 average.

Bar and coin investment saw a fourth consecutive quarter of strong year-on-year gains: Q2 demand of 243.8 resulted in a H1 total of 594.t, the strongest since 2013.

Modest Q2 inflows into gold-backed ETFs (40.7t) only partly offset the heavy outflows from Q1; consequently, ETFs saw H1 net outflows (of 129.3t) for the first time since 2014.

Central bank buying continued in Q2. Global gold reserves grew by 199.9t, which took H1 net buying to 333.2t – 39% higher than the five-year H1 average, and 29% above the ten-year H1 average.

Gold used in technology continued to recover from the 2020 lows: Q2 demand was 18% higher y-o-y at 80t – in line with average Q2 demand from 2015-2019 of 81.8t. H1 demand (161t) was fractionally above that of H1 2019 (160.6t).

By GoldOrg

Source: GoldOrg

Gold stuck in a rut as virus fears counter Fed's hawkish tilt

* Delta variant fears bring safe-haven flows into gold -analyst

* Record high U.S. equities capping gold’s upside

* Investors awaiting U.S. jobs data due on Friday

Gold drifted sideways on Monday as investors were caught between fears of a spike in the highly transmissible Delta strain of the coronavirus and expectations of an early interest rate hike by the U.S. Federal Reserve.

Non-yielding gold, which is also seen as a safe investment during uncertain times, tends to fall out of favour among investors when interest rates rise.

Spot gold was steady at $1,779.70 per ounce by 13:31 p.m. EDT (1731 GMT). U.S. gold futures settled up 0.2% at $1,780.70.

There are growing concerns about the spread of the Delta variant of the coronavirus, which is bringing back a slight bid into the gold market from a safe-haven perspective, said David Meger, director of metals trading at High Ridge Futures.

“Although, no rallies continue to follow through because of the recent set of rhetoric in regards to the potential for reducing asset purchases (by the U.S. Fed).”

Gold suffered its biggest intraday drop in five months after the Fed signalled earlier than expected policy tightening on June 16.

The S&P 500 and the Nasdaq hit record levels, limiting bullion’s gains.

“That takes some of the wind out of the sails of the gold market, and the reason why we saw gold fall below $1,800 level recently was based on that,” Meger added.

Investors are looking to U.S. non-farm payrolls data on Friday.

The potential for a stronger jobs report this week could inhibit positive flows into gold for now, TD Securities wrote in a note.

“In this context, gold is not completely out of the woods just yet, with another leg lower toward the $1,730 per ounce region opening the door to another round of CTA (Commodity Trading Advisor) selling.”

Elsewhere, silver rose 0.1% to $26.09 per ounce, platinum slid 1.4% to $1,095.70, and palladium gained 1.6% to $2,679.92. (Reporting by Swati Verma in Bengaluru; Editing by Kirsten Donovan, Bernadette Baum and Nick Zieminski)

By Swati Verma

Source: Reuters

China bars banks from selling commodities-linked products to retail buyers

China's banking regulator has asked lenders to stop selling investment products linked to commodities futures to mom-and-pop buyers, three people with knowledge of the matter told Reuters, to curb investment losses amid volatile commodity prices.

It has also asked lenders to completely unwind their existing books for these products, which they manufacture and sell to individual investors, said the sources, who are involved in and have been briefed on the decision.

The China Banking and Insurance Regulatory Commission's (CBIRC's) order to exit these products has not been reported before. It issued the order this year, two of the sources said.

"The risk contained in banks' commodity-linked investments cannot be easily spotted by ordinary investors, neither can they bear it," one of the sources said. "Banks also don't have enough expertise to run such products properly." 

The sources spoke on condition of anonymity as the directive is not yet public. The CBIRC, China's top banking watchdog, did not immediately reply to a Reuters email seeking comments.

The move comes as runaway commodity prices in both onshore and offshore markets have raised regulatory concerns about the risks of speculative bets, prompting China's state planner and exchanges in recent weeks to take price-control measures. 

The CBIRC wants to prevent losses like that incurred a year ago by Bank of China (BoC) on crude-oil linked investment products, the people added.

It has asked lenders, including Industrial and Commercial Bank of China (ICBC), to report "clean-up progress" on commodities-linked investment products on a monthly basis to regulators, two of the sources said.

The CBIRC has, however, not given a specific deadline to the banks for completely exiting their positions, they added.

The ICBC did not immediately reply to a request for comment.

While the total size of such products in the Chinese banking system is unknown, BoC's $1.8 billion losses tied to just U.S. crude futures highlights the attractiveness of similar products for retail investors looking for higher returns.

FULL SECTOR CLEAN UP

Regulators are worried mom-and-pop investors may get burnt again by the recent big swings in commodity prices, driven by post-pandemic demand recovery, liquidity easing and speculative trading. Government watchdogs have urged Chinese industrial metal firms to maintain market order.

