A recent report by Bloomberg highlights that if China were to adopt a gold standard, it would look nothing like the traditional systems used in the past. Ken Hoffmann, Bloomberg’s Global Head of Metals & Mining Research, doesn’t believe conventional western wisdom can predict the actions China might take. In fact, he cautions that China will be more than capable of thinking outside the box. And if the rising Eastern power does transition to a gold standard, it would send the price of the yellow metal through the roof.
China wants to establish the yuan as a global reserve currency. Backing it with gold would likely attract foreign investment. Here’s the catch — a gold-backed yuan would require either an exchange rate of about $64,000 an ounce, or three times more gold than currently exists in the world at current prices.
This article is by Addison Quale, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.
Metals have again found themselves very much range-bound this past month. Gold is trading between $1170 and $1230, and silver is bouncing back and forth between $15.75 and $17.50. We certainly seem to be in a kind of holding pattern until things shake out further. With geopolitical drama at a bit of a lull and everyone holding their breath until the next FOMC meeting in June, there hasn’t been too much to move the metals prices up or down. Clearly, something has to give.
The June Fed meeting could be a significant event at least. As this past Wednesday’s FOMC minutes suggest, the Fed will not raise rates next month. This dovish news could be the catalyst for metals to break out of their current rut.
As Peter has been reporting for over a year now, the US economy is not nearly as strong as the media would have you think. 2015 economic data has made it even harder for the recovery storyline to stick – especially with Q1 growth now confirmed to be lackluster. With the stock market very much dependent on easy money policies to keep chugging higher, Yellen has found herself caught between the proverbial rock and hard place.
Gold hit a three-month high on Monday, driven by fears over Greece’s ability to pay debts and soft economic data in the US.
The price of gold peaked at $1,232.20 Monday, before sliding a bit on Tuesday. CNBC reports a sharp rise in the euro and indications the European Central Bank may speed its 1 trillion euro ($1.12 trillion) bond-buying program stalled gold’s five-day rally Tuesday. Uncertainty about what the Federal Reserve will do regarding interest rates in its meeting Monday also weighed on the market.
But the long term trends that sparked the climb in gold prices over the last week remain firmly entrenched.
The war on cash continues to heat up with a proposed law in Denmark that would open the door to what Jim Leaviss called “the first step towards an economic revolution that sees physical currencies and normal bank accounts abolished,” in a recent Telegraph column.
Last month, we reported on the reasons central banks would love to do away with cash. In a nutshell, these central planners believe they can more effectively manipulate the economy in a cashless society.
The proposed Danish law would take a step in that direction, allowing shops to refuse cash and require some form of electronic payment. Policymakers claim the law would “ease administrative and financial burdens,” but Leaviss gleefully sees it as part of a much bigger picture.
The April non-farm payroll report has been called the “Goldilocks” report, because it apparently provided just the right data markets wanted to see. A better-than-expected job creation number “proved” that the US economy continues to recover. However, the report was not strong enough to spur the Federal Reserve to raise interest rates sooner, which could spook Wall Street.
Yet the rosy mainstream sentiment completely ignores the underlying facts of the report, which Peter Schiff lays out in his latest written commentary for Euro Pacific Capital.
The biggest shock should have been the downward revision of the already weak March numbers, which most people had expected would be revised upwards. Instead, 41,000 jobs were cut from March, leaving only 85,000 hires for the month, making it the worst month in job creation in three years.
Can the economic health of the nation’s largest cities tell us anything about the health of the greater economy? Perhaps.
On Tuesday, Moody’s downgraded Chicago’s credit rating to junk level. The downgrade comes in response to the city’s growing pension liabilities, paired with a new Illinois state court ruling that public pensions cannot be cut as a method of repairing the state’s finances. Moody’s wrote, “In our opinion, the Illinois Supreme Court’s May 8 ruling raises the risk that the statute governing Chicago’s Municipal and Laborer pension plans will eventually be overturned.”
The World Gold Council (WGC) released its Gold Demand Trends report for the first quarter of 2015. The WGC considers 2014 a year of stabilization for the gold market, and the the first quarter of the year saw this trend continue. The supply-demand picture for gold remained relatively unchanged. However, looking to the rest of 2015, the WGC sees supply subsiding. At the same time, demand could rise as investors adjust their strategies in response to weak economic growth in the West. In fact, the first three months of 2015 already saw a noticeable increase in gold investment demand:
ETFs (+26 tonnes) benefited from improved Western investor attitudes towards gold; Q1 2015 was the first quarter of positive net purchases since Q4 2012. Bar and coin demand, 10% weaker year-on-year, remains elevated compared with historical levels.
In this video interview, WGC’s Head of Market Intelligence Alistair Hewitt summarizes the report’s findings.
The use of silver in emerging technologies, particularly solar energy production, sets the stage for surging demand and rapidly rising silver prices in the future.
That means the silver market provides some great opportunities for investors.
According to a report in The Telegraph, analysts expect the demand for solar energy to increase 30% in 2015 alone. Silver paste serves as a key component in crystalline silicon photovoltaic (PV) cells, and the increased demand for solar energy will likely drive a concurrent demand for silver. Analysts estimate PV cell production alone will require some 70 million ounces of silver through 2015 to the beginning of 2016.
The latest US government data shows a record number of Americans renounced their citizenship in the first quarter of 2015. A total 1,337 Americans gave up their passports during that time. That’s almost 40% of the 3,415 in the entirety of 2014. That 2014 figure was an all-time record, following a record 2013 with 2,999 expatriates.
It’s no mystery why Americans living abroad are choosing to sacrifice their citizenship. United States tax laws are extremely onerous.
Peter Schiff spoke briefly with Ben Bernanke at the SkyBridge Alternatives (SALT) Conference yesterday. Approaching the former Federal Reserve Chairman, Peter warned, “In full disclosure, I’m your biggest critic.” Bernanke didn’t miss a beat: “You have a lot of competition.”