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  1. Investors choose to invest in gold bars and buy silver bars because there is no counterparty risk. In a world where money is devalued every second and governments are scrambling to stay afloat, it’s worth holding some assets outside of the increasingly tenuous financial system. Below, we look at two countries who couldn’t agree more. Countries own gold for many of the same reasons that investors do … mainly because gold is not a liability of any other country, and it alleviates counterparty risk. For more see our podcast post from September 13 “What Problem Does Gold Solve? The desire of countries to have less reliance on the US dollar for international trade is a subject that we have discussed often. Over the years there have been many attempts to ‘de-dollarize’ – one of the most recent was the new currency proposal to rival the US dollar put forward by Russia, Brazil, India, China, and South Africa. This was proposed around the same time in August as Russia’s proposal to create a new international standard for trading precious metals. See our August 25 post The Russian Gold Standard. But the conversation to de-dollarization always comes back to gold’s role in the international system. As stated above countries turn to gold for the same reasons that investors do it is not the liability of any other country. Ghana, gold and oil Two countries in the news this week are likely to rely heavily on gold in the coming year. The first is the explicitly announced plan of gold for fuel announced by Ghana. The second is China, as lockdown protests escalate, the CCP government is likely to act with force. In a fashion that brings displeasure and possibly sanctions levied by western nations against China. Ghana is the latest to announce a long-term plan to pay for energy imports without the US dollar. Instead, its plan is to trade directly in gold. Ghana requested a loan from the IMF in July to help reduce the extreme economic hardship the country has faced. How a Shortage of Rare Earth Metals Will Impact Us All Extreme inflation (40%+ in October), climbing public debt, and a declining local currency (one of the worst performing currencies, down more than 50% this year). Moreover, plus protests and businesses closing their doors are all wreaking havoc on the country’s finances. Ghana has a long history of loans and bailouts from the IMF dating back to the 1960s. The IMF requires a slew of meetings and promises from the country before agreeing to any loan. As part of the new gold for barter initiative Ghana, the largest gold producer in Africa, has ordered miners to sell 20% of their refined gold to the central bank starting January 1, 2023. (Ghana announced its first Domestic Gold Purchase Programme in July of 2021 aimed at doubling the country’s gold reserves.) The idea is that the government will buy the gold from miners at a set spot price, they can then buy fuel with gold instead of US dollars. The goal of the initiative is to tame inflation and stop the step devaluation of the Ghana Cedi. It will also help increase the dwindling foreign exchange reserves and shore up the country’s balance of payments account. Protests in China Turning to China, large protests in major cities over recent days against China’s zero-Covid policy and severe lockdowns pose a real challenge to the communist party. The protests started in Urumqi after barriers were put in place because of the zero-Covid policy they blame for the deaths of 10 people due to delayed rescue efforts to put out a fire. The protests have since spread to other major cities. This inludes Beijing and Shanghai, with demonstrators using the opportunity to call for political change. Although small local protests are common in China. Government censors are working to ensure they stay under the radar of the media and are unreported. Mass protests are not common, and the government reacts quickly to stop them. This week’s protests are not an exception. Moreover, in Beijing and Shanghai large numbers of police were deployed to head off protestors. China has one of the most sophisticated censor systems, and police often check phones for foreign social media apps such as Instagram and Twitter. Also, use cameras in public places to detain protestors later. Censors also scrub any mention of the protests or dissent about the zero-Covid policy from the internet. Western World is watching the Chinese government’s response to the protests very closely. A spokesman for US President Biden told reporters that the President is monitoring the situation. Also, said that people around the world should have the right to protest peacefully including in China. Moreover, Canada’s Prime Minister Justin Trudeau has expressed a similar sentiment. The protests and the Chinese government’s reaction are likely to increase already tense relationships with China and the West. The recent confrontation between Xi and Trudeau at the G20 summit in mid-November over Xi saying that Trudeau leaked information from their private informal meeting is just the latest example. Xi did not think it appropriate that Trudeau had told the press that he brought up “serious concerns about alleged espionage and Chinese interference in Canadian elections”. The recorded confrontation is just one example that China does not see reason to commit to open communication and rules of the Western world. Gold gives China confidence The US and its international allies have announced sanctions against China for human rights violations as recently as last year. This is when they announced sanctions against government officials for their treatment of Muslims. If the West does put sanctions on China for its response to protestors, China will likely retaliate with sanctions against the US. This could turn into a full-on trade war. China’s long bid to ‘de-dollarize’ and its building of gold holdings will certainly help China. This will help them to mitigate the negative effect of sanctions for longer. The 2022 playbook for de-dollarizing before committing acts which will earn the sanction of America was written by Russia who owned plenty of exportable commodities before invading Ukraine. China learnt from the sanctions against Russia that America and other nations would seize assets and deny access for money transfers. Therefore, holding gold makes sense since it can act as collateral in transactions that never pass through the western banking system controlled by America. Whatever your views about China and its policies, the fact remains that their gold holdings serve as insulation from sanctions. This is because physical metal has zero counterparty risk. It does this job for everyone that owns it. Maybe this is why America itself has not sold any gold since 1971. If you’re looking for a reason to avoid that spreadsheet or awkward email for a bit longer, go and take a look at our YouTube Channel, GoldCore TV. We’ve got some brilliant interviews and commentary from the GoldCore team as well as industry experts.