BoC's losses last year had wiped out several thousands of such small accounts held by retail investors, ranging from college students to retired workers, prompting the CBIRC at the time to ask commercial banks to halt new sales of a wide range of investment products linked to commodity futures.

Given the recent price volatility, the ban on new sales has been widened to a full sector clean-up, covering products linked to commodities not specifically targeted before, such as gold, silver, platinum, palladium, natural gas and soy beans, the three sources said.

Prices of most of these commodities have spiked in recent months, while futures prices for iron ore and corn on the Dalian Commodity Exchange as well as steel and copper on the Shanghai Futures Exchange have all hit record highs this year.

Some banks are considering ways to shift part of their existing commodity-linked investments and clients to affiliated brokerages, but that will need a nod from the securities regulator, one of the sources said.

While banks' derivative-like products have flaws in design and risk control, analysts say a harsh sector-wide clean-up means a major setback in China's plans to open up the market.

Despite repeated vows to ramp up financial derivatives, Shanghai Futures Exchange has already halted collaboration with banks on the launch of new derivative products in the wake of BoC's losses, two separate sources told Reuters.

By Reuters

Source: Investing

Global recovery to underpin commodity prices

The post-covid global recovery should help to sustain commodity performance in the near-term, a boon for investors looking to hide from inflation or diversify portfolios, according to Jack Manley, Global Market Strategist at JP Morgan.

Are we in a commodity super-cycle?

“With the global economy on the mend and a large cyclical upswing anticipated over the coming years, it makes sense that the potential of a super-cycle should be raised. However, a number of trends seem to suggest that this thesis may not hold water.”

“On the energy front, further upward price pressure seems dubious. Both the US and OPEC have an enormous amount of spare capacity, allowing production to increase in the face of rising prices; moreover, coordinated global efforts to address climate change will result in lower demand for fossil fuels in the decades ahead.”

“The sharp increase in both lumber and copper prices is due to a housing boom. The question, therefore, must be about the durability of this surge. Given global policymakers awareness of rising home prices – particularly in China – and the slow rollout of any new infrastructure investment in the US, the red-hot global housing market will likely cool in the years ahead.”

“Food and precious metals round out the commodities group. A reacceleration in economic growth should temporarily boost demand for food, but poor demographics point to a slowdown in longer-term population growth; and while gold and other precious metals would typically be beneficiaries of easy global monetary policy and inflationary concerns, the rise of cryptocurrencies has taken some appetite away from this sector.”

“The post-COVID-19 global recovery should help to sustain commodity performance in the near-term, a boon for investors looking to hide from inflation or diversify portfolios. However, it seems premature to call this anything more than a strong recovery.”

By FXStreet Insights Team

Source: FXStreet

Gold premium in India falls as prices drop to near one-year low levels

• Gold prices in India include 10.75% import duty and 3% GST
• Jewellers were busy closing their books while rising cornavirus cases also made them cautious

Gold activity in India slowed in India despite prices falling to near one-year lows. Meanwhile, premiums charged by dealers over official domestic prices also fell. Gold prices in India include 10.75% import duty and 3% GST. Meanwhile, gold futures on MCX to ?44,441 at day's low, before settling marginally lower at ?44,650. For the week, gold fell about ?500 in India, tracking softness in global rates.

Earlier this month, gold had declined to near one-year low levels of ?44,150.

Citing gold dealers, Reuters reported that gold activity in India remained muted this week as the country's financial year was coming to a close with jewellers busy with closing the books. Jewellers also remained cautious amid rising coronavirus cases. The Indian fiscal year runs from April to March. Dealers charged premiums of up to $5 an ounce over official domestic prices, down from last week's $6.

While US dollar and bond yields continue to sway gold, supporting price at lower levels is renewed virus concerns which have forced countries to impose stricter measures, Kotak Securities said in a note. Gold is also being supported by uneven global economic recovery and dovish stance of Fed and other major central banks, it added.

Outflows from gold ETFs also continue to weigh on gold prices. The world's biggest gold-backed exchange traded fund, SPDR Gold Trust, has seen outflows of more than 140 tonnes so far this year.

Gold has been trading in a sideways to negative trend from past many days, says Kshitij Purohit, Lead – International & Commodity at CapitalVia Investment Advisor. Support for MCX gold is seen at ?44400-44200 levels while resistance at gold ?45600, he added.

A firmer dollar, rising yields and a rally in equity markets have been pressuring gold. A stronger dollar makes holding greenback-denominated bullion more expensive for those holding other currencies, while higher yields raise the non-yielding metal's opportunity cost.

