Since Janet Yellen’s Federal Reserve has put an end to quantitative easing, the financial media generally believes the United States economy is improving. With an improving economy, the expectation is that Yellen will begin to raise interest rates in 2015. So goes the argument against an improvement in the gold market.
However, many analysts aren’t so optimistic about the state of the economy and haven’t given up on gold yet. In this video, Jim Rickards explains to CNBC why he thinks the US is in the same depression that began in 2007. Even Yellen can’t run from this reality, so Rickards argues that the Fed will be unable to raise rates in 2015.
While interviewing William Rhind of World Gold Trust Services, CNBC asked him why central banks around the world are buying so much gold. Speaking about Russia’s massive purchases this year, one host asked, “How long can you use gold to prop up your currency, ultimately?” Rhind politely set her straight that gold is not an asset used to simply “prop up” currencies. If he’d had more time, he might have pointed out how much value the US dollar has lost since it has been off the gold standard.
Due in part to central bank buying, Rhind believes that the global gold supply is returning to deficit. He predicts that 2014 might turn out to be the second highest year of gold demand on record.
This post was submitted by Erik Oswald, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.
In this article from Smaulgld, Louis Cammarosano examines the fundamental supply and demand figures for the gold market. Demand for physical gold has been increasing year over year since 2008, despite rising prices up until 2012. Following the correction from $1900 per ounce, market demand for physical bullion really took off. While many in the West do not appreciate the monetary significance of precious metals, the East has been consuming physical gold and silver at an unprecedented rate. This is evident in the official reserves reported by central banks. On the whole, Western central banks have been decreasing their holdings of physical bullion while Eastern central banks have been all too eager to purchase the surplus.
Countries like China are all too familiar with the dangers of paper monetary systems and have a much longer view of history than most Western central banks. The United States has never experienced a hyper inflationary environment in which the dollar has dropped to its intrinsic value of zero. Because we have exported inflation to our trading partners since World War II, we have been able to stave off the destructive effects of circulating irredeemable paper notes as real money in ever increasing quantities. Meanwhile, the developing BRICS countries have been cementing various trade and financial agreements with one another over the last several years. Their appetite for physical gold and silver is but one of many steps being taken to prepare for a world without the US dollar as a reserve currency.
Although we’re based out of the United States, SchiffGold and its Chairman Peter Schiff are passionate supporters of the Swiss Gold Initiative. Our hope is that Switzerland sends a message to the world’s central bankers that people are sick and tired of having their money manipulated. We’ve been doing our best to promote the issue, and Peter has even recorded a popular video appealing to Swiss voters that you can watch here.
However – and we hate to suggest this – what happens if Switzerland does not re-embrace gold and a sound currency on November 30th? The truth is that you do not need to rely on your government and central bank to maintain a gold standard. You can start your own personal gold standard at any time by owning precious metals as part of your own savings – your personal “reserves,” as it were. Jim Rickards explains the concept very well in a recent article:
In an interview with HedgeyeTV, David Stockman explains why he believes we’re on the verge of popping another major financial bubble for the third time in this century. He and Keith McCullough also discuss the potential political fallout from this bubble – who will be the politician to fire Janet Yellen and refute Keynesian policies? They wrap up by talking about Stockman’s recent book The Great Deformation and how the financial media is caught up in a “recency bias” that allows them to ignore the monetary fraud being perpetrated by the Federal Reserve and the government.
While parts of this conversation are a bit technical, Stockman does a great job explaining the fundamental economic and political realities of the United States.
James E. Miller, editor-in-chief of Mises Canada, published a defense of Peter Schiff’s forecasting record last week. Miller calls out mainstream financial media as biased Keynesian propagandists, while praising Peter’s willingness to stand by Austrian Economics in the face of public ridicule.
Still, Schiff has a point. He went on national television and endured a deluge of mockery for challenging established opinion. His forecasts, while not always correct, were far more accurate than those of his contemporaries. No one likes an ideologue wedded to a philosophy to the point of redundancy; yet there comes a point when facts are facts. When it mattered, Schiff had both an accurate assessment of the economy and a solid explanation to justify his findings. His advice might have saved the livelihood of millions, had it been taken. To this day, his call was seen as heroically prophetic, even while his philosophical underpinnings are still held in suspicion. He hasn’t earned the benefit of the doubt in the eyes of his Keynesian-minded contemporaries.”
Renowned author and investor Jim Rogers appeared on RT yesterday to share his thoughts about the end of the US dollar as the world’s reserve currency. In this short interview, he suggests that the Chinese renminbi might fill the void left by the dollar. This prediction shouldn’t be much of a surprise to our readers, as we’ve been following the ever-growing gap between the East and West. The big takeaway is this: Rogers is certain that by the end of this decade, the world will be well on its way to completely abandoning the dollar as a reserve currency.
The US thinks that they’re in charge and they don’t have to worry about anything. No, I hate to say it – I’m an American citizen – but you know, there’s a lot of arrogance still in the United States. Especially about the dollar.”
Last week, an analyst for Bank of America predicted that gold could rise to $1,350 if Switzerland passed the “Save Our Swiss Gold” initiative at the end of November. That’s almost 17% higher than today’s gold price. The media is not just watching the price of gold in the weeks leading up to the Swiss Gold Initiative – the value of the Swiss franc in relation to the euro has also been closely eyed. Unfortunately, as you can see in this article from Bloomberg, the financial media generally makes it sound like the Swiss Gold Initiative would be terrible for the franc.
However, the Swiss Gold Initiative is more than just a referendum on returning to sound money policies in Switzerland.
A couple weeks ago, we reported on Alan Greenspan’s prediction that the price of gold would rise. He said this at the New Orleans Investment Conference. In an interview at the Council on Foreign Relations (CFR) the next week, Greenspan commented even more on gold, though the CFR did not publish his thoughts in the official transcript. Most notably, Greenspan explains what so-called “gold bugs” have been telling the skeptical financial media for years:
Gold is a currency. It is still by all evidences the premier currency, where no fiat currency, including the dollar, can match it… Intrinsic currencies, like gold and silver for example, are acceptable without a third party guarantee…”
This post was submitted by Erik Oswald, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold. Check out Peter Schiff’s Gold News every Friday, when Erik will recommend a new entertaining and educational video – the Friday Feature.
For this week’s Friday Feature, I’d like to present “The American Dream”. This animated short takes an elementary look at how the American people have had the monetary rug pulled out from under them. The film investigates the causes of the financial crisis, the origins of money and examines those responsible for creating the Federal Reserve System. While much of the information in this film will be common knowledge to most contrarians, I believe this film is a great tool for educating younger generations about the Federal Reserve and the history of money. Enjoy!
Get Peter Schiff’s latest gold market analysis – click here for a free subscription to his exclusive monthly Gold Videocast.
Interested in learning more about physical gold and silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!