Gold tends to perform the best when the real rate of interest (interest rates minus the real inflation rate) is negative. For now, the Central Banks have been able to contain the movement of gold in order to prevent the price from doing what it should be doing when interest rates are negative.
With that enormous amount of negative yielding debt globally, and Treasury yields in the U.S. heading south quickly, from a fundamental standpoint there’s a high probability we have started the next big move higher in gold. Silver will eventually “catch up” and begin to outperform gold. That said, get used to a higher level of price volatility in the precious metals sector. Keep a core position but sell rallies and buy sell-offs if you want to trade the volatility. Otherwise, sit tight and be right.
The Prepared Mind invited to its podcast to discuss a wide range of issues from precious metals to geopolitical problems. Here’s Part 2 (click to view Part 1):
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Harvey Organ’s website https://harveyorganblog.com/ is essential reading for everyone who wants to look behind the curtain of the Wizard of Daz. This remarkable creature has the capacity of dazzling buyers of physical gold and silver into the most extraordinary arrangements. In 2018 the buyers of physical silver did not get the metal they paid for. The Wizard of Daz persuaded them to accept some more paper instead. The delivery of physical silver three times annual mine production thus morphed into a series of EFPs (Exchange for Physical contracts). Similar story with gold. Instead of delivering the metal for fully paid up contracts, EFPs were issued for more than 6000 mt of physical gold. The dazzling continues in 2019. So far, the delivery of 1183.5 million oz of physical silver were converted into EFPs and 3001 mt of physical gold. This reminds me of fairy tales. I thank Disney for this entertaining illumination: https://www.youtube.com/watch?v=cCX5JJwkZhU
I would like to add something to the EFP subject that you may not be unaware of. The buyers of gold by the ton are naturally first and foremost central banks. Why would they fall for Wizard Daz? Because the physical delivery of these quantities is impossible. Not even at a much higher price. You can not get hold of 6000 mt of gold if mining supply is at 3000. Therefore central banks have established a rationing book. Like in WW II. Every central bank cartel member gets a ration at the prevailing price. Imagine what would happen if the BOE, the BOJ, the ECB and the US Treasury wanted to buy 1000 mt each, at the same time. The price would go through the roof, nobody would be willing to sell and they would get nothing. Mining companies would stop supplying the market with metal. Instead they would sit on their gold, borrow against it and watch the price jump $100/day. The huge demand queue for gold and silver (this metal is more relevant for industry and private HNW individuals) helps you, dear reader to assess the true demand picture for PM. It is at insane levels but camouflaged to discourage the public from buying it.
And what do you think is most likely to happen to the PM market over the next 12-24 months?
Buyers from outside the Cartel will bust the system of the Wizard of Daz. Gold will go sky high.
With all due respect have been hearing this for years. So rare, so finite, so strategic that it can be manipulated unabated for DECADES without consequences.
I know. Please read my analysis on “A predictable gold price attack”. I explain why the paper money based economy is dying. This makes all the difference.
Gold Prices to Remain Well-Supported, BlackRock’s Hambro Says