THE REAL MOVE IN GOLD & SILVER IS YET TO START

Since the October 2023 gold low of just over $1,600 gold is up but is anyone buying?

Well no, certainly none of the normal players.

Gold Depositories, Gold Funds and Gold ETFs have lost just under 1,400 tonnes of their gold holdings in the last 2 years since May 2022. 

But not only gold funds are seeing weak buying but also mints such as the Perth Mint and the US Mint with its coin sales down 96% year on year. 

Clearly gold knows something that the market hasn’t discovered yet. 

RATES MUCH HIGHER 

For the last few years I have been clear that there will be no lasting interest rate cuts. 

As the chart shows below, the 40 year down trend in US rates bottomed in 2020 and since then rates are in a secular uptrend.  

I have discussed this in many articles as well as in for example this interview from 2022 when I stated that rates will exceed 10% and potentially much higher in the coming inflationary environment, fuelled by escalating deficits and debt explosion.

“But the Fed will keep rates down” I hear all the experts call out!

Finally the “experts” are changing their mind and  believe that cuts will no longer happen. 

No central bank can control interest rates when its government recklessly issues unlimited debt and the only buyer is the central bank itself. 

PONZI SCHEME WORTHY OF A BANANA REPUBLIC

This is a Ponzi scheme only worthy of a Banana Republic. And this is where the US is heading.  

So strongly rising long rates will pull short rates up. 

And that’s when the fun panic starts. 

As Niall Ferguson stated in a recent article:

“Any great power that spends more on debt service (interest payments on the national debt) than on defence will not stay great for very long. True of Habsburg Spain, true of ancien régime France, true of the Ottoman Empire, true of the British Empire”.

So based on the CBO (Congressional Budget Office), the US will spend more on interest than defence already at the end of 2024 as this chart shows: 

But as often is the case, the CBO prefers not to tell uncomfortable truths. 

The CBO forecasts interest costs to reach $1.6 trillion by 2034. But if we extrapolate the trends of the deficit and apply current interest rate, the annualised interest cost will reach $1.6 trillion at the end of 2024 rather than in 2034. 

Just look at the steepness of the interest cost curve above. It is clearly EXPONENTIAL. 

Total Federal debt was below $1 trillion in 1980. Now, interest on the debt is $1.6 trillion.

Debt today $35 trillion rising to $100 trillion by 2034.

The same with the US Federal Debt. Extrapolating the trend since 1980, the debt will be $100 trillion by 2036 and that is probably conservative.

With the interest trend up as explained above, a 10% rate in 2036 or before is not unrealistic. Remember rates back in the 1970s and early 1980s were well above 10% with a much lower debt and deficit.

US BONDS – BUY THEM AT YOUR PERIL  

Let us analyse the current and future of a US treasury debt (and most sovereign debt):

• Issuance will accelerate exponentially 
• It will never be repaid. At best only deferred or more probably defaulted on
• The value of the currency will fall precipitously

HYPERINFLATION COMING

So where are we heading? 

Most probably we are facing an inflationary period leading to probable hyperinflation 

With global debt already up over 4x this century from $80 trillion to $350 trillion. Add to that a Derivative mountain of over $2 quadrillion plus unfunded liabilities and the total will exceed $3 quadrillion. 

As central banks frenetically try to save the financial system, most of the 3 quadrillion will become debt as counterparties fail and banks will need to be saved with unlimited money printing. 

BANCA ROTTA – BANKRUPT FINANCIAL SYSTEM 

But a rotten system can never be saved. And this is where the expression Banca Rotta derives from – broken bench or broken bank as my article from April 2023 explained. 

But neither a bank nor a sovereign state can be saved by issuing worthless pieces of paper or digital money. 

In March 2023, four US banks collapsed within a matter of days. And soon thereafter Credit Suisse was in trouble and had to be rescued. 

The problems in the banking system have just started. Falling bond prices and collapsing values of property loans are just the beginning. 

This week Republic First Bancorp had to be saved. 

Just look at US banks’ unrealised losses on their bond portfolios in the graph below.

 Unrealised losses on bonds held to maturity are $400 billion.

And losses on bonds available for sale are $250 billion. So the US banking system is sitting on identified losses of $650 billion just on their bond portfolios. As interest rates go up, these losses will increase.

Add to that, losses on loans against collapsing commercial property values and much more.

EXPONENTIAL MOVES 

So we will see debt grow exponentially as it has already started to do.  Exponential moves start gradually and then suddenly whether we talk about debt, inflation or population growth. 

The stadium analogy below shows how it all develops:

It takes 50 minutes to fill a stadium with water, starting with one drop and doubling every minute – 1, 2, 4, 8 drops etc. After 45 minutes the stadium is only 7% full and the last 5 minutes it goes form 7% to 100%.

THE LAST 5 MINUTES OF THE FINANCIAL SYSTEM

So the world is most probably now in the last 5 minutes of our current financial system.

The coming final phase is likely to go very fast as all exponential moves do, just like in the Weimar Republic in 1923. In January 1923 one ounce of gold cost 372,000 marks and at the end of November in 1923 the price was 87 trillion marks!

The consequences of a collapse of the financial system and the global economy, especially in the West can take many decades to recover from. It will involve a debt and asset implosion plus a massive contraction of the economy and trade.

The East and South and especially the countries with major commodity reserves will recover much faster. Russia for example has $85 trillion in commodity reserves, the biggest in the world. 

As US issuance of treasuries accelerate, the potential buyers will decline until there is only one bidder which is the Fed. 

Even today no sane sovereign state would buy US treasuries. Actually no sane investor would buy US treasuries. 

Here we have an already insolvent debtor that has no means of repaying his debt except for issuing more of the same rubbish which in future would only be good for toilet paper. But electronic paper is not even good for that. 

This is a sign in a Zimbabwe toilet: 

Let us analyse the current and future of a US treasury debt (and most sovereign debt):

• Issuance will accelerate exponentially 
• It will never be repaid. At best only deferred or more probably defaulted on
• The value of the currency will fall precipitously

That’s all there is to it. Thus anyone who buys US treasuries or other sovereign bonds has a 99.9% guarantee of not getting his money back. 

So Bonds are no longer an asset of value but just a liability for the borrower that will or can not be repaid.

What about stocks or corporate bonds. Many companies won’t survive or experience a major decline in the stock price together with major cash flow pressures. 

As I have discussed in many articles, we are entering the era of commodities and especially precious metals. 

The coming era is not for speculation but for trying to keep as much of what you have as possible. For the investor who doesn’t protect himself, there will be a wealth destruction of an unprecedented magnitude. 

There will no longer be a question what return you can get on your investment. 

Instead it is a matter of losing as little as possible. 

Holding stocks, bonds or property – all the bubble assets – are likely to lead to massive wealth erosion as we go into the “Everything Collapse”.

THE NEW ERA OF GOLD AND SILVER

For soon 25 years I have been urging investors to hold gold to preserve their wealth. Since the beginning of this century gold has outperformed most asset classes. 

Between 2000 and today, the S&P, including reinvested dividends, has returned 7.7% per annum whilst gold has returned 9.2% per year or 8X.

In the next few years, all the factors discussed in this article will lead to major gains in the precious metals and falls in most conventional assets. 

There are many other positive factors for gold. 

As the chart below shows, the West has reduced its gold reserves since the late 1960s, whilst the East is growing its gold reserves strongly. And we have just seen the beginning of this trend.

The US and EU sanctioning of Russia and the freezing/confiscation of the Russian assets in foreign banks are very beneficial for gold. 

No sovereign states will hold their reserves in US dollars any more. Instead we will see central bank reserves move to gold. That shift has already started and is one of the reasons for gold’s rise. 

In addition, gradually the BRICS countries are moving away from the dollar to trading in their local currencies. For commodity rich countries, gold will be an important part of their trading. 

Thus there are major forces behind the gold move which has just started and will reach further both in price and time than anyone can imagine. 