  2. Football, love it or hate it, will dominate news outlets and Zoom small talk for the next month. Both the sport and the politics have entered the debating arenas, but there has been little mention of the whopping prize fund. Yes, football is one of the world’s largest industries, but is the prize fund just because of the World Cup’s popularity, or is it really not so huge when you consider what has happened to the value of money? No wonder the solid gold trophy is the world’s most sought-after. For this post, we take a break from the usual and discuss something near to many sports fans’ hearts – the FIFA World Cup! Moreover, the World Cup will dominate sports fan attention spans over the next month. The opening match of the 2022 event was on November 20; Ecuador defeated the host country Qatar, which was the first time a host nation lost in the opening match. It was also Qatar’s World Cup debut. It involves 32 teams at 6 different stadiums for a total of 64 matches. This will conclude with the championship game on December 18. In addition to the pure gold trophy, the winning team will be awarded $42 million in prize money. Additionally, the trophy will be passed to the winning team from France, the 2018 winner. The trophy stands at 36.5 cm tall with a weight of only 6.2 kg, with approximately 2kg of that weight the malachite discs at the bottom. The roughly 4.2 kg of gold would place the metal value (at US$235,000 at today’s price of gold. Amazingly 11 times the US$21,000 cost of that gold in 1974 when the current trophy was made. Keep in mind this is the gold price only, the trophy’s estimate cost US$50,000 to make. Also, the estimated value has grown exponentially to more than that US$20 million making it the most valuable trophy in the world. Correlation between The FIFA World Cup and Gold It is not only the value of the gold in the trophy that has increased over the last 48 years, but the total prize money for the FIFA World Cup has also increased substantially. As mentioned above, the winning team will get $42 million in prize money this year. Each of the other 31 teams that participate are also awarded prize money. A total of US$440 million is being awarded this year. In addition, each team is awarded money for preparation, a club benefit programme, and a club protection programme (i.e., player’s insurance). This all adds up to a total prize money fund of US$1 billion, compared to the 2018 total of US$791 million. The total prize money was $20 million in 1982. This was when FIFA first officially announced how much prize money each team would receive. The increase in the Total Prize Money of US$209 million from the 2018 World Cup to this year’s US$1 billion total amount was the largest increase in actual dollars. However, in percentage terms, it was the smallest increase between events since the official prize was announced in 1982. The largest percentage increase was the more than doubling (108% increase) from the 1982 World Cup held in Spain to the 1986 World Cup held in Mexico. Moreover, there are 40 years between 1982 and 2022. During this time the prize pool grew from US$20 million to US$1 billion. If we calculate the annual rate of compound growth for something. This was over 40 years growing from 20 to 1,000 million, we get a 10.27% annual rate of growth. Maybe this 10.27% inflation rate is a better representation of cost inflation than the government produced inflation indices? No one could ever definitively answer this question but it’s a great thing to ponder once your team exits (or wins!!) the tourney. Correlation between The World Cup and Inflation Come to think of this the 10.27% annual World Cup inflation rate is kind of close to the 7.96% inflation rate. If we calculate the price of gold over an even longer time frame. Here is our math; gold was US$35 in 1971, and today gold is US$1740 in 2022 being 51 years later. 7.96% was the true inflation figure and growing broadcast rights explain the 2.31% extra growth in World Cup prize money. Sporting prizes and salaries usually have much to do with business plans for broadcast growth. These do not directly link to official government inflation statistics. Yet to note that World Cup Total Prize packages grew at 10.27% annually. While the World Bank’s world consumer price inflation index has increased on average only half that amount at 5.32% since 1982. How a Shortage of Rare Earth Metals Will Impact Us All Those inflation rates seem very similar to us if you back out the growth in footie as the most popular human game. So, remember to go for gold by owning physical metals. Bored of football talk? Worry not. We have a whole channel that has absolutely nothing to do with football, for you to enjoy. Check out GoldCore TV. Here we have a great selection of gold and silver market analysis, commentary and interviews. Great for those who fancy a break from football.
  3. When you invest in gold or buy silver coins with GoldCore you are choosing to invest in an asset that has no counterparty risk. Sadly those who have been holding their bitcoin on the crypto exchange FTX, have not experienced the same level of reassurance and service from the exchange’s management. This event is all part of a much wider lesson about which assets really are safe havens. Also how to reduce the level of counterparty risk your investment portfolio is exposed to. This time last year, cryptocurrency enthusiasts were still touting “Crypto as the new gold”– crypto touted as having the same ‘safe’ attributes as gold. The main attribute is that it is a currency that government doesn’t control. Also, it is without counterparty risk. The latest debacle has once more proved this is not always the case for cryptocurrencies. The news that the crypto exchange FTX was filing for bankruptcy on November 5 sent Bitcoin plunging down a further 25%. This is on top of the more than 60% Bitcoin has already declined since its November 2021 peak. This brings the total decline to more than 75%. Bitcoin Chart The extent of the collapse and its fallout is still unfolding as more details are uncovered. The main risk goes back to one we have discussed many times before counterparty risk. What Happens to your Bitcoin as FTX Collapses The FTX collapse has brought to light that the CEO, Sam Bankman-Fried, had authorized billions of dollars worth of customer assets to be lent to its affiliated trading firm Alameda Research to fund risky bets. According to news reports Alameda Research owes FTX upwards of US$10 billion. This is more than half of its US$16 billion in customer assets! The bankruptcy case is likely to take years to unravel. There could be more than one million creditors, and more than 100 other related corporate entities involved. Everyone who thought they owned Bitcoin held by FTX became an unsecured bankruptcy creditor. These are the ones who must now rely upon some Court to confirm just how much, or any Bitcoin they will receive. FTX is not the first crypto exchange to collapse – Mt. Gox, which accounted for over 75% of all Bitcoin transactions until it filed for bankruptcy in 2014 after being hacked. Hundreds of thousands of bitcoins were lost (removed from the network). Some of these coins later recovered but withdrawals from the exchange were already stopped. It wasn’t until seven and a half years later, in November 2021, creditors and the court reached an agreement. The FTX web of deceit and ‘poor judgment’ in Mr. Bankman-Fried’s words, goes much deeper and is far more convoluted than the Mt. Gox bankruptcy. Is the Dollar About To Go Digital? Along the same lines of digital currency and counterparty risk, the Federal Reserve of New York announced on November 15 that it is “Facilitating Wholesale Digital Asset Settlement”. The Federal Reserve of New York and a dozen major banks are launching a twelve-week test of a digital dollar. A news release on the Federal Reserve of New York website states that the test is to determine the feasibility experiment as a ‘proof-of-concept’ of transactions using a digital US dollar. The twelve-week program will simulate digital money transactions between the participating bank customers. It then settles the transactions through a simulated Fed Reserve distributed ledger. The experiment of ‘digital dollar tokens’ through the test program titled “The Regulated Liability Network” by banks through the Federal Reserve is to bring blockchain technology to the ‘real economy’ and speed up settlements between banks and the central bank. The FRBNY states: In a 12-week proof-of-concept project—the Regulated Liability Network U.S. Pilot—the NYIC will experiment with the concept of a regulated liability Network (RLN). RLN is a concept for a financial market infrastructure (FMI) facilitating digital asset transactions. This connects deposits held at regulated financial institutions using distributed ledger technology. How a Shortage of Rare Earth Metals Will Impact Us All While the Regulated Liability Network could be an alternative to unregulated cryptocurrencies the potential fresh problems to arise are obvious given the transaction ledger is likely transparent for FRBNY purposes. Only time will tell if the timing of the test (on the heels of the FTX collapse) is simply ‘bad timing’ or an omen of a system building in even more risk. Investing in physical gold and silver are still the tried-and-true alternative! If you would like to hear more about the benefits to investing in gold or buying silver coins then have a look at our YouTube Channel, GoldCore TV. Here we bring you a wealth of news, commentary and analysis of the precious metals markets, as well as the wider macroeconomic situation.
