Friday, January 5, 2018

Open Window

Even as gold inches upward in dollar terms, the gold window is still open to international dollar holders. When gold rises to a dollar price that makes accumulation in dollars unattractive, gold can still flow in other currencies (and it will still be mined).

Have you noticed something strange lately? Most of last year, whenever gold inched up a few dollars, maybe 1.5%, the ludicrous headlines of gold "spiking" popped up everywhere. Yet in the last 30 days, gold has risen by nearly $100 (over 6%) and we hardly hear a word, day by day or week by week, just a mild occasional or bi-weekly (or end of year) commentary.


Finally, someone has exaggerated a bit about the "longest upside streak in history" which may be technically true, but certainly no big deal when one considers what is coming. It seems that the crypto frenzy has far overshadowed gold, and will continue to do so, even if gold continues it's longest upside streak from here to the moon. Gold could rise by $12 per day (every day for a week) in dollar terms and hardly anyone would notice for at least a few weeks. Crypto mania remains the focal fixation of the speculative Western mindset, both in the media and in media consumption.

When gold becomes expensive in dollars, major international dollar holders will still spend their dollars buying essential goods and services that remain a relatively "good deal". When nearly everything "real" becomes ridiculously expensive in dollars, dollars will still retire derivative debt. It is not as substantial as it seems, these hundred trillions. After all, in our world of dollar sanctions, the world's largest implied contract - unbiased used of dollars for any legal purpose - has been broken. Why should any country on the dollar's shit list honor unfavorable dollar denominated contracts? In fact, who stands to lose the most if major interest rate, commodity, equity or FX derivatives begin to unravel? Yes, the Euro has gained a bit of skin in the derivatives game, maybe 30/70 to the dollar? But the game has changed since the time of Another. The Euro will NOT be the "next reserve currency" as Another had clearly stated, it will rather be one of five. To preserve the debt based system, only certain systemic debt will be retired with gold and dollar inflation.

For the dollar hyperinflation event to take place, ALL items of real "utility" value must become very expensive in dollar terms. But as long as certain necessary items of real value remain relatively reasonable, there is no psychological knee jerk reaction to "get out of dollars now at any cost". The dollar ratio in the SDR is completely flexible and it can be weighted according to relative dollar inflation as much as any other factor. The current SDR composition and its five stable components allows for the decline. No single national currency has this flexibility. The plan is to maintain the status quo as much as possible as we transition from dollar to SDR. As gold has no "utility value", it's monetary value will allow it to hyper-inflate in monetary terms, to retire systemically important dollar debt, as the dollar currency continues it's utility function, especially as a domestic unit. The US military is in decline, though they cannot bring home the HUGE workforce which maintains it's dollar policy around the world until that policy is redirected into a national policy. Then, the influx of veterans into the "America First" workforce will be utilized to rebuild the country's crumbling infrastructure. The jobs will be there and the government will still be America's largest employer.

In the concept of true leadership, it is always preferable to do the right things for the right reasons. But in our compromised world of today, the families will contend with getting as much done as possible by using leaders who do the right thing for the wrong reason. Mostly because they are too inept to think their decisions all the way through. Trump fits into this framework.

For now, the gold window remains open at a still very attractive dollar price. How long that will last remains a product of so many variables, we can never foretell with any certainty which way the wind will blow. But things are progressing pretty much according to design. As gold rises in dollar terms, the opportunity to sell it will be there among the speculative shrimp of the West. Eastern shrimp (the savers) buy on the decline, while Western shrimp (the spenders) buy on the rise.

At what price will you sell your gold? And how much will you leave your children? Make these decisions today while the window is still open. When it closes, those choices will be made for you.

16 comments:

  1. I agree gold will take a much more prominent role in the central banks’ reserve. The world wants to shift the reference point of oil from the dollar to a neutral settlement asset such as gold. However, the world monetary system has transformed from the old rigid physical asset to an overly unrestricted and abstract digital derivitive. A neutral fiat like SDR is needed to combine the old and the new.
    I don't agree that gold would go up $12 to $20 everyday for a week or month when the switch is flipped. Gold price will have to be adjusted to cover whatever the amount of SDR will be needed to cover the five currencies in the SDR pie.
    It would be similar to what happened in 1974 when it was decided that oil would be used to back the dollar. The oil market wasn't big (expensive) enough for the transition, the price of oil needed to be raised to around $12/barrel from around $3/barrel to cover the money supply in dollar. The 1973 oil embargo was probably a Kabuki dance between the Saudis and Kissinger to justify the predetermined price of $12 petrodollar.
    The price of oil went up 400% in less than a week to make way for the deal. About 6 months later, the petrodollar deal was made with the Saudis. A month later, President Nixon was impeached. About 5-6 months later, President Ford signed the X.O., opening the gold window for the Saudis.
    I suspect gold will rise in similar manner as oil did back in 1973, then IMF announce SDR will be the recognized world reserve currency a few months later. The current Bitcoin craze is probably a banker's ploy to dull our senses when gold begins its ascension like Bitcoin.