HOW TO OWN GOLD

But remember for investors, holding gold is for financial survival and protection of assets. 

Therefore gold must be held in physical form outside the banking system with direct access for the investor. 

Also gold must be held in safe jurisdictions with a long history of rule of law and stable government. 

The cost of storing gold should not be the primary consideration for choosing a custodian. When you buy life insurance you mustn’t buy the cheapest but the best.

First consideration must be the owners and management. What is their reputation, background and previous history. 

Thereafter secure servers, security, liquidity, location and insurance are very important. 

Also, high level of personal service is paramount. Many vaults fail in this area. 

Preferably gold should not be held in the country where you are resident, especially not in the US with its fragile financial system. 

Neither gold nor silver has started the real move yet. Any major correction is likely to come from much higher levels. 

Gold and silver are in a hurry so it is not too late to jump on the gold wagon.

THE REAL MOVE IN GOLD & SILVER IS YET TO START

VON GREYERZ partner, Matthew Piepenburg, joins John Buttler (Southbank Research) and David Lin in a spirited discussion on the omni-present yet undeniably important theme of the USD and its historical implications for rising gold.

Understanding gold tailwinds requires an understanding of debt forces and their impact on fiat currencies in general and the USD in particular. Toward that end, Piepenburg opens with a high-level (yet fact-focused) assessment on the current and unprecedented debt crisis in the land of the world reserve currency. Piepenburg unpacks how such debt crises impact a broad range of market themes—from risk assets, rate policies, recessionary forces, inflation cycles and precious metals.

When asked about the time horizon for such events to unfold, Piepenburg argues that the process has already begun. He gives example after example of real-time signals of a USD in open distrust and hence open decline. David asks if and how sovereign deficits impact stock markets. Piepenburg and Buttler address this question in divergent ways, but both agree that even a Fed-supported market rising in a background of cancerous debt levels can only be “maintained” at the expense of a debased and terminally ill (Fed-printed) currency. Piepenburg and Buttler then address the causes, risks and opportunities in a rising equity market bubble.

David asks why the USA has yet to experience hyperinflation, to which Piepenburg and Buttler share their opinions. For Piepenburg, the inflationary end-game is a matter of cycling through dis-inflationary interest rate and recessionary cycles, which will be followed by highly inflationary direct and indirect QE policies out of DC. In this light, the conversation turns to current and projected Fed policies, record UST issuance, long-term interest rate direction and the hard math behind real rather than reported inflation.

All themes, of course, lead to gold and the conversation ends with a review of all the forces–from the oil markets, de-dollarization trends among the BRICS+ nations to COMEX changes and a debt-trapped/cornered US Fed–which point toward an inherently weaker USD. This all explains the current gold rise and a much greater to rise to come.

THE REAL MOVE IN GOLD & SILVER IS YET TO START

Needless to say, we at VON GREYERZ spend a good deal of time thinking about, well… gold.

The Complex, the Simple, the Math and the History

Year after year, and week after week, there is always a new way to examine gold price moves and decipher the obvious and not-so obvious forces which flow behind, ahead, above and below its monetary and, yes, metallic, move through time.

Today, deep into the early decades of the 21^st century, and well over 100 years since the not-so immaculate conception of the Fed in the early 20^th century, we could (and have) spent pages and paragraphs on key turning points in the rigged to fail history of paper vs. metallic money.

At times, this effort can and has seemed intense and even complex, with all kinds of historical facts, mathematical comparisons and “big events.”

The turning points of gold’s relationship with fiat currencies, and its role in preserving wealth, for example, are known to an admitted minority—as only about 0.5% of global financial allocations include physical gold.

Gold’s Language

Yet the need, role and direction of gold is fairly blunt, at least for those with eyes to see and ears to hear.

History, for example, has some clear things to say about paper money.

And so does gold.

From the Bretton Woods promises of 1944 and Nixon’s open and subsequent welch on the same in 1971 to the 2001 outsourcing of the American dream to China under Clinton (and the WTO) or the recent weaponization of USD in Q1 of 2022, gold has been watching, acting and speaking to those who understand her language.

The Big Question: Why Is Gold Rising Now?

And this year, with gold reaching all-time-highs, piercing resistance lines and racing toward what the Wall Street fancy lads call “price discovery,” we are understandably getting a lot of interview requests, phone calls and even emails from friends otherwise silent for years and now suddenly asking the same thing:

“Why is gold rising now?”

The Wall Street side of my odd brain, like it or not, gets all excited by such questions.

Never at a loss for words, my pen and mouth rapidly seek to wax poetic on the many answers to why gold matters forever in general, and why it is rising in particular now.

Toward that end, the list of the fancy and not-so-fancy answers to this question in recent years, articles and interviews could look as simple (or as complex) as the following list of 7 key factors:

The Malignant Seven

1. Every debt crisis leads to a currency crisis—hence: Good for gold.
2. All paper currencies, as Voltaire quipped, eventually revert to their paper value of zero, and all debt-soaked nations, as von Mises, David Hume and even Ernest Hemingway warned, debase their currencies to retain power—hence: Good for gold.
3. Rising rates (and fiscal dominance) used to “fight inflation” are too expensive for even Uncle Sam’s wallet, thus he, like all debt-soaked nations, will debase his currency to pay his own IOUs—hence: Good for gold.
4. Global central banks are dumping unloved and untrusted USTs and stacking gold at undeniably important levels—hence: Good for gold.
5. After generations of importing US inflation and being the dog wagged by the tail of the USD, the BRICS+ nations, prompted by a weaponized Greenback, are now turning their tails slowly but surely away from the USD dog—hence: Good for gold.
6. The Gulf Cooperation Council oil powers, once seduced (circa 1973) into a Petrodollar arrangement by a high-yielding UST and globally revered USD, are now openly selling oil outside of the 2024 version of that far less-yielding UST and far less-trusted USD—hence: Good for gold.
7. That legalized price-fixing sham otherwise known as the COMEX employed in 1974 to keep a permanent boot to the neck of the gold price, is running out of the physical gold needed to, well…price fix gold—hence: Good for gold.

In short, each of these themes–from sovereign (and unprecedented) debt levels, historical debt lessons, the secrets of the rate markets, global central banks dumping USTs or the implications of changing oil markets to the OTC derivatives scam masquerading as capitalism–all DO explain why gold is rising now.

This list, of course, may be simple, but the forces, indicators, lingo, math and trends within each theme can be admittedly complex, as each theme is in fact worthy of its own text book rather than bullet point.

Indeed, currencies, markets, history, bonds, geopolitics, energy moves and derivative desks are complicated little creatures.

But despite all this complexity, study and deliberation, if you really want to address the question of “why is gold rising now?”—the answer is almost too simple for those of us who wish to appear, well… “complex.”

The Too-Simple Answer to the Big Question

In other words, the simple answer—the answer that cuts through all the fog, lingo and math of “sophisticated” financial markets–boils down to this:

GOLD IS NOT RISING AT ALL. THE USD IS JUST GETTING WEAKER AND WEAKER.

At VON GREYERZ, we never measure gold’s value in dollars, yen, euros or any other fiat currency. We measure gold in ounces and grams.

Why?

Because history and math (as well as all the current and insane financial, geopolitical, and social events staring us straight in the eyes today) teach us not to trust a currency backed by man (or the “full faith in trust” of the UST or a Fed’s mouse-clicked currency), but instead to seek value in monetary metals created by nature.

Fake Money & Empty Promises

Once a currency loses a gold backing (nod to Nixon), it is nothing more than the empty promise of a government now free to print and spend without a chaperone to buy votes, market bubbles and even a Nobel Prize (i.e., what Hemingway called “temporary prosperity”) but then hand the bill and inflation to future generations (what Hemingway then called “permanent ruin”).

Gold Does Nothing

So yes, gold, as Buffet and others have quipped, “does nothing.” It just sits there and stares at you.

