Switzerland will vote on the “Save Our Swiss Gold” initiative this Sunday, and the news is reminding everyone just why the financial world is watching so closely. USA Today and the Wall Street Journal can give you a good summary of how the Swiss gold initiative would affect the policies of the Swiss National Bank (SNB). The Guardian explains why a “yes” vote on the initiative would be extremely bullish for gold in this article published yesterday:
Its supporters come from the populist right-wing Swiss People’s party (SVP), which says in its mission statement: ‘Most Swiss don’t even know that part of the nation’s gold is stored abroad and that the SNB has already sold over half of the gold reserves.’
This post was submitted by Erik Oswald, SchiffGold Precious Metals Specialist.
While financial commentators continue to bash gold as an asset that produces nothing and should be left to the pages of history, the real story of the gold market is found at the macro economic and fundamental level. Central banks the world over have been net buyers of physical gold since 2011. On top of this, many sovereign nations have been requesting and taking delivery of their gold holdings from the New York Federal Reserve and London, where a majority of central banks’ gold holdings are stored.
Major news hit today on this front. The Netherlands has become the most recent Western European nation to take delivery of their physical holdings from the NY Fed. The Dutch central bank located in Amsterdam has increased its domestic holdings of physical bullion from 11% of total gold reserves to 31%. The official domestic Dutch gold horde has increased from about 67 tons to nearly 190. While this number is small in comparison to the reserves held by countries like China, Russia, and (allegedly) the US, the act of removing physical bullion from an international depository and returning it to the country of origin represents yet another vote of no confidence in the US financial system.
The price of gold in US dollars was up 1.5% this morning, boosting it to a 2-1/2 week high. Although the financial media continues to be bearish on precious metals, central banks around the world are starting to look more closely at the yellow metal as an important asset. Their reasons for buying or considering to buy gold vary widely from one bank to the next, but analysts are starting to expect a boost to the gold price in December thanks to central banks.
The 3rd quarter of 2014 marked the 15th consecutive quarter that central banks were net purchasers of gold, according to the World Gold Council. Here’s a brief rundown of some of the notable international gold news this week:
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.
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.”
This post was submitted by Erik Oswald, SchiffGold Precious Metals Specialist.
The Financial Times reported yesterday that Russia and China have signed a gas deal that would side-step Western markets. This agreement is just the latest development as the two countries continue to cement ties and diversify their holdings away from the United States. Reaching this agreement further removes the Chinese from dependence on oil purchased from OPEC and thereby puts another nail in the coffin for the petrodollar standard. Not only that, but its announcement comes just days after Mikhail Gorbachev warned that the world is nearing another Cold War.
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…”
The latest jobs numbers were released today, and the financial media is making much of the drop in the unemployment rate – now 5.8% according to the Bureau of Labor Statistics. Obviously, the economy must be getting better, just like Janet Yellen and Barack Obama have been telling us, right? Not so fast. The results from Tuesday’s elections tell a different story, as exit polls showed that the vast majority of voters were primarily concerned about the economy. Main Street Americans are waking up to the fact that this recovery is a hoax.
Even major news outlets like the LA Times are reporting on the new phenomenon of “secular stagnation,” which Peter Schiff addresses in his commentary below. ZeroHedge summarized how bogus the latest jobs numbers are, pointing out that most of the jobs gained are low-end service sector positions, while high-quality full-time work is dropping. Most alarmingly, it looks like there may soon be more waiters and bartenders in America than manufacturing workers:
SchiffGold and other major precious metals dealers have just received notice that the United States Mint has temporarily sold out of its Silver American Eagle bullion coins. There has been a huge surge in demand for silver bullion in the past week, as the price of the metal hit four year lows. Clearly investors are taking advantage of this buying opportunity.
We heard last week that US Mint sales of silver coins hit a 21-month high in October. The US Mint sold 5.79 million ounces of silver in October. This is the highest sales report since January 2013, when the Mint set a monthly record of 7.5 million ounces. As we reported last week, demand for silver coins has been on the rise across the globe, draining supplies from both private and national mints.