from Birch Gold Group:
This week, Your News to Know rounds up the latest top stories involving precious metals and the economy. Stories include: Who’s the mystery gold buyer making big waves in the market?, gold hasn’t yet gained as much as the dollar has lost and how you know without a doubt that gold is being reintroduced to the monetary system.
New major buyer in the gold market has analysts puzzled
Even before it was trendy, we noted over and over how gold’s moves up are seemingly happening without obvious causes. (The fundamentals are there, of course – but based on them, gold price should have been much higher long ago.)
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Gold has historically surged in the wake of black swans (not the Natalie Portman movie, but Nassim Taleb’s shorthand for “rare and unpredictable outlier events, their extreme impact and the human tendency to find simple explanations for those events”). Example black swan events would be the 2007-2008 Great Financial Crisis, the Covid-19 pandemic and associated global lockdowns, Russia’s invasion of Ukraine and so on.
But this time is different…
The mainstream media, in a curious turn of events, has gone from ignoring this story to now asserting that gold has a “mystery buyer.” It makes sense, since a mystery buyer would explain a lot of gold’s price rise since the start of the year – and explain the invisible force that’s supporting gold’s all-time high prices. See, people hate mysteries without a satisfying conclusion.
Recently, we discussed DoubleLine CEO Jeffrey Gundlach’s report that the turn of the year has seen some highly aggressive and unusual buying. He thinks that explains the surprise price jump around New Year’s. He said one or more big money investors are not only covering their short positions, but perhaps switching sides and buying gold instead.
This leads us to a story that’s been making headlines over the past week: Who is gold’s big mystery buyer? It seems to have almost become a consensus explanation. Analyst Lobo Tiggre says that central banks, the “usual suspects” so to speak, aren’t the culprit.
Check it out:
This alone is enough to get the imagination going…
Who rivals sovereign nations in terms of capital?
And if “they” are now also loading up on gold, shouldn’t we all be paying attention?
The World Economy Editor at The Daily Telegraph, Ambrose Evans-Pritchard, starts his analysis like a thriller novel:
A powerful force is stalking the world’s gold market. It is operating in the shadows.
None of the normal footprints are visible on the London bullion market or the Chicago Mercantile…
Is somebody preparing for an escalation of the shadow Third World War?
He puts forth two possible explanations. Maybe it’s China building up a war chest ahead of a Russia-China-Iran alliance. This is plausible! China has a number of sovereign wealth funds and state-sponsored corporations with their own, semi-independent balance sheets. Even the People’s Liberation Army has a hand in the gold market – did you know there’s a special PLA detachment dedicated to gold exploration, mining and transportation? It’s called 武警黄金部队 or Gold Armed Police.
So yes, it’s plausible.
But the second explanation is far more interesting:
Covid finally broke our spendthrift governments. The talk in hedge fund land is that some big beasts are taking bets against ‘fiscal dominance’ across the West.
It is a collective judgment that too many countries have pushed public debt beyond 100 per cent of GDP and beyond the point of no return under prevailing economic ideologies and political regimes. Budget deficits have broken out of historical ranges and are running at structurally untenable levels for this stage of the cycle.
In essence, he stipulates that the multi-trillion dollar stimulus and the accompanying debt trap have fully ensnared Western governments. And that, in turn, big money are making big bets against Western monetary hegemony.
Or, more dramatically:
We are living through a fundamental convulsion of the global order, and the dollarised financial system will not be the same at the end of it. Gold is the hedge against dystopia.
One doesn’t need much in the way of convincing or explanations as to why this might be the case. Cash has always treated its holders poorly. The more cash you own, the greater the inflation tax you pay.
In that sense, it’s not surprising to see an increasing flood of money moving out of cash, into a safe-haven store of value. The real mystery might be why didn’t this happen sooner?
Deeper insights into the U.S. dollar’s erosion and general economic weakness
After all the attempts to convince us that this might be the driver of gold prices by the mainstream since the start of the year, we now have the first signs of a war-related fear trade. Somewhat defying expectations of an immediate correction, gold has been rekindling its relationship with $2,400 as Israel fired back on Iran.