But while this yield-less pet rock sits there “doing nothing,” the currency by which you measure your wealth is in fact quite busy melting like an ice cube–one day, month and year at a time.

Here’s to Doing Nothing: Price vs. Value

Sometimes a picture can say a thousand words and make the most complex economic topics or themes, like “price vs. value” or “store of value,” make immediate sense.

Think, for example, about a 1-ounce bar of gold just doing nothing in say… 1920.

Well, if you had 250 of those do-nothing ounces in a shoe box in 1920, which was “priced” then at around $20 USD per ounce, you could afford the average US home, then priced at $5000.

Today, however, the average price of a US home is $500,000.

So, if your grandfather left you a shoebox with 5000 crumpled Dollars inside, it would not even pay for the landscaping needed for that same house today.

But if your grandfather had instead handed you a shoebox with those same 250 singe-ounce bars of gold (today “priced” at 2300/ounce), you could buy the same average home and the landscaper too—with a nice tip for the latter.

So, do you still think those little gold bars just stared back at you, doing nothing?

After all, the shoe box with the 5000 USDs inside was very busy doing one thing very well, namely: Losing its value like snow melting off a spring mountainside…

So, which shoebox would you want to measure your wealth?

The one measured in fiat dollars actively losing value? Or the one measured in gold ounces “doing nothing” but retaining its value?

Sometimes the complex really is that simple.

The Next Big Question: Where’s Gold Headed Tomorrow?

The pathway to answering such a question is just as clear as the one we just traveled.

The aforementioned “Malignant Seven” are each factors which we believe will continue to push the USD down and hence gold higher, because, and to repeat: It’s not that gold will get stronger, it’s just that all fiat currencies in general, and the weaponized, distrusted and over-indebted USD in particular, get weaker.

But for those still understandably and realistically convinced that despite its myriad and almost endless flaws, the US (and its Dollar) is still, for now at least, the best horse in the glue factory, a case can be made that measured relative to other currencies (i.e., the DXY), that the USD is supreme, and that when and as financial markets weaken, investors will flock to it like a lifeboat in a tempest.

Milkshake Theory?

Such a credible view is held by very smart folks like Brent Johnson, with whom I have discussed the USD at length.

Brent’s “milkshake theory” intelligently argues that powerful demand forces from the euro dollar, SWIFT and derivative markets, for example, create a massive, “straw-like” sucking sound for the “milky” USD, which demand will keep it strong, and send it stronger, in the seasons ahead.

He may in fact be right.

But I think differently.

Why?

Two primary reasons stick out.

No “Straw” for the UST

First, despite the undeniably powerful demand forces at play for the USD, demand for USTs is, and has been, tanking around the world since 2014.  That is, foreigners don’t trust the US IOUs as much as they did before America became a debt trap.

Ever since foreign (central bank) interest in USTs began net-selling in 2014, and gold interest began net-buying in 2010, the only buyer of last resort for US public debt has been the US Fed, and the only tool the US Fed has to purchase that debt is a mouse-clicker (“money printer”) at the Eccles Building.

Unfortunately, creating money out of thin air is not a sustainable  policy but a near-term fantasy. More importantly, such a policy is inherently, and by definition: Inflationary.

My US Realpolitik Theory…

The second, and perhaps more important reason the USD’s declining future is fairly easy to see (or argue), is this:

EVEN UNCLE SAM WANTS AND NEEDS A WEAKER DOLLAR.

Why?

Because the only way out of the biggest debt hole the US has ever seen is to inflate its way out of it by debasing the currency to “save” an otherwise rotten system.

We’ve argued this for years, and the facts supporting this historically-repeated pattern (and view) haven’t changed; they’ve just grown worse.

That is why it was easy to foresee that inflation would not be “transitory” despite all the useless commentary (and Fed-speak) arguing to the contrary.

That is also why it was easy to see that Powell’s “war on inflation” was a political ruse—an optics play.

Powell’s real aim was (and remains) inflationary via negative real rates (i.e., inflation higher than 10Y bond yields).

Thus, even while pursuing his “higher-for-longer” and anti-inflationary rate hikes, actual inflation, which Powell needed, was still ripping.

But he (and the BLS) was able get around this embarrassing CPI reality by simply lying about the actual inflation…

In other words: Classic DC fork-tonguing…

China is Not Turning Japanese

But in case you still need further proof that the US wants and needs a weaker USD to fake its way out of their self-created debt disaster via an increasingly diluted USD at YOUR expense, just consider what’s happening with China.

Unbeknownst to many, Yellen has been scurrying off to Asia to convince, cajole or even threaten China into accepting a weaker USD vs the CNY.

Why?

Because the prior, “stronger” 40-year version of the Dollar has rendered expensive US exports (and trade deficits) unable to compete with cheaper Chinese goods.

This floating currency game was a trick the US played on Japan when I was a kid—i.e., weaken the USD to fight the then-rising Sun of Japan’s then rising power.

But China ain’t Japan. It won’t float its currency in dollar terms.

So, what then can the US do to weaken the USD without upsetting China?

Does DC Finally Want Higher Gold Prices?

Well, as Luke Gromen once again makes beautifully clear, the easiest path forward for all parties concerned is to simply (and finally) let gold go much, much higher.

The surest and steadiest path to a weaker USD is higher gold.

Yellen’s Treasury Department could use its Exchange Stabilization Fund to buy/sell gold and other financial securities to control the USD without having to rely so much on the Fed’s now embarrassing money printer.

Gold is now a critical pivot point and tool for the US. If gold went, for example, to $4000 while CNY gold sits at 16,000, China’s central bank would have to re-rate higher in Dollar terms, pushing the CNY higher.

But such an arrangement won’t upset China, as it holds a lot more gold than the World Gold Council reports.

Rather than float the CNY in Dollar terms, China could instead float its CNY in GOLD terms.

In short: A veritable win-win for the China and the US, with gold now leading the way.

Or stated otherwise, you know it’s gonna be a gold tailwind, when both China and DC are seeking higher gold.

Based on the foregoing, do you still think gold does nothing?

Think harder.

THE REAL MOVE IN GOLD & SILVER IS YET TO START

In this full-ranging discussion with Anthony Fatseas of WT Finance, VON GREYERZ partner, Matthew Piepenburg, squarely addresses the financial, market, currency and central bank forces which evidence an embarrassing disconnect between markets at blow-off tops and a Main Street economy openly blowing away…In this backdrop, the direction and role of gold is now undeniably significant.

Piepenburg opens by distinguishing a rising market from a so-called “resilient” economy by citing recessionary facts and math against the so-called “full employment” and “robust GDP” public narrative. Piepenburg sees a dangerously narrow S&P “ripping” in a Pavlovian response to promises of 2024 rate cuts and what he describes as “backdoor QE” trending toward direct QE to “save” broke(n) credit markets at the expense of the USD. These facts explain gold’s secular move north. As for markets, once net-income margins in the S&P 5 transition from expansion to contraction, stocks will fall in the backdrop of a global rather than regional recession, which makes the current bubble far more dangerous than prior market reversals/mean-reversions in 2000 or 2008.

Piepenburg cites the lessons of math (trillions in debt-based “growth”) and history (from 18^th century France to today) to plainly reveal what Hemingway described as the sad transition from “temporary prosperity to permanent ruin” via an historically repeated template of debasing the currency (inflation) and going to war (proxy or direct)  to distract a centralized public from the debt failures of their weak leaders. Toward this end, Piepenburg addresses all the forces destroying the USD (debt, de-dollarization, petrodollar shifts, example after example of hidden, “backdoor” QE, record-high T-Bill issuance and unlimited yet hidden leverage permission by the big banks to buy unloved government debt off the Fed’s balance sheet).

Piepenburg makes an open joke of “reported inflation” and gets to the honest data to explain why the US needs a weaker USD. Gold, of course, is rising, and will continue to rise, simply because the USD is now, and will continue to be, inherently weaker, regardless of its relative strength.  Again: “It’s common sense” colliding with the lessons of basic math & history.

