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.
Lawrence Williams reports for Mineweb that the Shanghai Gold Exchange (SGE) reported more than 2,100 metric tons of gold withdrawals in 2014. The last three trading days of the year alone saw 29 tons of withdrawals. Many analysts have turned to figures from SGE as a better gauge of Chinese consumer demand, because the Chinese government does not release official physical gold import figures.
The Chinese Lunar New Year isn’t until February 19th this year, which means there’s still a lot of time for Chinese consumers to stock up on gold in advance of the holiday. This is one of the strongest times for Chinese gold demand and often sets the tone for the rest of the year, which some think might approach record levels again in 2015.
Last week, President Obama announced a plan to provide “free” community college to American students. Democrats in particular rejoiced at the proposal, revealing just how limited mainstream economic literacy really is. Austrian economists like Peter Schiff know that nothing is really free.
Indeed, Obama’s plan would cost the federal government at least $60 billion. That’s $60 billion that would be passed on to American consumers one way or another by adding it to the already unsupportable $18 trillion US public debt. However, beyond the headline price tag, a “free” community college program would add a layer of government manipulation to a higher education market that is already floundering.
Famed investor Mark Cuban explained last year why he sees the student loan industry as another major bubble that will inevitably burst:
CNBC spoke with Chicago Fed President Charles Evans this morning about the Federal Reserve’s schedule for raising interest rates above zero percent. While Evans confirmed the official narrative that the United States economy is getting better and better, he still doesn’t think the Fed will raise rates until 2016. Even the CNBC anchors seem to be waking up to the obvious doublespeak of these government officials, asking the same question Peter Schiff has posed for months: “If the economy is so strong, why can’t it support rate hikes?”
Here’s what Evans had to say about the seemingly improving job markets:
Employment growth has been very good for quite a long time now, and that has been a very important criteria for us to judge success… We’ve seen [substantial improvement in the labor market outlook]… Good, good progress… That’s good. Economic activity seems to be strong, so I’m pretty confident about the outlook…”
The December issue of The Silver Institute’s Silver News is now available. This edition highlights the growing demand for industrial silver in 2015 and beyond.
From watch batteries to massive solar energy systems, the special properties of silver are often indispensable in industrial applications, including silver-coated bearings, catalysts, medical care and many products in our daily lives. Along with technological improvements, more and more applications of silver have been invented and, more importantly, commercialized, such as nanosilver, solar cells and printed inks.”