  4. The US midterms have not produced the ‘red tsunami’ so many political commentators predicted. But the Democrats could still lose the House of Representatives and possibly the Senate, as well. The implications this could have on policy making could be dramatic. Even if the swell of red is more of a ripple than a wave, politicians will be forced to sit up and take note of what is frustrating voters right now: the economy. Exit polls showed that the economy and inflation were voters’ biggest worries. This will have benefited Republicans and will influence not only the next couple of years in US politics, but also the next election. The swing to the right might not be here just yet but it’s likely to be on its way. Read on to see what this could mean for gold and silver prices. The pendulum is swinging to the right in US Politics … which potentially puts the Fed on a tighter leash. National surveys show that the main issues on voter’s minds are soaring inflation, fear of recession, and excessive government spending. Republicans have yet to reform their agenda but are finding victory in ranting about the high crime rates, rising prices – especially at the pump and grocery store, and excessive government spending. US voters are choosing any alternative to the incumbents. This swing in the pendulum to the right also sets up a possible Republican Presidential victory in 2024. President Trump on November 7, the very eve of midterm elections, said that he doesn’t want to detract from midterms but that he is going to ‘make a big announcement on November 15th. Could it be that Trump will be seeking Republican nomination for the 2024 presidential election? Implications for Gold and Silver There are two key implications of the swing to the right, for the gold and silver market. Both revolve around the Fed and monetary policy. The first is increased central banking alongside renewed calls for the Fed to have less independence in ‘freely printing money’ and the second is renewed calls for a return to the gold standard. Once the election dust settles the Republicans won’t have Democrats to blame anymore for the state of the economy so their attention will surely turn to the Federal Reserve’s role in distorting the markets by holding interest rates too low on top of non-stop money printing for the last 15 years. And remember that the drop in bond prices has made the Fed’s own balance sheet look like a loser. See our post on October 27 Is Central Banks’ License to Print Money about to Expire? The Republicans are, of course, not alone in criticizing the Fed when times get tough. As Democrat chances of maintaining control of Congress slipped over the last several weeks some Democrats also turned on the Fed. Sen. John Hickenlooper (D-Colo.) sent a letter to Fed Chair Jerome H. Powell, urging the central bank to ease up on its back-to-back interest-rate hikes until it’s clear how drastically those decisions affect the economy this year and next And earlier this week, Senate Banking Committee Chair Sherrod Brown (D-Ohio) cautioned the Fed against triggering unnecessary consequences for the labor market, which reliably weakens in a slowing or contracting economy. Those calls, which echo earlier concerns from Sen. Elizabeth Warren (D-Mass.), reflect growing criticism among left-leaning economists and Fed watchers who say the central bank is going too far and risks overcorrecting and pushing the economy into a recession (Msn.com, 10/27/2022). The difference is that Republicans don’t just send letters to the Fed Chair urging them to comply with what they think is best. Instead, Republican lawmakers will put forth notions and bills to audit and/or abolish the Fed. The second implication for gold and silver is an increased support to reinstate the Gold Standard. On this front, US Representative Alex Mooney has already got the ball rolling. On October 9, 2022, he introduced HR9157 – the Gold Standard Restoration Act, which states (in part): The Federal Reserve note has lost more than 30 percent of its purchasing power since 2000, and 97 percent of its purchasing power since the passage of the Federal Reserve Act in 1913. Under the Federal Reserve’s 2 percent inflation objective, the dollar loses half of its purchasing power every generation, or 35 years … The American economy needs a stable dollar, fixed exchange rates, and money supply controlled by the market, not the government … The gold standard puts control of the money supply with the market instead of the Federal Reserve, discourages excessive deficit spending, and encourages the balancing of Federal budgets … Physical gold and silver continue to be good investments! The Gold Standard Restoration Act specifically proposes to define the Federal Reserve note dollar in terms of gold. Not later than 30 months after the date of the enactment of this Act the Secretary of the Treasury shall define the Federal Reserve note [dollar] in terms of a fixed weight of gold, based on that day’s closing market price of gold; Federal Reserve banks shall make Federal Reserve notes redeemable for and exchangeable with gold at the fixed price and create processes that facilitate such redemptions and exchanges between member banks and the public. (bolding added). To be sure, bill HR9157 – the Gold Standard Restoration Act was, as they say, dead on arrival, however as the pendulum swings over the next two years these kinds of bills along with others limiting Fed reach are very likely to become more popular. Bottomline: Physical gold and silver continue to be good investments! If you want to take a bit more time out of your day to learn about the fallout from loose monetary policy then why not look at our YouTube channel, GoldCore TV. Here we have a wealth of in depth interviews with market experts, leading commentators and best selling authors. From the energy crisis to US Debt to China’s move to a digital currency, we have plenty to keep you informed and up-to-date. How a Shortage of Rare Earth Metals Will Impact Us All