The discussion closes with the unspoken danger (and current reality) of increased centralization, grotesque wealth inequality and less freedoms, the evidence of which is sadly everywhere. Is there a “way out” of currency debasement, economic risk and continued social unrest? Piepenburg is not so hopeful, as leadership today, across the world, is largely devoid of basic honesty, economic savvy or a respect for history. 

Preparation is up to each of us, not our leaders.

THE REAL MOVE IN GOLD & SILVER IS YET TO START

The desire of gold is not for gold. It is for the means of freedom and benefit.

Ralph Waldo Emerson

Gold is now in a hurry and silver even more so. 

The price moves in the coming months and year are likely to be spectacular. The combination of technical and fundamental factors can easily drive gold well above $3,000 and silver to new highs above $50. 

Forecasting gold is a mug’s game, as I have often stated. 

But that is in the short term.

In the medium to long term, forecasting the Gold price is a cinch. 

How can I be so certain?

Well, since the history of gold and money began, gold has always increased in value measured against fiat money. 

Voltaire gave us the formula in 1729 when he said:

PAPER MONEY EVENTUALLY RETURNS TO ITS INTRINSIC VALUE – ZERO

So why has no investor or layman ever heeded the simple fact that –

ALL CURRENCIES HAVE WITHOUT FAIL GONE TO ZERO.

What most people, including experienced investors, don’t understand is that gold doesn’t increase in value. 

Gold just maintains stable purchasing power. A Roman toga 2000 years ago cost 1 ounce of gold and a tailored suit today also costs 1 ounce of gold. 

So it is really totally wrong to talk about gold going up when it is the unit we measure gold in that goes down. Just as all fiat money has done.

Just take gold measured in US dollars. As the illustration below shows, the value of the dollar since 1971 has crashed, measured in real terms which is gold. 

As the picture shows, 1 ounce of gold cost $35 in 1971. Today 53 years later 1 ounce of gold costs $2,300. So has gold increased in value 66x since 1971?

No of course not, it is the dollar which has declined in value and purchasing power by 98.5% since 1971.

 So what will gold be worth in the next 5 years? That is of course the wrong question. 

Instead we must ask how much will the dollar and all currencies decline in real terms in the next few years?

Gold and silver have not increased in line with money supply or inflation and are severely undervalued. 

Just look at gold adjusted for US CPI (Consumer Price Index) in the graph below.

So if we inflation adjust the gold price, the 1980 high at $850 would today be $3,590.

But if we adjust the gold price for REAL inflation based on Shadow Government Statistics calculation, the gold price equivalent of the $850 high would today be $29,200. 

In the 1980s the inflation calculation was adjusted, by the US government, to artificially improve/reduce official inflation figures. 

And if we adjust the silver price for US CPI, the 1980 silver high of $50 would today be $166. 

Adjusted for REAL inflation, the $50 high silver in 1980 would today be $1,350. 

GOLD – LONG SIDEWAYS MOVES FOLLOWED BY EXPLOSIONS  

Gold makes powerful moves and then goes sideways for long periods. After the gold explosion from $35 in 1971 to $850 in 1980, gold spent 20 years correcting until 2000. 

That was the time that we decided that gold was now ready for the next run at the same time as risk in stock markets, debt and derivatives was starting to look dangerous. 

So in 2002 we made major investments into physical gold at $300 for investors and for ourselves. At the time I recommended up to 50% of financial assets into gold based on wealth preservation principles and also the fact that gold at the time was unloved and oversold and thus represented excellent value.

WE HAVE LIFTOFF!

As gold went through $2,100 in early March, I declared “GOLD – WE HAVE LIFTOFF!”

Since then gold has moved up another $200 but that is the mere beginning of a secular move. 

After the move from $300 in 2002 to $1920 in 2011 gold had a long correction again between 2013 and 2016. The break of the first Maginot Line (see chart) was predictable (article Feb 2019). Then in March 2023 it was clear that the second Maginot Line would break and we were seeing the beginning of the demise of the financial system as four US banks and Credit Suisse collapsed within a mater of days. 

I discussed this in my March 2023 article “THIS IS IT! THE FINANCIAL SYSTEM IS TERMINALLY BROKEN” 

HOLDING GOLD REQUIRES PATIENCE

The message I want to convey with the two graphs above is that gold investing requires patience and obviously timing of the entry points. But in the long term investors will be extravagantly rewarded and at the same time hold the best insurance against a rotten system that money can buy. 

Gold has consolidated under $2,000 since August 2020. The recent breakout is extremely important and not the end of a move. 

No, this is the beginning of a move that will reach heights that today are unfathomable. 

I am in no way intending to be sensational, but just trying to explain that fundamental and technical factors are now pointing to a secular bull market in gold and silver. 

Also, normal measures of overbuying will not be valid. Gold and silver will in the coming months be overbought for long periods of time. 

But don’t forget that there will also be vicious corrections, especially in silver which is not for widows and orphans. 

I want to emphasise again that our intention to invest heavily in gold and much less heavily in silver (much more volatile), was primarily for long term wealth preservation reasons. That reason is more valid than ever today.

THE EVERYTHING COLLAPSE WILL COME

Since we have been expecting the “Everything Bubble” to turn into the “Everything Collapse” (see my article April 2023), all the bubble assets like stocks, bonds and property are likely to decline substantially in real terms which means measured in gold. 

I willingly admit that I have been premature in predicting the Everything Bubble to collapse in nominal terms. But in real terms almost all major asset classes have underperformed compared to gold since 2000 including stocks. 

It is only the illusion of growth and prosperity based on worthless money creation that keeps this circus travelling on. But the circus acts will soon run out of tricks as the world discovers that this is only a mirage which has totally deluded us. 

If we take stocks as an example, gold has outperformed the Dow and S&P since 2000.

Here is what I wrote 2 weeks ago:

The world’s best kept investment secret is GOLD.

• Gold has gone up 7.5X this century
• Gold Compound annual return since 2000 is 9.2%
• Dow Jones Compound annual return since 2000 is 7.7% incl. reinvested dividends
• So why are only 0.6% of global financial assets in gold?
• The simple answer is that most investors don’t understand gold because governments suppress the virtues of gold. 

See my article on this subject

Stocks are now in position where we could have a major decline/collapse at any time.

WOLVES IN SHEEP’S CLOTHING 

So back to the circus. The leaders of the Western World, whether we take the US, UK, Canada, Germany, France etc are mere clowns trying to fool their people with fake costumes (wolf in sheep’s clothing) and fake acts whether it is:  

Money printing, debts, vaccines, climate, war, migration, more lies, propaganda, moral and ethical decadence to mention but a few of the problems that are leading us to the collapse of the Western World.

Real clowns would probably do a better job than current leaders. They would at least entertain us instead of bringing the misery that a majority of people are currently experiencing. 

Yes, I am aware that there is a small elite that is benefiting dramatically from the shameful mismanagement of the world economy whilst the majority suffers badly from inept leadership around the world. 

So how will this end? In my view, as I have outlined in many articles, it can only end one way which is a total collapse of the financial system as well as of the political system. 

Will we first have hyperinflation and then a deflationary implosion or will it go straight to the implosion. Will there be a global war. Well, the US and most Western leaders are doing their utmost to start a World War against the will of the people. There is absolutely no attempt to find a peaceful solution. 

Instead it is more weapons and more money to escalate the war as well as pushing as many countries as possible into NATO. Both Biden and Stoltenberg (NATO leader) also want Ukraine – a warring nation – to join NATO. 

And with today’s sophisticated and dangerous weapons, no one can win a war. 

Obviously, China, Russia, North Korea and Iran would win a war with boots on the ground at a cost of 100s of millions of lives. But modern wars are won in the air. And with around 15,000 nuclear warheads, the world can be destroyed many times over in a few minutes. 