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  2. Judie, any thoughts to what price gold would have to be in order to be "big enough"?

    Also doesn't really show that Hubbert's Peak Oil was really just BS. How convenient for US production to fall just as Kissinger needed a dollar recycle. And now that game is over all of a sudden US is world's biggest producer.

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    1. Oil is a commodity with multiple industrial usages which restricted how much the banksters could do. I think the banksters pushed that limit with 4X price increase by using oil as a monetary commodity.
      As the dollar Ponzi expanded with perpetual trade deficits or supports from Japan and China, oil was allowed to gradually return to prices in accordance to the law of supply & demand.
      Gold is the monetary square peg which was forced in a commodity round hole in 1971. The banksters don't have that limit (monetary peg in monetary hole) on how far they can push today as they did in 1973.
      The only thing they have to worry about is too many jumbo shrimps start buying physical gold before IMF makes the announcement as I'm pretty sure gold will be used to back or partially back the SDR.
      If Bitcoin were indeed a bankster's psy-op to create complacency, I suspect Bitcoin will go from $18,000 to under $1,000 like a waterfall. With that precedence, the jumbo shrimps may not dip into the gold pot at $20,000/oz.

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    2. Recall the 2015 Economist cover, The Pied Piper in the bottom left? I wonder if that's BTC.

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    3. "...the jumbo shrimps may not dip into the gold pot at $20,000/oz." But the little guy caught out of position by a gold step function, might look at Ag and BTC that market. Same for greenfield pm explorers.

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    4. I don't think the banksters care about what the little shrimps may or may. It do. Most little shrimps are silver bugs rather than gold bugs who can barely afford a few ounces of physical gold at $1,300/oz.
      When gold ascends to whatever predetermined price as oil did in 1973, the entire process will likely take less than a week. Most PMs bugs, especially the little guys, will not have the guts or the cash to jump in.
      Other little guys are likely paper bugs who would jump into the paper gold pot via ETFs like GLD.

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    5. I think you down play psychology of mania. Most recently with bitcoin, the little people in the west refinanced homes to participate.

      That being said, what meteoric rise in bitcoin price shown us, is that rise in price of purely monetary asset, has little effect in terms of price raise of goods in real life. After all, it's not used for anything else other than well, perceived store of value.

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    6. I converted 20% of my assets into gold in 2008-2009. I thought the end was upon us in 2011 when gas price fluctuated daily from $3-$4. I didn't have the conviction to buy more at $1,800 even thought I had cash in hands.
      I suspect most people in the west would refinance their homes to participate in paper gold market rather than physical gold when it reaches the mania phase.
      Anyway, the jumbo shrimps are central banks of smaller developing countries. If they were aware of the transition and start accumulating (probably in tonnage) before the announcement, that can push the market price way over the predetermined price which is needed to cover the M1.

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    7. M1 of currencies included in SDR basket, or global M1?

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    8. This comment has been removed by the author.

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    9. M1of SDR only.
      Currencies within the SDR basket inside the country of origin should not be included.
      I think the goal is to set up sovereigns in the SDR basket with sufficient amount of gold to back or partially back the respective fiat currencies in the MB (1:1 or 1:10), the M1 will be denominated in SDR as the global reserve currency.
      The currencies in the SDR basket inside the respective nations will be no different from other regional currencies included in the global M1.
      If all the jumbo shrimps had sufficient amount of gold before the reset and decided to accumulate more gold rather than the SDR afterward, gold would directly challenge the reserves currency status of the SDR.
      IMF needs to expand the M1 via the SDR, not gold.

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  3. There will be no mania phase for paper gold. It will burn with the gold price. Then, revelation.

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    1. At the end, all papers will burn and then the rebirth.

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  4. I'm not so sure about that. China is well underway on developing a robust derivatives market for gold. Paper gold is going nowhere. Just a change in management.

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    1. http://news.forexlive.com/!/bundesbank-has-decided-to-include-the-chinese-yuan-in-its-currency-reserves-20180115

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  5. In 2011, Swiss franc was like gold. The Swiss didn't like that at all. I don't think the Chinese want the yuan to be like Swiss franc or gold.

    https://www.npr.org/sections/money/2011/08/19/139791374/the-friday-podcast-switzerlands-too-strong-for-its-own-good

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