  5. Yesterday the Fed hiked rates. It wasn’t exactly a surprise. For gold and silver investors it was yet another great opportunity to remind ourselves why we invest in gold bars or buy silver coins - because central banks are predictable. They do not have perfect economic knowledge, they do not create long-term value and they are always reacting to the consequences of their poor decisions. Of course gold and silver are in high demand right now - precious metals are one of the few remaining ways to keep out of the way of central banks decisions and to protect your wealth. The Federal Reserve raised the fed funds rate by a further 75 basis points to a range of 3.75% to 4.00%, as expected this week. And the statement had hints of a possible pivot – or slowing of rate increases. Citing the slowing of global activity and mentioning “the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and financial developments”, the Fed gave faint hope to bond and equity investors. Markets took the statement as a dovish sign and rallied. Gold rallied too, for a moment. But then in what one Bloomberg commentator called a ’bait and switch’…. “Like a reproving parent, the Federal Reserve chairman quickly put the kibosh on any budding euphoria his comments about monitoring the lagged effect of interest rate policy might have provoked.” Powell then went on to reiterate that “rates are going up” adding “probably more than people thought.” After the initial surge markets sank – to finish far lower. The S&P 500 index surged 1% - then closed the day down 2.5% - its steepest drop since mid-October. Markets are looking for central banks to pivot to easier policy – which we think they will do next year as economic growth weakens and unemployment surges, but we also propose that there is an additional pivot on the horizon which is far more important for our readers – that the inflation target rate itself will ‘pivot’ higher. Please take a moment to reread our primer on inflation target rates from May 26 – Did Central Banks arrive at their Target Inflation Rate by Mere Fluke? As economic activity wanes, house prices fall, equity markets drop and mortgage rates rise - we remind readers that the 2% rate inflation target was set by a fluke. Central bankers are, of course, denying that they are even thinking about doubling the inflation target from 2% to 4% – but central bankers change their messaging often. Remember it was last year at this time rates were still at near zero and central banks were trying to convince the world that high inflation rates were completely ‘transitory’ and we would be back to 2% levels by now. A higher target inflation rate could end up being the central banker ‘get out of jail free card’. It enables central banks to pause rate hikes while inflation remains high as economic activity weakens and housing prices fall – and it also benefits governments by inflating away some of the massive debt loads that have built up through years of overspending. This pivot could play out as a ‘temporary’ increase in the inflation target rate. Again, going back to last year, central banks were also proclaiming the message that inflation could run above target for some time since it had been below the inflation target for many years. Some inflationary pressures have abated – supply chains are being restored for example. However, others are long lasting new policies, such as ‘friend-shoring’ aka protectionist policies – no matter the name, the resulting higher prices are a new reality. Another source of higher inflation for years to come is the move to renewable and sustainable energy. New price hikes are coming as the technologies are developed but the commodities needed are in short supply. One might ask why governments would support central banks increasing the targeted rate of inflation – the simple answer: governments like to spend more than they have which has led to massive debt levels. One way to reduce these massive debt levels – higher inflation! The only other way to reduce debt levels is financial repression and austerity. The problem with austerity is that governments choosing this route are quickly voted out of office. See our post from March 4 Central Banks Still Do “Whatever It Takes”! for more on government options on reducing massive debt levels. Bottom line: The Fed Still Has No Idea What’s Coming Next, which was the headline to our March post after the Fed raised the fed funds rate for the first time this year. Finally we remind readers that no central banker can inflate five pounds of gold into ten pounds of gold. Paper currency is inflated at a pace controlled by the government. One of the best reasons to own physical metals is storing wealth outside a system which is built on debt and government promise. If you’re keen to hear more about FOMC actions, or the wider macro-economic landscape then have a look at our YouTube Channel, GoldCore TV. This week we discussed access to rare earths and how the West’s energy supply hangs in the balance. See the conversation with Dr Stephen Leeb, here.
  6. The pandemic and the Russia-Ukraine war have shown just how quickly supply chains can be disrupted by geopolitical instability. More than ever we are beginning to appreciate how important it is to secure access to alternative energy supplies. But, paradoxically, the resources the world needs to make this happen are tied up by the very people who have restricted access to the traditional energy resources. Not only is it countries that are desperate to secure access to the key rare earths that will enable us to secure our energy supplies, but it is also companies with P&Ls bigger than small countries. This is making for a very interesting time when it comes to commercial deals, as well as geopolitical tensions. Earlier this week it was revealed that Tesla has been in talks to buy a minority stake in Glencore, the Swiss mining giant. Already the one-man show has secured a deal with the company to buy cobalt but it looks like they want even more of a direct-line to the good stuff. Tesla is not an outlier when it comes to worrying about its rare earth supply lines. According to Baker Steel Resources Trust, “Demand for magnet rare earth is forecast to more than double by 2030, driven by the green revolution. Outside of China there is already a real issue in securing enough material and processing to the magnet stage.” The Trust expects to see “demand to more than double by the end of the decade for the magnet rare earths. Value-in-use estimates for [rare earths] in EVs and wind turbines are orders of magnitude above current levels.” The report brought to mind comments Dr Stephen Leeb recently made when speaking to GoldCore’s Dave Russell. The New York Times best selling author’s depth of knowledge when it comes to geopolitical insights is nothing short of exceptional, especially when it comes to Russia and China. Today we bring you just a short excerpt of our interview with Dr Leeb, where he talks about how the current environment is both exciting and treacherous, and that this is all thanks to access to raw materials. How a Shortage of Rare Earth Metals Will Impact Us All