The world has never had a global economic and political crisis of this magnitude with so many destructive weapons, both financial (debt, derivatives) and military. 

So to forecast the outcome is clearly impossible. One can only hope that people power will prevail and that incompetent leaders will be pushed out. 

Otherwise there is little us ordinary people can do. 

Wealth preservation in the form of physical gold, owned directly and in a safe jurisdiction (countries like the US, Canada or EU are not safe politically) is clearly the best insurance investors can buy.

Also we must assist family and friends in the difficult times ahead and make that circle the kernel of our lives (if it isn’t already).

And remember that most of the wonderful things in life are free like nature, music, books etc. 

THE REAL MOVE IN GOLD & SILVER IS YET TO START

In recent weeks, gold has reached new all-time highs in many currencies, including the US dollar, the euro and the Swiss franc. We want to take the euphoric mood among gold investors as an opportunity to focus on a fundamental topic. From our point of view, the gold sector is riddled with an elementary misunderstanding. Many gold investors and analysts operate on an erroneous assumption: they attach too much importance to  annual production and annual demand. We often read that the gold price cannot drop below production costs. We would like to discuss this misconception in the following.

Every gramme of gold that is held for a variety of reasons is for sale at a certain price. Many owners would sell at a price slightly above spot, others would only sell at a substantially higher price. If, due to favorable prices, a private individual wants to sell his gold holdings that he acquired decades ago, it will not reduce the overall supply of gold. All that happens is the transfer from one private portfolio to another private portfolio. To the buyer, it makes no difference whether the gold was produced three weeks or three millennia ago.

This means the annual gold production of currently more than 3,600 tons is of relatively little significance to the pricing process. Rather, the supply side consists of all the gold that has ever been produced. The recycling of existing gold accounts for a much larger share of supply than is the case for other commodities. Paradoxically, gold is not in short supply– the opposite is the case: it is one of the most widely dispersed goods in the world. Given that its industrial use is limited, the majority of all gold ever produced is still available.

In contrast to other commodities such as oil, copper or agricultural products, there is an enormous discrepancy between annual production (= flow) and the total available stock of gold. In other words, gold has a high stock-to-flow ratio (SFR). The high stock-to-flow ratio is the most important characteristic of gold (and silver). The total gold ever mined amounts to almost 213,000 tons. Annual production in 2023 was just over 3,650 tons. Dividing the two amounts gives a stock-to-flow ratio of 58.4, which means that the current annual production must be maintained for more than 58 years to double the current gold stock.

	Total reserves in tons (stock)	% share of total reserves (stock)
Jewelry	96,500	45%
Private holdings (bars, coins, ETF)	47,500	22%
Central bank holdings	36,.700	17%
Others	32,000	15%
Total	212,600	100%
Estimated mining production (flow)	3,600	1.7% of total stock

Gold holdings are currently growing by around 1.7% a year, which is much slower than all monetary aggregates around the world. This growth is roughly in line with population growth. Confidence in the current and future purchasing power of money depends largely on how much money is currently available and how the quantity will change in the future.

Gold Stock (Above Ground Gold), in Tonnes, Money Supply (US M2), in USD bn, 1910-2023

Year	Gold Stock	yoy	Money Supply	yoy	Year	Gold Stock	yoy	Money Supply	yoy
1910	35,626	2.0%			1970	90,695	1.7%	626.5	6.6%
1911	36,325	2.0%			1971	92,145	1.6%	710.3	13.4%
1912	37,030	1.9%			1972	93,535	1.5%	802.3	13.0%
1913	37,724	1.9%			1973	94,885	1.4%	855.5	6.6%
1914	38,387	1.8%	26.0		1974	96,135	1.3%	902.1	5.4%
1915	39,091	1.8%	30.0	15.4%	1975	97,335	1.2%	1,016.2	12.6%
1916	39,776	1.8%	34.9	16.3%	1976	98,545	1.2%	1,152.0	13.4%
1917	40,407	1.6%	40.9	17.1%	1977	99,755	1.2%	1,270.3	10.3%
1918	40,985	1.4%	46.2	12.9%	1978	100,965	1.2%	1,366.0	7.5%
1919	41,535	1.3%	52.0	12.7%	1979	102,175	1.2%	1,473.7	7.9%
1920	42,042	1.2%	51.3	-1.4%	1980	103,395	1.2%	1,599.8	8.6%
1921	42,540	1.2%	45.7	-10.9%	1981	104,675	1.2%	1,755.5	9.7%
1922	43,021	1.1%	50.5	10.5%	1982	106,015	1.3%	1,905.9	8.6%
1923	43,575	1.3%	50.7	0.4%	1983	107,415	1.3%	2,123.5	11.4%
1924	44,167	1.4%	53.9	6.3%	1984	108,875	1.4%	2,306.4	8.6%
1925	44,758	1.3%	57.6	6.9%	1985	110,405	1.4%	2,492.1	8.1%
1926	45,360	1.3%	56.1	-2.5%	1986	112,015	1.5%	2,728.0	9.5%
1927	45,957	1.3%	56.7	1.1%	1987	113,675	1.5%	2,826.4	3.6%
1928	46,560	1.3%	58.2	2.6%	1988	115,545	1.6%	2,988.2	5.7%
1929	47,169	1.3%	57.7	-0.9%	1989	117,555	1.7%	3,152.5	5.5%
1930	47,817	1.4%	54.3	-5.8%	1990	119,735	1.9%	3,271.8	3.8%
1931	48,512	1.5%	47.7	-12.3%	1991	121,895	1.8%	3,372.2	3.1%
1932	49,266	1.6%	44.3	-7.1%	1992	124,155	1.9%	3,424.7	1.6%
1933	50,059	1.6%	42.9	-3.1%	1993	126,435	1.8%	3,474.5	1.5%
1934	50,900	1.7%	49.4	15.0%	1994	128,695	1.8%	3,486.4	0.3%
1935	51,824	1.8%	58.4	18.3%	1995	130,925	1.7%	3,629.5	4.1%
1936	52,854	2.0%	66.6	14.0%	1996	133,215	1.7%	3,818.6	5.2%
1937	53,954	2.1%	62.7	-5.8%	1997	135,665	1.8%	4,032.9	5.6%
1938	55,124	2.2%	68.4	9.0%	1998	138,165	1.8%	4,375.2	8.5%
1939	56,354	2.2%	77.5	13.3%	1999	140,735	1.9%	4,638.0	6.0%
1940	57,664	2.3%	90.1	16.3%	2000	143,325	1.8%	4,925.0	6.2%
1941	58,744	1.9%	103.4	14.7%	2001	145,925	1.8%	5,433.8	10.3%
1942	59,864	1.9%	133.9	29.6%	2002	148,475	1.7%	5,772.0	6.2%
1943	60,760	1.5%	168.8	26.0%	2003	151,015	1.7%	6,067.3	5.1%
1944	61,573	1.3%	191.3	13.3%	2004	153,435	1.6%	6,418.3	5.8%
1945	62,335	1.2%	215.6	12.7%	2005	155,905	1.6%	6,681.9	4.1%
1946	63,195	1.4%	226.4	5.0%	2006	158,275	1.5%	7,071.6	5.8%
1947	64,095	1.4%	238.0	5.1%	2007	160,625	1.5%	7,471.6	5.7%
1948	65,027	1.5%	234.6	-1.4%	2008	162,925	1.4%	8,192.1	9.6%
1949	65,991	1.5%	234.0	-0.3%	2009	165,415	1.5%	8,496.0	3.7%
1950	66,870	1.3%	244.5	4.5%	2010	168,246	1.7%	8,801.8	3.6%
1951	67,753	1.3%	258.1	5.6%	2011	171,145	1.7%	9,660.1	9.8%
1952	68,621	1.3%	268.1	3.8%	2012	174,057	1.7%	10,459.7	8.3%
1953	69,485	1.3%	271.0	1.1%	2013	177,196	1.8%	11,035.0	5.5%
1954	70,450	1.4%	278.4	2.7%	2014	180,571	1.9%	11,684.9	5.9%
1955	71,397	1.3%	284.6	2.2%	2015	183,945	1.9%	12,346.8	5.7%
1956	72,375	1.4%	288.1	1.3%	2016	187,498	1.9%	13,213.4	7.0%
1957	73,395	1.4%	286.0	-0.7%	2017	191,048	1.9%	13,857.9	4.9%
1958	74,445	1.4%	297.0	3.8%	2018	194,693	1.9%	14,362.7	3.6%
1959	75,575	1.5%	298.6	0.6%	2019	198,295	1.9%	15,320.7	6.7%
1960	76,765	1.6%	312.4	4.6%	2020	201,738	1.7%	19,114.6	24.8%
1961	77,995	1.6%	335.5	7.4%	2021	205,309	1.8%	21,546.6	12.7%
1962	79,285	1.7%	362.7	8.1%	2022	208,921	1.8%	21,346.3	-0.9%
1963	80,625	1.7%	393.2	8.4%	2023	212,582	1.8%	20,827.2	-2.4%
1964	82,015	1.7%	424.7	8.0%
1965	83,455	1.8%	459.2	8.1%
1966	84,905	1.7%	480.2	4.6%
1967	86,325	1.7%	524.8	9.3%
1968	87,765	1.7%	566.8	8.0%
1969	89,215	1.7%	587.9	3.7%

