Russia has added more gold to its foreign reserves, making December the ninth month in a row that it has bought the yellow metal. Russia’s gold holdings are now the largest they’ve been in two decades, according to the International Monetary Fund.
Smaller countries have also been stocking up on the yellow metal. Kazakhstan added to its reserves for the 27th straight month. Malaysia, Belarus, Greece, Kyrgyz Republic, and Serbia also bought gold.
The World Gold Council has released a fascinating new report on Turkish gold demand and gold culture. Many gold investors are aware that China and India have been the top gold consumers in the world, but Turkey has a thriving gold economy as well. In fact, Turkey is the world’s 4th largest gold consumer, and in many ways, gold is even more integrated into the Turkish economy.
The World Economic Forum’s meeting in Davos ended this past weekend, and much of the mainstream news focused on the hypocrisy of the world’s wealthiest individuals discussing the plight of the global economy. Research released by Oxfam in the middle of the conference shows that the richest 1% own 48% of the world’s wealth. Politicians love broad statistics like this, which they can use to justify more government “solutions” to this inequality.
However, it’s these same successful (and rich) businessmen who are sounding the alarms about the destructive policies of global central banks. These monetary policies are the single biggest contributor to income inequality, because they enrich the financial elite while destroying the economic fundamentals that allow the lower and middle classes to prosper. Renowned business magnate George Soros made the news at Davos when he stated the obvious:
As of this morning, gold is up more than 10% and silver is up more than 16% since the beginning of the year. Gold stocks have also been strong, especially in the mining sector. While the S&P 500 has dropped about 1%, the Arca Gold Miners Index is up nearly 25%. Unsurprisingly, the mainstream financial media is starting to jump on the gold bandwagon.
In an article on the front page of its business section, The Wall Street Journal looks at all the factors influencing bullish sentiment for precious metals thus far in 2015. These include:
The European Central Bank (ECB) will begin a new quantitative easing (QE) program in March. The central bank announced this morning that it would buy at least 1.1 trillion euros worth of euro-denominated bonds from governments and private institutions across Europe. It will begin its monetary manipulation at the rate of €60 billion a month, which will last into the fall of 2016. If you’ve got a few minutes to waste, you can watch ECB President Mario Draghi deliver the news himself:
Like Janet Yellen, Draghi uses the bogus excuse of low inflation as one of the primary justifications for the program. This renewed commitment to creating European inflation boosted to gold, pushing it over $1,300.
The German central bank (Bundesbank) repatriated 120 metric tons of gold in 2014. 85 of those tons came from the New York Federal Reserve, which held nearly half of Germany’s gold at the time. This is in sharp contrast to repatriating just 37 tons in 2013 – only 5 of which came from New York. It would appear that Germany is quite serious about getting its gold back after all.
At the beginning of 2013, the Bundesbank announced that it would begin the process of repatriating massive amounts of its physical gold reserves back into Germany. The goal is to have half of its gold back in Germany by 2020. Currently, nearly 65% of its reserves are stored in the New York Federal Reserve, the Bank of England in London, and in the Banque de France in Paris. New York alone holds almost 43% of Germany’s gold:
Precious metals naysayers often fail to keep a global perspective on the economics behind gold and silver. This past week has been a stark reminder that gold is an international asset whose real, fundamental value cannot be found in US dollar terms alone. When the Swiss franc’s peg to the euro was dropped, gold surged against global currencies.
A Kitco commentary by Frank Holmes featuring a variety of currency charts makes the point succinctly. First, here’s gold in euros. Gold is up 14.3% in the past month against the euro. It’s moved nearly 6% since Switzerland decided to abandon the euro.
The price of gold took off this morning when news broke that the Swiss National Bank has removed the euro cap on the Swiss franc. For three years, the franc has had a ceiling of 1.20 francs per euro. When the cap was removed, the currency surged 30% against the euro, sending currency traders scrambling into gold as a safe haven. Gold surged more than 2% and is currently hovering around $1,260.
Currency markets aren’t alone in their volatility this week.
Famed contrarian investor Marc Faber has predicted that gold will go up “substantially” in 2015, perhaps as much as 30%. Much like Peter Schiff, Faber sees 2015 as the year that the markets wake up and realize that central banks are no longer capable of artificially supporting asset prices.
Faber’s investment advice comes down to shorting central banks:
My belief is that the big surprise this year is that investor confidence in central banks collapses. And when that happens — I can’t short central banks, although I’d really like to, and the only way to short them is to go long gold, silver and platinum… That’s the only way. That’s something I will do.”
In his latest podcast, Peter Schiff dissects the jobs numbers from December, Obama’s new community college plan, and Charles Evans’ call for more inflation. Peter continues to be one of the few reporting on the reality underlying the headline jobs numbers, though Paul Craig Roberts just published an enlightening article at LewRockwell.com. Roberts looks at the Shadow Stats employment data for December and reveals that real unemployment is more like 23% – not 5.6% as reported by the government.