  7. This week we ask if the wobble experienced by UK pension funds, last week, was just the canary in the gold mine for the global economy. If not for other central banks then this was certainly a reminder for individuals, who were prompted to ask about the levels of counterparty risk their savings and pensions were exposed to, and how they might better protect themselves in the coming months and years. UK pension funds’ lack of liquidity is only the first fault line in a crumbling financial framework. UK pension funds came under major distress after the plummeting price of gilts triggered margin calls totaling more than £100 million (US$107 million) last week. Also, the Bank of England was there to save the day. See our post- Ross Geller inspires Bank of England policy. The BoE’s bond-market rescue, to the tune of £65 billion (US$69 billion), came after gilt prices plummeted, along with the pound, after the new government’s announcement of unfunded tax cuts. At the center of the pension, a meltdown is a derivative-based strategy, that like most plans, started with good intentions. The ‘good intentions’ were from UK regulators that pushed private pensions into investments called liability-driven investments, aka LDIs. These are linked to the returns of UK government bonds. These investment strategies worked great until the surge in UK government yields sent everyone to the exit at the same time. The push towards LDIs has increased the investment class to a total of nearly £1.6 trillion (US$1.79 trillion). This is more than two-thirds the size of the British economy—no small feat to bail out if the market continues to implode. This is reminiscent of the no-fail, no-loss, no-risk strategy of the US housing market mortgage-backed derivatives that led to the 2008 financial crisis. It works only until the price falls and the counterparty risk is exposed! Are the problems in the UK pension funds only the canary in the mine? The United Nations (UN) warns that there are more widespread financial meltdowns on the horizon if the Fed and other Central Banks continue to raise interest rates. The UN warns that the result will be a global recession following prolonged stagnation – high inflation, high unemployment, and low growth. The UN report estimates the rapid increase in interest rates has reduced economic output in emerging countries. This is by over US$360 billion over the next three years. Additionally, tightening will do even more harm. The report suggests that instead of central banks hiking rates, which aim to stifle demand, policymakers should target high prices directly through price caps. This should be on large profits by energy companies. India’s central bank (The Reserve Bank of India, RBI) also warned that the aggressive monetary policy tightening will cause the third major global shock to the economy in three years. Following the shocks of covid and the Russia invasion of Ukraine. RBI has raised rates four times since May to try to bring inflationary pressures down. The RBI has also drained close to US$100 billion in foreign-exchange reserves. This effort to defend the rupee from slumping further against the US dollar. Both the UN and RBI governor Shaktikanta warned that the spill-over effect of aggressive tightening. This is not only slowing growth but increasing financial instability. A storm Brewing for Emerging Markets A storm is brewing for emerging markets which are now facing slowing economic growth on top of a higher commodity (especially energy and food prices) along with declining currency values. This is culminating in distressed debt, often priced in US dollars. The financial problems of raising interest rates in today’s climate of high leverage and debt are starting to crack open. As central banks stumble through what comes next we refer readers back to our post in March Even Volcker Couldn’t Volcker in Today’s Economic Conditions. As always, we remind readers the reason to own physical metals is that counterparty risk is zero. Counterparty risk at zero means you don’t rely upon some regulator or bank to confirm what you own. Certainly, there is no regulator pushing you to own derivatives when interest rates are artificially low. There is also no chance of someone deciding to create millions of tonnes of gold or silver at the push of a button, at the whim of a central banker or inexperienced Chancellor. If events in the UK and elsewhere have you wondering how to reduce the level of counterparty risk your portfolio or pension is currently exposed to, why not contact a member of the GoldCore team to discuss how to buy gold or how to hold gold in your pension? Events in the UK economy and its wider implications is something we also explore in the latest episode of The M3 Report, with Rick Rule and Ed Steer. Conversations with both guests offer up some new insights as well as discussions around the importance of owning gold. Watch now: Rick Rule Interview on The M3 Report. Rick Rule Interview on The M3 Report
  8. What do: Ron Paul Mike Tyson A fart in an elevator President Paul Kagame of Rwanda …have in common? They are all featured in this week’s The M3 Report, your show for all things Metals, Markets and Money. This is our sixth episode of the hit show. Subscribe now, to be sure not to miss it. Click Here to Watch It Now We bring you great content every week on GoldCore.com and if you enjoy that then you will be sure to love our flagship show The M3 Report. This week we bring you insight and commentary from the GoldCore team on the disaster that is UK financial policy. And stick around for a clip from our exclusive interview with investing and banking legend Rick Rule, as well as gold and silver chat with Ed Steer. Listen out for Rick Rule’s Hire! Fire! And Admire! …as well as Ed’s thoughts on movements in physical gold between central banks. In short, tune in to episode six of The M3 Report – Metals, Markets and Money. A must-watch for anyone looking to gain insights to help them better manage their savings and investments. Make sure you don’t miss a single episode… Subscribe to GoldCoreTV
  9. Our guest this week is Ed Steer, expert gold and market analyst and author of the Gold & Silver Digest. We invited Ed onto GoldCore TV to get his take on what is concerning him most in financial markets, movements in SLV and sanctions against Russia. He also draws our attention to central bank purchases of gold. Ed’s interview serves as a reminder that those who currently do own gold and silver are just the tip of the iceberg when it comes to the number of people who are going to be looking to insure their savings when the proverbial really does hit the fan. If you enjoyed Dave’s chat with Ed Steer then be sure to subscribe to GoldCore TV and watch our flagship show, The M3 Report. Featuring bonus material from guests such as Jim Rickards and Jim Rogers, as well as commentary from our own team and chart analysis from Gareth Soloway, this show really is at the forefront of alternative market and economic commentary. Click on the Link to Watch Now Make sure you don’t miss a single episode… Subscribe to GoldCoreTV
