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We Print Money, And People Believe It

Summary

  • Adrian Orr, the central bank head of New Zealand, mocked modern central banking and fiat currency control monopolies this week, highlighting ongoing fraud in the system.
  • Despite central banks' ability to create fiat currency, their significant purchases of gold bullion in recent years indicate a growing realization of gold's value as a store of wealth.
  • The excessive printing of fiat currency by major G8 nations compared to their official gold reserves suggests a need for a higher gold price to balance diminishing faith in fiat currencies.
  • Russia is well-prepared for gold's revaluation, considering its substantial gold reserves relative to unbacked currency supplies and GDP.
  • Japan and the United Kingdom were added to the list of economies in recession this week.
  • Despite nominal stock market highs in Japan, when measured in gold, stocks remain significantly cheaper than in the late 1980s.
  • Gold dipped below $2,000 per ounce this week, yet Western unsecured gold ETFs saw outflows while spot gold remained above $2,000 for the 12th consecutive week.
  • US CPI data revealed higher-than-expected inflation at 3.1% annually, with rising car insurance premiums contributing to increased costs for consumers.
  • Billionaire investor Stanley Druckenmiller attributed the decline of the US middle class to the actions of the Federal Reserve and shifted investments from tech to gold miners.
  • Bullion has consistently outperformed gold mining stocks, emphasizing the importance of owning physical assets for wealth protection amidst market uncertainties.

Adrian Orr, the central bank head of New Zealand callously made fun of the ongoing fraud that is modern central banking and their fiat currency control monopolies this week.

And while central banks indeed control and can create fiat currency from mere keyboard strokes, on a global net basis their official gold bullion buying in record size volumes over the last few years reflects a growing truth.

Gold bullion is the proven store of value money that will be increasingly saved to backstop the unraveling faith in fiat currencies as stable stores of value to come. 

The largest G8 nations have so abused their fiat currency creating privileges versus their ongoing Official Gold Reserve piles, that it will require a substantially higher gold price ahead to rebalance diminishing fiat currency faith versus future gold reserve reality.

Surprisingly it is the Russian Federation that is best currently prepared for gold's coming revaluation escalations when we consider outstanding unbacked currency supplies and GDPs versus ongoing respective Official Gold Reserve holdings.

This week Japan and the United Kingdom were both added to this list of economies currently in admitted recessions.

And while on a nominal basis, the Japanese stock market has finally returned to its former nominal price highs achieved during the late 1980s. 

When measured in gold bullion, the Japanese stock market is still over 5 times cheaper now versus back in late 1989.

This week the spot price of gold finally dipped below $2,000 oz during intra-week trading.

Western unsecured gold ETFs continue to see outflows, yet spot gold still finished its 12th week in a row priced above $2,000 oz.

Underreported US CPI data came in hotter than expected this week at 3.1% annualized.

Admitted price inflation in US car insurance premiums led the list of increasing costs eating away at US consumer purchasing powers.

The vanishing US middle class, according to billionaire investor Stanley Druckenmiller's, has been driven by "no greater engine of inequality than the Federal Reserve Bank of the United States."

In a signal that billionaire investors are beginning to see real value increasing their exposure to gold related investments. Stanley Druckenmiller's family office sold tech and bought shares in major gold miners as reflected by recently reported financials.

Here was one of those mining company's CEOs this week on Bloomberg.

Promoters of gold mining bets often tout the potential upside leverage miners can offer investors, yet their overall performance has continued to be generally dismal when compared to simply owning physical bullion outright.

Bullion outperforming miners has been the general situation in the precious metals industry starting years before the 2008 global financial crisis to now in 2024. 

And the brutal fact is that bullion has outperformed global gold mining indices by a factor of more than 6Xs since the start of 2006.

Of course this underperformance may eventually change, but in an era where protecting one's capital is far more important than risking one's capital. I will continue owning the real things outright.

The silver and gold markets had a mixed week in spot price performances with silver outperforming gold.

The spot gold price closed again for now three months running above the building's $2,000 oz price support.

The spot silver price had some pop in trading today finishing the week's trading both bid and ask prices well above $23 oz.

The spot gold silver ratio fell sharply with silver's strength trading down to 86 for the end of the week.

The Chinese market returns after its recent New Year holiday. Nicky Shiels points out that historically the return of Chinese traders to the silver spot price market has contributed to a rising silver spot price over the last decade and half of data.

While that is a short term data point worth consideration, I would prefer to look out further on the horizon especially lookin east.

The world's fastest growing consumer populations and consistent physical gold and silver buyers are mostly in the eastern world. China and India being where much of the world's new wealthier consumers will be growing at.

And while last year's 2023 Indian silver import buying was off from its record buying volumes in 2022.

The start to this year 2024 is encouraging as India imported over 700 metric tonnes or just over 22.5 million ounces of silver bullion last month January 2024.

Rising premiums locally in India for silver bullion suggest this year's import volumes will be larger, and they are off to a decent start in terms of demand. Demand was so strong in India last month, that even the United Kingdom coughed up over 150 tonnes of the shiny exports.

Swinging back to the USA and the overvalued US Stock market broadly speaking. Let's look at the Buffet Indicator since the 1980 gold bullion mania peak. Beginning 1980 at merely 40% of the US GDP it has now bubbled to over four times that figure.

Measuring the US stock market bubble by bullion illustrates a similar potential value proposition setup. 

In terms of the current S&P 500 divided by ongoing gold price, a future date below one to one parity seems conservative given the 2011 lows and throughout the 1970s gold bullion bull.

Considering the current S&P 500 divided by the ongoing silver spot price, the spread and long term opportunity is even greater with a future dip below 50 being conservative given historic precedents of 2011 and the 1970s bull.

When we consider both current and rapidly escalating US debt levels ahead, divided by the ongoing gold price, a similar dead cat bounce formation from the 1970 to 1980 bullion bull is forming here in the 21st Century.

Back then US debt divided by the ongoing spot price of gold peak to trough collapsed by a factor of 10 in about as many years.

This 21st Century secular bullion bull market version is both larger and longer. A similar repeat of this US debt to gold ratio collapse phenomenon, simply means anyone owning bullion here to there will not only have protected and preserved their wealth. But rapidly enhanced it over the coming debt devaluation era.

That will be all for our weekly SD Bullion Market Update. 

As always to you out there, take great care of yourselves and those you love.

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James Anderson
James Anderson
Senior Market Analyst & Content

A bullion buyer years before the 2008 Global Financial Crisis, James Anderson is a grounded precious metals researcher, content creator, and physical investment grade bullion professional. He has authored several Gold & Silver Guides and has been featured on the History Channel, Zero Hedge, Gold-Eagle, Silver Seek, Value Walk and many more. You can pick up Jame's most recent, comprehensive 200+ Page book here at SD Bullion.

Given that repressed commodity values are now near 100-year low level valuations versus large US stocks, James remains convinced investors and savers should buy and maintain a prudent physical bullion position now, before more unfunded promises debase away in the coming decades...

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