Summary
- Despite the relative strength of the fiat US dollar index compared to other fiat currencies over the last decade, concerns arise about the need for bullion over cash in a declining empire.
- Over the past decade, gold bullion has proven itself as a reliable store of value in US dollar terms, even during the dollar's strong periods.
- Questions arise about the future value of gold as the US dollar's purchasing power may decrease in an inevitable bear market.
- US-based Costco customers are rushing to buy gold bullion from the website, with a limit of two troy ounces per customer.
- Unsecured gold ETF shareholders have been selling derivative ETF gold in 2023.
- The collective gold price remains strong despite the strength of the fiat US dollar and rising interest rates, leaving Westerners puzzled.
- Export-import data shows Western ETF gold bullion heading to China, where gold price premiums are as high as $120 over Western prices.
- China has been the world's largest gold bullion buying market since the 2008 global financial crisis, and it's also the largest gold miner since 2010.
- China's high gold bullion premiums stem from citizens' fears of their fiat yuan currency losing purchasing power.
- With a recent gold selloff, local bullion demand in China is likely to increase as people seize the opportunity.
- The volatility in silver and gold derivative trading led to price declines during the week.
- The gold-silver ratio remained at 83 due to COMEX derivative selling. There's speculation about a potential future decline in the gold-silver ratio.
Gold's Future Amid Dollar Devaluation
Even with the fiat US dollar index enjoying relative strength versus other competing fiat currencies over the last decade. Apparently we are now reaching the phase of collapsing empire where bullion aside from cash is required to bribe our lawmakers.
You think inflation is bad using fiat US dollars, imagine using these relatively weaker fiat currencies over the last ten years.
Even so, over the last decade the value of gold bullion has been able to climb and prove itself as a reliable store of value in fiat US dollar terms, even during the dollar's bull market in relative terms.
What happens to gold's future value as an inevitable secular bear market in the fiat US dollar's purchasing power eventually returns?
Costco Customers Rush to Buy Gold Bullion
A news item that made the rounds this week was the unsurprising news that US based Costco customers are quickly buying gold bullion off their website in limits of two troy ounce maximum allotments per customer.
Meanwhile unsecured gold ETF shareholders have been net sellers of derivative ETF gold since the start of this year 2023.
And while westerners are left scratching their heads about why the world's collective gold price has remained so buoyant in the face of fiat US dollar strength and record pace interest rate rises.
Gold Flows Eastward: China's Dominance in the Gold Market
Available export import data shows that much unsecured western ETF gold bullion underlying is fleeing east, specifically to China of late.
We again witnessed another week of headlines pointing out still stubbornly high gold price premiums locally being paid in China as much as $120 oz over western gold spot price quotes.
Since the 2008 global financial crisis, China has been the biggest gold bullion buying market in the world followed closely by India over the past 15 years.
Also since 2010 China has also been the world's largest miner of gold in per year volumes mined.
Here are the last twenty years of local gold price premiums for China so you can better understand what an anomaly this phenomenon has been of late.
The main driver behind why such high gold bullion premiums are being paid locally in China revolves around their citizens' understandable fears that their fiat yuan renminbi currency will continue devaluing in purchasing power as it recently has versus gold and other competing stores of value.
It's a reasonable guess that with today's selloff in gold, local bullion buying demand in China will likely increase as locals take advantage of the price dip.
After-all, they, like we, are also printing their fiat currency's value into future oblivion.
Volatility in Silver and Gold Markets
It was a very volatile day to close this week in silver and gold derivative trading.
The spot silver price and the spot gold price both closed sharply down on the week.
The spot silver price finished at just over $22 oz bid while the spot gold price closed the week just under $1,850 oz bid.
The spot gold silver ratio gyrated just below 80 early today Friday, only to have the COMEX derivative smash down take effect and keep the spot GSR at 83 to close the week.
There are many gold and silver onlookers looking for the eventual flush lower in the gold silver ratio as technically it looks like it was setting up to do.
While this morning a rotation into or a possible short squeeze in silver looked like it was underway only to be crushed by heavy volume COMEX silver futures selling knocking the spot price down over $1 oz intraday.
What Lies Ahead for Precious Metals?
Will spot prices continue falling?
We will see if support around $22.50 oz silver and $1850 oz gold can hold, otherwise perhaps we can fall a bit further.
But I simply suggest for those of you out there who are dollar cost averaging into bullion to take the long view.
Visit us as SDBullion.com/deals to take advantage of today's spot price dip and get your bullion while spot price weakness lasts.
That will be all for this week's SD Bullion Market Update.
As always, take great care of yourselves and those you love.