  10. This morning the UK pound slumped as one of the world’s oldest central banks pressed hard on the panic button. The Bank of England was seen to be shouting ‘Pivot! Pivot! Pivaat!’ as they announced they would temporarily suspend their programme to sell gilts and will instead buy long-dated bonds. In a statement, the bank said that they would be embarking on a “temporary and targeted” bond buying operation. Although we expect it to be about as temporary and as targeted as a toddler with a paint gun. Unsurprisingly the markets did not see this as a vote of confidence in the British economy and almost anything associated with the former Empire has taken a beating. What caused the Bank of England to act so hard and so fast? Unsurprisingly, markets were unimpressed. According to Tradeweb data, the 30-year gilt rates had their largest one-day decline ever as they dropped 0.75 percentage points to 4.3% from an earlier 20-year peak above 5%. Yields decrease when prices increase. Ten-year rates decreased from 4.59 percent to 4.1%. What caused the Bank of England to act so hard and so fast? An attempt to prevent the wholesale equivalent of the run that destroyed Northern Rock in 2008. It now seems to be common knowledge that there was a ‘run dynamic’ on pension funds. Following severe declines in the value of the pound and the price of gilts, UK pension funds have received variation margin calls totaling up to £100 million ($107 million) each. As a result, mark-to-market valuations on derivatives and leveraged repo positions have been heavily skewed against them. Such margin calls were set to cause mass liquidation on pension funds had the central bank not intervened. This, along with the U.K. government’s proposed tax cuts on the heels of the Federal Reserve increasing its projections for interest rate increases are the latest three things in a long string of central bank and government actions that have markets dizzy with uncertainty. However, the Bank of England’s announcement today gives its first-mover status as a central bank that has done what many of us saw as inevitable – take an about turn from QT to QE. Today’s moves by the Bank of England might set it as the first to stop QT, but it certainly won’t be the last. Central banks around the world are struggling with a major dilemma: should they fight inflation risking a global depression like we’ve never seen before, or work to support economic recovery with hyperinflation a constant backdrop? This was the second move by the UK, in less than a week to try and stave off total currency and economic collapse. Markets reacted swiftly to the U.K. government’s announcement on Friday to cut taxes and provide energy subsidies. The plan, right out of the Reaganomics textbook of the 1980s, among other things scraps the highest income-tax rate and is aimed to stimulate stagnating U. K. growth to try and avoid a deep recession. The combination of the Bank of England not matching other central bank interest rate hikes and the tax cuts have increased inflation expectations. UK Gilt 10- Year Yield Chart The surge in yields has close to a third of U.K.’s safest bonds sending off distress signals. It’s a sign of just how troubled a market is when the price of roughly a third of the safest sterling corporate bonds drops into distressed territory, compared to just one at the end of last year … Most of the jump in the number of distressed bonds happened in the two days through Monday, triggered by the government’s plan to fund the nation’s biggest tax cuts in 50 years through more borrowing. While the UK credit market was already having a difficult year, the selloff recently, particularly in the pound and government debt, put sterling notes at the center of the world’s worst bond selloff in decades. The moves this past week have dragged the overall index price to within a few pence of distress, but it’s worth noting that not a single bond’s spread is above 1,000 basis points, another measure of distressed debt. (Bloomberg, 09/27). UK Pound Sterling Chart The pound was already in a steady slide against the dollar before last week. This was mostly due to the combination of pressure from high energy prices widening the U.K. trade deficit and more aggressive Federal Reserve rate hikes drawing investors towards U.S. dollars. Even prior to the UK’s reactionary announcements in the last week, it was already declining against the dollar. But, it is not the only currency doing so, however. Japan intervened in the currency markets last week for the first time since the 1998 Asian financial crisis in order to help prop up the declining yen. The euro and Chinese renminbi have also declined against the dollar since the Fed started hiking interest rates in March. Note that gold has held its value in the surging U.S. dollar environment since March better than other currencies! Currencies in US Dollars Chart The U.S. dollar (DXY index) has surged 19% since the beginning of 2022 and more than 25% since May 2021. Large surges in the U.S. dollar have ended in crisis or taken international agreements to bring down. The rise in the U.S. dollar from 1995 to 2002 coincided with the Asian financial crisis in 1997 and the Dot-com bubble bursting in 2000. The early 1980s major surge in the dollar resulted in the Plaza Accord in 1985 (named for the signing at the Plaza Accord hotel in New York City). The Plaza Accord was an international agreement between France, West Germany, Japan, the U.K., and the U.S. to depreciate the U.S. dollar. Under the Plaza accord leaders of the five governments promised to carry out a policy that would bring down the U.S. dollar’s value. For its part the U.S. promised to reduce its deficit, Germany promised tax cuts, and Japan promised looser monetary policy. Not all of the promises were kept of course, but the agreement did result in a decline in the U.S. dollar. The U.S. dollar declined so much in fact that in 1987 the Louvre Accord then replaced the Plaza Accord. Under the Louvre Accord, which also included Canada, governments set ranges and promised to intervene if their currencies moved outside of those ranges. Many analysts attribute the agreements as the main cause of Japan’s asset price bubble that built from 1986 to 1991 and then the subsequent crash in 1992. US Dollar Index Chart As economic growth slows, competing interests between central banks and governments are going to come to the forefront as governments scramble to support growth and central banks battle inflation. Why did the dollar rise in the 80s? So, what caused the rise in the U.S. dollar in the 1980s in the first place? – the competing policies of a Paul Volcker led Fed tightening policy and the expansionary policies of the U.S. Administration, lead by none other than Ronald Reagan. The slowdown in economic activity has not raised the unemployment rate in the U.S. yet. However, when it does the U.S. administration is likely to follow the U.K. government’s lead and announce stimulative measures to support the economy. Especially as the 2024 election approaches which will then put even more upward pressure on the U.S. dollar. It seems unlikely in today’s climate to get governments to come together for a Plaza Accord-type agreement, which leaves a currency war as the likely outcome. Keep holding physical gold and silver while the storm is brewing! As expected, the price of gold reacted positively to the drop in the pound, so intuitive it is to central bank disaster policies. To hear more of our insights into the gold price and the geopolitical environment, why not check out the latest episode of The M3 Report where we discuss the energy crisis and the impact of sanctions on Russia.