Annual gold production is relatively small

What does this mean in concrete terms? If mine production were to double – which is extremely unlikely – this would only mean an increase of 3.4% for the total stock of gold. This would still be a relatively insignificant inflation of the gold stock, especially compared to the current central bank inflation. If, on the other hand, production were to cease for a year, this would also have little impact on the total stock and pricing. If, on the other hand, a significant proportion of oil production were to be lost for a longer period of time, stocks would be depleted after a few weeks. Strong increases or decreases in production can therefore be absorbed much more easily.

We therefore assume that gold is not so valuable because it is so rare, but quite the opposite: gold is valued so highly because the annual production is so low in relation to the stock. This characteristic has been acquired over the centuries and can no longer change. This stability and security is a key prerequisite for creating trust. This clearly distinguishes gold as a monetary metal from other commodities and precious metals. Commodities are consumed, while gold is hoarded. This also explains why conventional supply/demand models can only be used to a limited extent on the gold market. Or as Robert Blumen once put it: “Contrary to the consumption model, the price of gold does clear the supply of recently mined gold against coin buyers; it clears all buyers against all sellers and holders. The amount of gold available at any price depends largely on the preferences of existing gold owners, because they own most of the gold.”[1]

For a commodity that is consumed, a rising deficit would clearly trigger higher prices until equilibrium is restored. Not so with a good that is hoarded. A simple consumption model therefore only works for goods that are consumed and whose annual production is high in relation to the stock (= low stock-to-flow ratio).

Current mining costs are insignificant for the gold price

This is why the production costs of gold play a subordinate role in pricing. They are primarily relevant for the performance of gold stocks. In our opinion, analyses that state that the gold price cannot fall below production costs are based on a fundamental fallacy. Although mining would be uneconomical for the majority of mine operators above a certain price, trading in gold that has already been mined would not come to a standstill. While mining therefore has little influence on the gold price, the reverse is not true. The gold price naturally has a considerable influence on mining and its profitability.[2]

There is no generally equal production cost rate for all mines – the costs depend on the characteristics of the mine and the reserves. Even the cost of producing individual ounces from the same mine can vary. The gold price in relation to labor costs and the cost price of capital goods determines whether a mine is profitable or not, and what gold can be profitably extracted from a mine. As the price of gold rises in relation to production costs, previously unprofitable reserves can become profitable to mine.

The demand side consists of investors, the jewelry industry, central banks and industry. However, this is actually only a fraction of the total demand. The majority of demand is so-called reservation demand. This term describes gold owners who do not want to sell gold at the current level. By not selling at the current price level, they are responsible for ensuring that the price remains at the same level.[3]

The decision not to sell gold at the current price level is therefore just as important as the decision to buy gold. The net effect on price discovery is the same. The supply of gold is therefore always high. At a price of USD 5,000, the supply of old gold would amount to a multiple of annual production. This also explains why the much-cited “gold deficit” is a myth and why there can be no shortage. Robert Blumen once formulated this aspect as follows: “Gold is an asset. Supply and demand should be understood in the same way that we understand the shares of a company. Every time shares change hands, the shares are demanded by a buyer and supplied by a seller. For each and every transaction, supply equals demand. Adding up all of the transactions that occur on a particular exchange, over the course of a month or a year, tells you absolutely nothing…If you said that buyers in China had bought 100 million shares of Microsoft but ‘no supplier could supply that many shares,’ nor was the company issuing enough new shares to meet the demand, you would readily see the error in that statement… Everyone understands that new shares only dilute the value of the existing shareholders, that it is not required for a company to issue new shares for the price to go up or down and that most trading of shares consists of existing shareholders selling to people who have dollars.”[4]

Just as increasing the money supply dilutes the purchasing power of the money in circulation and issuing new shares leads to a dilution of the old ones, an increase in the supply of gold should be seen as a dilution of the existing supply. An increase of 1% is absorbed by the market by the price falling by 1%, while the nominal supply remains the same.

With the exception of the past four years, there is a clear positive correlation between the gold price in US dollars and the expanding supply of recycled gold. The low volume of recycled gold in relation to the gold price over the past four years could indicate that market participants are becoming accustomed to the higher price level and will only sell at significantly higher price levels. It also appears that gold is gradually moving from shaky to firm hands.

Whenever someone sells, it means that the gold price has reached its reserve price. Thus, someone is selling to someone with an implicitly higher reservation price – which results from the fact that they are willing to buy at that price. This means that larger sales (for example by central banks) contribute to an improvement in the market structure.

Conclusion

The gold market should be seen as a holistic market. In our opinion, the distinction between annual new supply and total supply is incorrect and leads to false conclusions. All sources of supply are of equal value, as every ounce of gold available for sale is in competition with other ounces. It does not matter whether the gold was mined 3,000 years ago or 3 months ago or consists of recycled dental gold, for example. The current annual gold production of more than 3,600 tons is therefore relatively insignificant for pricing.

Annual gold production is also only subject to very minor fluctuations, in contrast to fiat money, whose annual rate of change fluctuates strongly. Over the past quarter of a century, M1 for the euro has fluctuated on a quarterly basis between just under -10% in Q3/2023 and +17% in Q4/2005, while M2 for the US dollar has gone from -4.1% in Q2/2023 to more than +25% in Q1/2021. Ludwig von Mises summarized these theoretical findings perfectly: “If a thing has to be used as a medium of exchange, public opinion must not believe that the quantity of this thing will increase beyond  all bounds.” 

---

[1] Blumen, Robert: “Does Gold Mining Matter?”, Mises Institute, August 14, 2009

[2] See Blumen, Robert: “Does Gold Mining Matter?”, Mises Institute, August 14, 2009

[3] See Blumen, Robert: „WSJ does not understand how the gold price is formed“, May 30, 2010

[4] Blumen, Robert: “Does Gold Mining Matter?”, Mises Institute, August 14, 2009

THE REAL MOVE IN GOLD & SILVER IS YET TO START

In this brief, 13-minute compilation of insights from 2023, VON GREYERZ, AG partner, Matthew Piepenburg, reminds us of prior warnings which are truer than ever (and playing out) today as the stock market totally divorces itself from the real (and recessionary) economy. There’s a reason gold is spiking, for despite a Fed-driven and hence entirely “Pavlovian” S&P, recessionary forces will force further currency debasement to monetize unsustainable debt levels. Looking purely at the recessionary forces of 2023, which Piepenburg bluntly unpacks with data rather than drama, the current disconnect between rising markets and a bleeding economy into 2024 should have all investors thinking carefully about what lies ahead, including an inflationary endgame which Piepenburg will unpack in subsequent video compilations.