By Livemint

Source: Livemint

Bitcoin could become 'digital gold' if volatility and liquidity issues subside with 'regulatory certainty'

• Bridgewater's Director of Investment Research told Bloomberg on Wednesday that bitcoin could become "digital gold."

• "As institutional investors, we don't know yet if it's going to be digital gold, it may be over time, but I don't think we can say that with confidence yet," Patterson said.

• Patterson argued that with more "regulatory certainty", volatility and liquidity issues may subside.

Bitcoin could become "digital gold" if volatility and liquidity issues subside with "regulatory certainty," according to Bridgewater's director of investment research Rebecca Patterson.

Patterson sat down with Bloomberg on Wednesday to discuss her firm's investment strategy, and the topic of bitcoin quickly came up.

The director said she "wouldn't call bitcoin an alternative currency" and argued that, if anything, the better comparison is to gold.

Patterson noted she believes bitcoin has the potential to become "digital gold" in the future, but current regulatory, volatility, and liquidity issues have kept Bridgewater away for now. 

"As institutional investors, we don't know yet if it's going to be digital gold, it may be over time, but I don't think we can say that with confidence yet," Patterson said.

She highlighted bitcoin's value to investors as a hedge against fiat currency inflation in the interview. 

"It is something that investors have been looking to as they worry about fiat currencies being devalued by all this central bank printing," she said.

When asked what the trigger would be that would signify bitcoin is in fact "digital gold," Patterson said there isn't "one green light" for Bridgewater, but there are a few things the firm is looking for.

First, Bridgewater needs to see lower volatility. Patterson said, "right now bitcoin can move 10% on a tweet, that's not exactly a store of wealth for most institutional investors." She also noted bitcoin's volatility is still double that of the Venezuelan Bolivar. 

Second, the firm wants to see greater liquidity and Patterson argued this liquidity may come from "regulatory certainty."

Unlike many other analysts and investors, Patterson doesn't see regulation as bitcoin's downfall.

"The more you get a real regulatory ecosystem developing around bitcoin and other currencies, the more other types of investors are going to be comfortable coming in, that's going to bring the liquidity, that's going to reduce the volatility," the director said.

In a tweet last Sunday, Michael Burry, who rose to fame after being portrayed in 'The Big Short', said nearly the opposite.

Burry argued bitcoin's "long-term future" is "tenuous" because of regulatory risk. 

The Scion Asset Management chief said in a tweet, "legally violent, heartless centralized governments with lifeblood interests in monopolies on currencies" won't allow bitcoin to thrive and remain decentralized in the long-term.

By Will Daniel

Source: Businessinsider

The Gold Standard Ended 50 Years Ago. Federal Debt Has Only Exploded Since

This year marks the 50th anniversary of the end of the gold standard in the U.S. In August 1971, President Richard Nixon formally unpegged the U.S. dollar from gold, meaning the greenback was no longer convertible into bullion. Overnight, the dollar became a free-floating currency, measurable only by comparing it to other world currencies. 

And yet there were still restrictions on private ownership of gold coins, bars and the like. It wouldn’t be until President Gerald Ford signed a bill in December 1974 that Americans could freely buy and trade bullion, for the first time in over 40 years.

A lot happened as a result. Its price no longer fixed, gold exploded 385% from the end of 1974 to 1980, when the metal topped out at $850 an ounce as the U.S. coped with historic levels of inflation.

Over the past 50 years, gold has expanded more than 46 times, with a compound annual growth rate (CAGR) of about 8%.

The ability to trade gold freely has obviously been good for investors. Today, gold bullion is one of the most liquid assets in the world, its daily volume standing at more than $145 billion, according to the World Gold Council (WGC). Only the S&P 500 and U.S. Treasuries trade more—but not by much.

The Age of Runaway Debt

The drawback is that, in the years since the end of the gold standard, there’s been a significant and growing lack of discipline when it comes to government spending. Before 1971, there was a natural limit to how much money could be printed. New issuances were dependent on the amount of gold sitting in the nation’s coffers.

Today, with the dollar backed not by a hard asset but by the “full faith and credit” of the U.S. government, the federal debt is closing in on an astronomical $28 trillion, which is more than 130% of the size of the U.S. economy.

To give you some idea of how dramatically times have changed, federal debt in 1960 was only a little over half the size of the economy.

The debt is expected to surge even more in the coming months now that Joe Biden has been sworn in as president and Congressional control has shifted in the Democrats’ favor. Biden, who turned 78 in November, has called for a $1.9 trillion economic relief package that include $1,400 checks for all American adults.

I’m not advocating that we return to the gold standard. It’s probably no longer feasible. According to the Treasury Department, official gold reserves currently stand at approximately 261 million ounces, for a market value of some $493 billion. 

That’s just not enough metal to support an economy as large as the U.S.—not unless the price of each ounce of gold was fixed at something outrageous like $100,000.