  11. Is the energy crisis something that can be resolved? Was it always inevitable? Will renewable energy make it all OK? Are Western financial policies to blame? All this and more in today’s The M3 Report! If you’re not already subscribed to GoldCoreTV then click here right now to make sure you’re all set to watch the fifth episode of our flagship show. Click Here to Watch It Now Featuring Mr. Energy himself Steve St. Angelo as well as a short explanation from Brent Johnson on the Dollar Milkshake Theory. Plus our do-not-miss feature Chart Watch! This week we look at major shortages in the SLV and ask what’s driving the silver price right now. Our theme this week is gas (in case you hadn’t guessed). Our team looks at gas, what is affecting the price right now and wonder how easily it can be resolved. We also look at Putin’s motives and wonder if the gas issue is a distraction from his ultimate arsenal. Let us know your thoughts on the show, as ever we welcome feedback whether on Youtube, by email or on Twitter. Snail mail also an option! Watch episode five of The M3 Report now. Make sure you don’t miss a single episode… Subscribe to GoldCoreTV
  12. Fed’s message this week – higher rates, lower economic growth, higher unemployment. The Fed hiked interest rates by 75 basis points for the third straight meeting and the statement said that the committee anticipates further increases. The Summary of Economic Projections (SEP) showed that the median projection is for a further 1.25% increase by yearend. Another 75 basis points at the November 1-2 meeting and 50 basis points at the December 13-14 meeting. The projections then show a further 25 basis point increase next year before the Fed holds then starts to lower rates in 2024. Implied Fed Funds Target Rate Chart Central Banks Have Already Lost Control Over the Markets The statement did acknowledge that Russia’s war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks. The difficulty is that central banks have zero control over supply issues and their only response is to choke demand to meet the limited supply. Also, the approach of raising interest rates does not target sectors but is instead broad based across the entire economy. Although financial markets react to interest rate increases very quickly, and many times are forward looking, i.e. equity markets decline before a rate increase, it takes 6 to 12 months for the full effects of interest rate increases to reach the broad based economy. Lies, damned Lies, and statistics – statistics can be misleading. The U.S. unemployment rate is one of the main indicators the Fed uses for its measure of the labour market. The caveat is that a person without a job must have actively looked for a job in the last four weeks to be counted as unemployed. Otherwise, they are not counted as a participant in the labour force. In other words, because of the way the unemployment rate is calculated it could be ‘artificially low’. What we can Learn from the International Gold Market Watch Jan Niewenhuijs Only on GoldCore TV People are ‘dropped out of the labour force figures’ instead of being counted as unemployed. The percent of the population in the labour force has not recovered to pre-covid levels – i.e. there are fewer people in the labour force. The number of employed in the U.S. as a percent of the population has also not recovered to pre-covid levels. So it may turn out that the FED believes employment markets are stronger than they actually are because of misleading statistics. And since the FED wants to raise interest rates until the labour market breaks, maybe they are raising rates based on bad statistics. US Labour Force Chart The Blame Game Continues… There are many reasons quoted by individuals for not returning to the labour market. The highest job openings brackets are in health care and hospitality. The burnout rate during/post covid of healthcare workers has many moving to different sectors or choosing to advance their education, stay home, or early retirement instead of returning to the sector. The high burnout of healthcare workers coupled with an average salary of US$48,000 to $65,000 for a paramedic in New York City, where the monthly average rent is close to $4,000. It is no wonder there are more job openings than applicants in this sector. Wage inequality has been a very long-standing problem in the U.S. According to Forbes the average S&P 500 CEO currently makes 299 times the average employee. This compares to the average CEO earning 50 times more than the average employee in 1950. In the current post-covid, the high inflationary environment is ripe for U.S. employees to demand higher wages. The Fed wants to lower demand by getting higher income households and businesses to slow their spending without pushing lower income households even further down the poverty rabbit hole. Powell is quick to point out that it is lower income households that are the most negatively affected by inflation, but it is also lower income households that are the most negatively affected by higher interest rates. Also, lower income households are even more affected by high unemployment levels. Jim Rogers Interview Only on GoldCore TV The SEP projections also show that the Fed does expect economic growth to be weaker than its June Projection (table below) with only 0.2 growth this year and 1.2% growth next year. With a higher unemployment rate projected at 4.4%, this implies more than 1 million additional unemployed people in America. And still, inflation is well above the Fed’s 2% target. High inflation, and rising unemployment have strong parallels to the early 1980s. Add to this a U.S. Administration that blames everyone but themselves for the issues at hand…we are reminded of Jimmy Carter. The Fed was late to recognize inflation, late to raise rates, and late to start quantitative tightening (shrinking the balance sheet), are they now going to be late to recognize how much effect the higher interest rates are slowing economic growth. And if the two quarters of negative U.S. economic growth in the first half of the year and the disastrous earnings announcement from FedEx are any indications; not only the U.S. but the global slowdown is at hand! When economic growth does slow politicians will turn the blame on central banks.
  13. Today’s guest on GoldCore TV thinks it’s very likely that in the next ten years we will be moving onto a new gold standard. It is of course, not uncommon for gold market commentators to say something along these lines. But Jan Nieuwenhuijs is a gold analyst, who is bringing the chat around gold demand firmly into the 21st Century. His analysis and relentless questioning has put him on the map as the go-to expert when it comes to gold reserves, the movement of gold and the international role of gold. We welcomed him onto the show to ask him about the investigative reporting he does on the movement of gold and how he thinks money-printing central bankers will make the seismic shift to a new Gold Standard. Click on the Link to Watch Now Next week we bring you the latest episode of our flagship show, The M3 Report. We look at the energy crisis and ask what chain of events brought us to where we are today. Steve St Angelo joins us to give us his invaluable insight and stay tuned for his appearance in Chart Watch when we look at the massive shortage in the SLV. If you’re not already, then why not Subscribe to GoldCoreTV channel now so you don’t miss the show’s release!