For now, keep the economic facts discussed here clear in mind when positioning and protecting your wealth, and hence gold, in the currents to come.

THE REAL MOVE IN GOLD & SILVER IS YET TO START

If you want to understand the direction of debt, rates, the USD, inflation, risk asset markets, gold and the US endgame, it might be better not to listen to the experts.

In fact, Johnny cash Cash is a far better source…

Five Feet High & Rising

In a classic 1959 tune by Johnny Cash, the singer asks: “How high’s the water mama?”

This question is then answered by a riff which chants, “she said it’s two feet high and risin.’”

And with each subsequent refrain, the water level goes to three feet, four feet and then five feet, “high and risin’.”

In short: An obvious flood.

And when it comes to debt in the land of the world reserve currency, Johnny Cash may have something to teach Jerome Powell and the other DC children drowning the US (and its debt-soaked Dollar) into a slow but steady debt flood.

Boring?

I’ve often said that good journalism, like honest economics, is boring.

One has to understand “hard” indicators like bond yields (which move inversely to bond price) and the high-school level basics of supply and demand forces.

But as I’ve also said countless times, and will say countless times more: The bond market is THE thing, because bonds are all about DEBT.

If you understand bonds, and in particular, the Fed’s hidden (real) mandate to save Uncle Sam’s sovereign IOU’s from sinking in price, then you will be able to easily foresee (rather than date predict) the future of risk assets, gold, BTC, the USD and yes, inflation.

The complex truly is that simple.

How High’s the Debt Mama? 120% and Risin’

And if you turn to Johnny Cash and ask “How high’s the debt level mama?” well… the blunt answer informs just about everything you need to know.

So, let’s keep it simple.

Simple, Not Boring

Debt is WHERE it all begins, and it tells you exactly HOW the American song ends.

And just how high is the water (debt) mama?

Ten years ago, US public debt was $17T “and risin’.”

Today it’s $34.5T “and risin’.”

America’s debt to GDP is 120%, its deficit to GDP is around 6%, and every 100 days we add another $1T in borrowing to our shameless bar tab of debt addiction masquerading as capitalism.

Even our own Congressional Budget Office will confess that unless we issue more debt (and print more debased money to monetize it), our Medicare and social security piggy bank will be empty by 2030.

Meanwhile, the USA is staring down the barrel of $212T in unfunded liabilities yet only $190T in assets.

In other words, and based on objective math, America literally has the balance sheet of a banana republic.

No Crisis?

Apologists (i.e., truth and math-challenged politicos), however, will tell you there is no crisis, even as the water levels rise past our closed eyes.

The clever ones will remind us that America’s USD comprises 85% of FX transactions, the vast bulk (80%) of international trade settlements, and is in constant “milk-shake” demand from the Eurodollar, derivative and SWIFT payment systems.

In other words, the Dollar is gonna be just fine.

Hmmm…

Facts vs. “Just Fine”

As warned from day-1 of the myopic (and suicidal) sanctions against Putin in which the US weaponized the world reserve currency, those days of a “just fine” USD simply ended.

Not all at once, but slow and steady, like a flood’s water line…

In just 2 years, we’ve seen undeniable signs of de-dollarization from the BRICS+ nations and an extraordinarily telling shift in the petrodollar dynamics (20% of 2023 global oil sold outside the USD), which would have been otherwise unimaginable in the pre-sanction era.

But, if you remain convinced that America and its reserve currency have magical immunity from the de-dollarization’s slow drip greenback demise, let’s get back to the oh-so boring but oh-so honest cries of the US Treasury market.

Why?

Again. Because the bond market is everything.

As important, the bond market has everything to do with debt, and current US debt is drowning the nation and diluting the USD, one slow trillion at a time.

Sound sensational?

Pounding A Fact-Based Fist

For years, I have pounded my fist reminding readers and viewers that debt destroys nations and currencies. Every time, and without exception.

And for years I have pounded my fist saying that Powell’s “war on inflation” was a ruse, as every debt-soaked nation needs to debase its currency to inflate away debt.

And from day-1 of Powell’s claim (lie) that inflation was “transitory,” I’ve been calling his bluff. 

For years, I’ve argued that the Fed would simply lie about inflation (i.e., grossly under-report it) in order to make it appear statistically lower than what we actually knew/felt it to be.

Even Larry Summers, who is the classic arsonist (from his repeal of Glass-Steagall to deregulating the derivatives markets) now playing at fireman, has publicly stated that the actual US CPI scale, using pre-1983 housing methods, peaked last year at 18%, not the official 3.7% range…

If we then tack on a US debt/GDP ratio that is 30% higher today than in 2009, we mathematically see that despite Powell’s repressive “higher-for-longer” rate polices, we’ve made zero dent in our debt—instead, we’ve increased it.

In other words, our war against inflation is a loss; and our debts have increased.

And in the last couple of years, I’ve been pounding my fist that Powell would pivot from rising rates, to pausing rate cuts to eventually cutting rates followed in turn by outright money printing (or rather mouse-clicking Dollars) to “pay” Uncle Sam’s debt at the expense of our currency via what Luke Gromen calls “super QE.”

And all modesty aside, I think I/we have been right…

Right or Wrong?

Already, and as of last week, Powell has openly projected rate cuts in 2024, and they are likely to come by or near September.

We’ll see.

For now, just the promise (words) of rate cuts have been enough to send Pavlovian (Fed-dependent) markets to all-time-highs despite a real economy already under water.

And the subsequent decline in the Market Option Volatility Estimate (“MOVE” Index) was a neon-flashing sign that the market is getting ready for a new flood of dollar-diluting liquidity…

Where’s the QE, Matt?

But what about my forewarned QE?

What about that ultimate moment when Powell admits full defeat in his so-called “war” on inflation (while quietly seeking inflation) and openly does what many off us (nod again to Luke Gromen et al) already know he will do, that is: Debase the currency to “save” a rigged-to-fail (i.e., debt-based) USA?

Clearly, it seems, I/we have been wrong about that QE, no?

Well…Not so fast.

Coming Through the Back Door

In fact, Powell, along with his former Fed colleague-turned-mind-numbing Treasury Secretary, Janet Yellen, have been doing un-noticed back-door QE at staggering levels too complex (or obvious) for the mental midgets in our so-called main stream media to even notice.

Shocker? Hardly…

Facts Are Stubborn Things

The fact is that five times in the last four years, DC has been doing QE by just another name (what I call “backdoor QE”) to avoid the embarrassment of direct QE.

Notwithstanding the “not-QE” (which really was QE) in 2019 when the Fed bailed out a cash-dry repo market (which, by design, no one understood), the DC magicians have been doing trillions worth of QE-like liquidity measures without having to call it, well QE…

That is, the Fed and Treasury Dept. have been pulling liquidity out of the drying Treasury General Account, the now retired “BTFP” measures, and the intentionally confusing reverse repo markets.

More recently (and equally as well intentionally confusing to the masses), the Fed is quietly on the verge of allowing the Fed banks to use unlimited leverage to buy unlimited amounts of USTs off the Fed’s balance sheet via the removal of what the fancy lads call “Supplementary Reserve Ratios.”

This latest trick, by the way, is just off-balance sheet QE, and yet another symptom of the big banks becoming branch offices of the Fed, as our already centralized America becomes even more grotesquely, well…centralized, which is a classic symptom of a desperate and debt-soaked regime.

But just in case none of the foregoing tricks of backdoor QE have convinced you of what basically amounts to just QE, we can get our clearest signals from—you guessed it: THE BOND MARKET.

That is, one of the most obvious examples of “backdoor QE” is the Treasury Department’s open yet ignored trick of issuing most of its recent debt from the short duration end of the yield curve.