There’s been some discussion of making Bitcoin a reserve currency. Like gold, its supply is limited, and it has the potential to scale up. But at the moment, cryptos are far too volatile. 

So for now, we’re left with the current monetary system of unlimited money-printing, which in turn makes each U.S. dollar less valuable and each ounce of gold more valuable.   

The Rise of Modern Monetary Theory (MMT)

What this is all pointing toward is the rapid adoption of modern monetary theory (MMT). 

In short, proponents of MMT say that governments that issue their own currency, as the U.S. does, are free to spend as much as they want, regardless of the amount of revenue generated. And if the government ends up with a spending deficit, it can just print more money to cover the difference.

Isn’t this what we’re already doing? In 2020, the federal government spent a total of $6.55 trillion, despite it collecting “only” $3.42 trillion—about half of that—in tax revenue.

What’s more, the amount of M1 money supply—which includes the most liquid and readily available forms of money—was up an unprecedented 67% in December 2020 compared to the same month the previous year.

As Ray Dalio, billionaire founder of Bridgewater, the world’s biggest hedge fund, has said a number of times, “Cash is trash.”

Our Favorite Ways to Get Exposure to Gold

So where does Dalio put his money instead? A look at Bridgewater’s third-quarter filings reveals large positions in physical gold and gold mining companies. At 11.6%, the gold-backed SPDR Gold Trust is the fund’s second-largest position. The fifth-largest position, at 3.4%, is the iShares Gold Trust.

Among the gold producers in Dalio’s portfolio are Newmont, Yamana Gold and Freeport-McMoRan.

Besides the securities already mentioned, we also like to get exposure to gold and precious metal miners via the royalty companies. 

Our two favorites that follow the royalty and streaming model, Franco-Nevada and Wheaton Precious Metals, have impressive track records of outperforming bullion and gold miners over multiple time periods, in bull and bear markets.

Wheaton similarly performed well over multiple periods. For the one-year, three-year, five-year and 10-year periods, Wheaton crushed not just gold and silver but also miners and the popular VanEck Vectors Gold Miners ETF.

These strong track records have resulted in the companies consistently returning value to shareholders. As of September 30, Wheaton had an incredible $1.2 billion declared in dividends. Franco, meanwhile, has had 14 straight years of dividend increases, with $1.4 billion paid out since its 2008 initial public offering (IPO).

Both companies are scheduled to report in early March, which I’m eagerly awaiting.

By Frank Holmes, Great Speculations

Source: Forbes

What Is In Store For Gold In 2021?

Gold prices are snapping their three-day losing streak today as investors are favoring the risk-off trade. The precious metal is up nearly 22% year-to-date, but it has been under selling pressure for the past three days, as traders have been busy booking their profits as 2020 comes to an end. There is no doubt that this year has brought glory for gold traders as the gold price made an all-time high of $2,075 in August this year.

However, ever since the price made its high, the dominant trend for the gold price has been skewed to the downside, and earlier this month, the gold price fell to its lowest since July.

The big question for investors and traders is whether the gold price is going to make another record high next year, or whether we will see the downward trajectory continue its move.

The answer is very much dependent on a few factors. Firstly, it is all about containing the coronavirus and any other future variant of these viruses. If we are successful in this task, it is highly likely that investors will favor riskier assets, which may not work well for the gold price. However, if the coronavirus situation doesn't come under control, traders will seek shelter in safe-haven assets, and gold prices will likely move higher.

Secondly, the economic data, the stock market, and businesses' actual health are completely out of sync. That is because the U.S. stock market is still sitting near its record high while enterprises are consistently forced to close. With the new variant of coronavirus, chances are that lawmakers are likely to keep their guards up entering the first quarter of 2021 and that they can reinstate more lockdowns.

Struggling businesses are more likely to file for more bankruptcies, and there are greater chances that it will create more shocks for the global economy. Such an event could once again help the gold price to move higher.

Something that is surely going to influence the gold price is the trend in the dollar index, which is determined by the Federal Reserve's monetary policy stance. According to the most recent Federal Reserve meeting, it was clear that the Fed is more optimistic about the economic recovery, and this made them upgrade the growth forecast for the U.S. economy.

Once again, if the virus is contained, and Covid-19 remains under control, the Fed will likely change its stance toward its forward guidance. This means that the Fed could start preparing the market to begin scaling back from its asset purchase program. If the markets perceive the Fed's stance as hawkish, it is likely to bring life to the dollar index, which could be negative for the gold price.

The bottom line is that the gold price trajectory in 2021 is very much dependent on the coronavirus situation. If the situation continues to improve during the first quarter of 2021, investors will favor riskier assets, and that means lower gold prices for the rest of the year.

By Naeem Aslam

Source: Forbes