  14. We last spoke to Jim Rogers way back in January. He told us then that we were set to see the ‘worst bear market’ in his ‘lifetime’. Since then, a lot has changed. Russia has invaded Ukraine, inflation has gone on a tear, Europe is facing a major energy crisis and the US has been sabre-rattling in Taiwan. To say things have stepped up a gear could be considered an understatement. So, we decided to invite him to GoldCoreTV to catch up with our host Dave Russell and to ask his thoughts on a few things. As ever this is a thought-provoking interview but we especially recommend you listen to his final answer at the end, when he is asked about his thoughts on the US-Taiwan-China situation. Click on the Link to Watch Now If you enjoy this interview, then please let us know either in the comments below the video, or why not tweet us? And don’t forget to subscribe to our YouTube channel, to make sure you don’t miss any of our upcoming interviews. Make sure you don’t miss a single episode… Subscribe to GoldCoreTV
  15. It is easy to get caught up in data releases. The media is keen to read a lot into them, hoping it will offer some sense of what is really going on, so often the news is about numbers just announced or expectations for what one economic measure will show from one month to the next. However, as we outline below, many of the numbers that are released on a frequent and regular basis (CPI and employment, for example) can be misleading. Whether it’s down to the inputs or how the figures are presented to us, they rarely give enough insight into the breadth and depth of what is really going on. They are snapshots in a small time frame, with very selective inputs. This is why we like gold. Gold is a constant. It is tangible, finite and exists without the say so of central banks and government policies. So when you next hear the new CPI number of payroll data, rather than take it as a given that they are telling you what the economy looks like right now, why not look at gold and the gold price across a number of currencies and see what that tells you about the state of play now and in the long-term. Because, ultimately that’s what matters. Click Below to Watch Now Equity markets plunged on Tuesday. The systematic correlation of equity markets meant that not only did U.S. equity markets decline sharply but it also meant many international equity markets were also sharply lower. The main U.S. indices all plunged: the DOW (-3.9%), S&P500 (-4.3%), and NASDAQ (-5.2%). International indices, although not as steep of a decline, were also down, the FTSE (-2.3%), and DAX (-2.7%) for example. The catalyst for the decline was the U.S. CPI report for August showed that inflation continues to be a major issue for the U.S. economy. This changed the probability of a larger Fed funds interest rate increase at the Fed’s meeting next week, and it also increases the probability of ‘larger’ increases at future meetings. CPI is one of the main indicators for inflation in the U.S Before the CPI data release on Tuesday the market was somewhat split between whether the Fed would increase interest rates by a further 50 basis points or by 75 basis points, after the CPI data the conversation has changed to whether the Fed will increase by 75 basis points or 100 basis points. Furthermore, the stopping point of the current tightening cycle seems higher than before – some are calling for the Fed funds rate to reach more than 4.5% before the Fed pauses. Economic weakness is already showing in the US economy (negative GDP, for the first two quarters for example) and the fear is that the higher the Fed raises rates the deeper the resulting recession will be. The recession has been the ending result of all but two of the Fed’s nine tightening cycles since 1971. The systematic failure extends to the very data that markets are reacting to – and which the central banks are basing their rate increases on. The Consumer Price Index is one of the main indicators for inflation in the U.S. This data is released each month by the U.S. Bureau of Labour Statistics and represents the increase in prices of a weighted basket of goods and services compared to a prior period, usually the previous month or previous year. Two main components of CPI There are two main components of CPI that are often touted by the press – Total CPI (also called Headline CPI) and Core CPI, which takes out the energy and food components. The data released for August showed that Total CPI increased by 8.3% from August 2021 (which was a slightly smaller increase than the 8.5% in July). However, Core CPI increased by 6.3% compared to August 2021 (which was a larger increase than the 5.9% in July). US Consumer Price Inflation Chart The idea behind Core CPI is that by taking out the energy and food components, which are generally more volatile (they can increase or decrease quickly depending on economic and political conditions), that the underlying components better determine the longer-term trend of the price pressures in the economy. This means that Core CPI is measuring the price differences of goods and services such as shelter, medical care, clothing, and vehicles (both new cars and used). The largest of these components is shelter which is approximately one-third of Core CPI, which is measured – not by the rise in housing costs or mortgage payments but by what the Bureau of Labour Statistics calls “owner’s equivalent rent of residence”. The problem with this measure is that it lags house price increases 12 to 18 months. This means that the 2020 and 2021 house price increases are just now getting picked up in CPI data. The bottom line on CPI data is that not only is it a lagging indicator. This means that it is data from the past but that the actual components are very antiquated and don’t capture the true rising prices in the economy. There is no doubt that inflation is an issue in today’s economies, and the official CPI data undoubtedly has under measured rising prices for many years now. However, our point here is that now the Federal Reserve and other central banks are basing their interest rate decisions on antiquated data sets and will most likely overshoot in their quest to bring inflation down, which will in turn cause a significant slowdown in the economy, which leads to high unemployment. Don’t let low unemployment rates fool you, the unemployment rate does not generally start to rise until a recession is underway and unemployment does not peak until mid-recession. All this is an example of the discussion in our recent podcast on What Problem Does Gold Solve? Gold provides an avenue to protect our portfolio from financial systematic risk. The rapid rise in interest rates into an economy that is addicted and relies on cheap money is not going to end well. The systematic risks are only starting to rear their ugly heads and it is likely to get ugly before central banks are forced to retreat into lower rates again – probably by the middle of next year. We end with two charts: The first chart below shows the relative performance in 2022 year-to-date of gold and various equity market indices. The second chart shows the gold price in various currencies. For those holding gold in currencies besides the U.S. dollars the returns have been even better this year-to-date. Gold Price and Various Equity Market Indices Chart Gold price In various currencies If you’re new to gold and silver investment or perhaps looking for a refresher about holding gold in your portfolio, then have a listen to Stephen Flood’s interview on the Capital Club podcast. Stephen discusses the problem that gold solves as well as suggested allocations and what counterparty risk really is. Listen here. You might have noticed that in the last few months we’ve sent some brilliant interviews and commentary your way, all from the GoldCore Team. If you’ve enjoyed it or would like to watch our latest interview with Jim Rogers then head to our YouTube channel and hit ‘subscribe’.
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