What The T-Bills Are Saying

By issuing more short-term IOUs in the form of T-Bills, this takes the supply-push inflation pressure off the openly unloved 10Y USTs, whose price declines (and subsequent as well as fatally unpayable yield/rate spikes) not only crushed regional banks, but Uncle Sam’s wallet as well.

OK. Yield curves and duration implications may sound, well… boring, but stick with me because this really, really matters.

The extreme levels of T-Bill issuance (as opposed to 10Y IOUs) has immense implications and is a flashing neon sign that the US is not heading into an economic crisis, but is in fact, ALREADY in a crisis.

Today, T-Bill issuance is at a two-decade high, and comprises greater than 85% of all US Treasury issuance.

This short-end issuance is far more like QE, i.e. simple money printing—which, we remind you, is highly inflationary/reflationary.

Hard to believe? See for yourself:

The last time we saw such QE-like desperation from the T-Bill side of the yield curve was during the Great Financial Crisis and the COVID crisis.

No Crisis? Huh?

But according to our so-called “leaders,” we are not at all in a crisis today. As they keep reminding us, we are at “full employment” (eh-hmmm) and nominal GDP is growing at 6%.

Then again, nominal GDP “growing” on the back of over $23T in UST issuance (bonds, notes and bills) is simply debt-driven “growth,” and debt-driven growth is not growth, it’s just debt.

In short, and as Luke Gromen concluded far better than I: “You know the debt crisis is real when the US resorts to short-term debt issuance.”

Summing Up

Whenever one is dealing with truth-challenged profiles like the Fed, Treasury Dept or White House, it is far better/simpler to watch what they do rather than what they say, as the difference is approximately 180 degrees…

All of the evidence above (from debt levels, de-dollarization trends, petrodollar shifts, backdoor QE measures and T-Bill over-issuance) screams of an open and obvious debt crisis which ALWAYS indicates a consequent currency crisis.

Always.

And as I have said for years, including a public discussion with Brent Johnson, the US can’t afford a strong USD because its debt levels require a weaker, inflated USD, regardless of its “relative”/DXY “strength.”

The string cite of evidence above (and beyond just rate cuts) is simply a cleverly veiled way of the Fed and Treasury telling us they want (need) a much weaker USD to save their necks at the expense of the dollar in your portfolio, checking account or wallet.

Gold, of course, is sniffing this out.

So are the stock markets and BTC.

So are the global central banks, who are stacking gold and dumping USTs at record levels.

The COMEX and London exchanges are also sniffing this out, as physical gold and silver is going from churn motions to actual physical delivery at record levels.

Meanwhile, even the BIS has made gold a Tier-1 asset.

Just saying…

The empirical (rather than “sensational”) evidence of an unloved UST and distrusted (debased and weaponized) USD is there for all who have eyes to see and ears to hear.

Gold has hit all-time-highs (and will go much, much higher) simply because the USD is going much, much lower.

But, of course, no one in DC will say the quiet part out loud.

THE REAL MOVE IN GOLD & SILVER IS YET TO START

The world’s best kept investment secret is GOLD.

• Gold has gone up 7.5X this century
• Gold Compound annual return since 2000 is 9.2%
• Dow Jones Compound annual return since 2000 is 7.7% incl. reinvested dividends

So why are only 0.6% of global financial assets in gold?

The simple answer is that most investors don’t understand gold because governments suppress the virtues of gold. 

GOVERNMENTS WILL ALWAYS LIE TO THEIR PEOPLE

Has anyone ever heard a Western government tell their people that gold is the best protection against their government’s total mismanagement of the economy and their currency?

Has any government ever told their people that throughout history all governments, without fail, have destroyed the total value of the people’s money?

That includes every single currency in history since no currency has ever survived. 

And have current governments told their people that since 1971, their currencies have declined by 97% to 99%?

So why don’t governments tell their people that in the next 50-100 years their currency will lose another 97-100%?

Obviously, no government would ever be elected if they told their people the truth that the economy and their money will continue to be mismanaged and destroyed like it has throughout history. 

And why don’t governments study history where they could learn from their predecessors mistakes?

And why don’t journalists study the history of money and educate the people?

The answer is obvious, journalism is just government propaganda and there is not a serious investigative journalist around today. 

INVESTMENT MANAGEMENT INDUSTRY IN DENIAL. 

In addition, the whole investment management industry neither understands nor likes gold. 

Studying and understanding money doesn’t serve their purpose. Better to create a mystique around a mediocre industry that on average underperforms the market. 

A greedy and self-serving investment management industry is not interested in gold. Gold doesn’t allow them to churn commission which is important for their survival. 

This whole industry could be abolished with most investments being held in index funds and physical gold. The net performance would most probably be superior to a very and inefficient industry. 

DRIVERS FOR GOLD

In the 12 minute video extract from a Palisade Radio interview below, I discuss the drivers for gold. 

In summary the important drivers discussed which will soon propel gold to much higher levels are:

• Global deficits & debts – US, Europe, China, Japan, Emerging markets 
• War
• Social unrest
• Gold buying by BRICS countries 
• Central bank gold purchases of gold due to move from Dollar reserve assets to Gold

GOLD IS THE BEST WEALTH PRESERVATION ASSET THROUGHOUT HISTORY

• Gold is not an investment. It is nature’s money and thus the only money which has survived in history.
• Governments and Central Banks are Gold’s best friend. Throughout history they have without fail destroyed the value of Fiat money whilst Gold has for thousands of years maintained its purchasing power. 
• As I discuss in the interview, risk is today greater globally than any time in history. 
• Physical Gold is the ultimate protection against such risk. 
• Gold for WEALTH PRESERVATION  purposes must be held in physical form with direct access by the investor. 
• Gold must obviously be held outside a fractured financial system. No use holding your gold in the system that you are protecting against. 
• NEVER, EVER hold gold in paper form or ETFs. 

• Gold must be held in a safe jurisdiction outside your country of residence and especially outside the US, Canada and the EU. 
• Gold and Silver are not just for the wealthy. You can buy 1 gram for $70 or one ounce of silver for $25.
• With major bubbles in virtually all asset classes including stocks, bonds and property, the allocation to physical gold and some silver should be at least 25% of your financial assets and potentially much more. 

NEVER worry about the gold price. Governments will continue to devalue your fiat money and thus revalue gold as they have throughout history. 

THE REAL MOVE IN GOLD & SILVER IS YET TO START

In this unique compilation of interviews made throughout 2023, VON GREYERZ partner, Matthew Piepenburg, squarely addresses the key themes and questions regarding physical gold ownership. Not surprisingly, so many of the trends (inflation, rates, Fed policy and gold pricing) which Piepenburg tracked throughout 2023 are clearly playing out/confirmed in real time as we move into 2024.

In this highly informative (one-stop) survey of gold as an asset class, Piepenburg turns his attention to the core gold themes and questions, namely:

-Why doesn’t everyone own gold?

-What has gold done for you lately?

-How does gold compare to stocks and bonds? To currencies?

-Where is gold heading? In Price? In value?

-What about BTC?

-Is the USD going up or down in general?

-What are the key risks for which gold protects?

-How and where should gold be owned and not owned?

-Gold investing vs. Gold speculating: What’s the difference?

-How trapped is the Fed and what’s coming for banks, rates, markets and gold?

-Is a gold-backed currency inevitable? Necessary?

-What does the new oil trade say about the USD? Gold?

-How real is the de-dollarization influence on the gold price?

-How does mistrust in currencies, sovereign bonds and political systems play out going forward?

All of these critical questions, as well as the implications behind these themes and trends, are squarely addressed. We hope you enjoy this educational, as well as easily understood/plain-spoken “big picture” gold discussion. Gold emerges throughout this compilation of discussions as a now undeniably important asset to help far-sighted investors prepare for the changes happening today and coming at greater speed tomorrow.