If all the world’s debt were backed by gold, the US dollar price of the yellow metal would be nearly $34,000. Frank Holmes of US Global Investors explains the math in an insightful article.
- 5.9 billion ounces = total above-ground gold in world.
- At $1,181 per ounce, that’s about $7 trillion.
- Total global debt = $200 trillion.
- $200 trillion divided by 5.9 billion = $33,898.
It’s an eye-opening number in a world where the gold standard reigned supreme for most of modern history.
The price of gold shot up about 1.5% today, breaking through the technically significant barrier of $1200. Gold closed around $1185 on Wednesday, and rallied today to a peak of $1206. It now hovers around $1202.
The jump in price comes on the news that the Federal Reserve is likely to keep the federal funds interest rate at zero for some time. In a press conference yesterday, Janet Yellen hinted at rate hikes later in the year, but ultimately reaffirmed that any rise in rates is entirely data dependent.
In case you missed it earlier, here’s Peter Schiff’s analysis of the FOMC’s meeting and Yellen’s statements:
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It’s official: China now plays a small role in directly setting the price of gold in Western markets. For the first time ever, a Chinese bank has joined the twice-daily gold price fixing process run by the London Bullion Market Association (LBMA).
As we reported back in February, this news was anticipated. The LBMA has replaced the old London Gold Fix with a new, electronic mechanism in an effort to increase transparency in the gold markets.
On Friday, Texas Governor Greg Abbott approved a law creating the Texas Bullion Depository – the first state-level precious metals depository in the United States. The bill would also allow Texas to repatriate $1 billion of gold back into the state. The law will go into effect immediately, though it is still unknown exactly where and when the Depository will be built.
In passing this law, Texas joins the ranks of major global economies that want to bring their gold home. Germany, Austria, the Netherlands, and other European nations have already begun to repatriate gold from the New York Federal Reserve or have proposed to begin doing so.
If you’re planning on buying gold later this summer or in the fall, you might want to consider acting sooner.
A looming miners strike in South Africa could push gold prices up in the near to medium-term.
According to a Reuters report, “South Africa’s Association of Mineworkers and Construction Union [AMCU] could launch a wildcat strike if its rival union and gold mining companies extend a wage deal to its members.”
When an investment columnist who makes it a point to tell you, “I am no gold bug,” writes a column entitled “Gold can glitter if stocks hit the rocks,” it should serve as a pretty good indication now may be the right time to invest in gold.
Jeff Reeves writes for MarketWatch, “…given the continued volatility in the stock market and the risk of a correction, it’s worth considering a targeted bet on the precious metal.” Reeves is usually a technical analyst of the precious metals markets, while we look at the fundamental reasons for investing in gold and silver. When these two methods of analysis align, investors should take note.
In fact, there are a number of factors that indicate investors should consider gold now.
Last week, International Monetary Fund Managing Director Christine Lagarde said that the Federal Reserve should delay any interest rate hikes until 2016.
Higher US policy rates could still result in significant market volatility with financial stability consequences that go well beyond the US borders. In weighing these risks, we think that there is a case for waiting to raise rates until there are more tangible signs of wage or price inflation than are currently evident. In other words, we think a rate hike would be better off in early 2016.”
After the bombing of Pearl Harbor, President Franklin D. Roosevelt called Dec. 7, 1941, “A date that will live in infamy.”
When it comes to the US monetary system, June 5, 1933 should share that ignoble title, because that date marks the beginning of a slow death of the dollar.
Eighty-two years ago, the US went off the gold standard when Congress enacted a joint resolution erasing the right of creditors to demand payment in gold. The move was the culmination of actions taken by Roosevelt that year.
Austria Repatriating Some Gold from Britain
Reuters – Austrian central bank officials say they plan to repatriate some of its gold reserves from Great Britain in response to criticism that it stores too much of its precious metal abroad. The Austrian National Bank administers the country’s 280 metric tons of gold reserves. Currently, about 80% is stored in Britain. Bank officials say they plan to decrease that to around 30%, with 50% of the reserves kept in Austria. The country also stores gold in Switzerland. This repatriation is part of a larger European trend beginning with Germany, which brought home 120 tons of gold from New York and Paris in 2014.
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Gold Smuggling in India at All-Time High
Times of India – Gold smuggling hit an all-time high in India this year, with police and revenue agencies seizing more than 3,500 kg of gold in 2014-15. In 2012-13, agents only seized 350 kg gold. It’s generally thought that seizures represent less than 10% of actual smuggling. Officials say in the two years since the duty on gold was upped to 10%, smuggling has increased by 900%. Seizures in Nepal also doubled with the Indian duty increase, as smugglers pushed gold from Dubai, Thailand and China into Nepal to be brought to India as authorities monitored more traditional routes.
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Just as Peter Schiff has been predicting, first-quarter GDP in the United States was revised dramatically lower today. The Commerce department previously estimated that US economic output rose 0.2% in the first quarter of 2015, but it is now reporting a seasonally adjusted rate of negative 0.7%.
Peter has anticipated this downward revision since the beginning of the second quarter.
