After a dismal November, gold and silver are starting to show some signs of life. But what caused the big drop in the price of precious metals last month? Was it warranted? In this episode of the Friday Gold Wrap podcast, host Mike Maharrey looks at the economic and monetary fundamentals and tries to bring us back to reality. He argues that despite the optimism about a coronavirus vaccine, nothing will fundamentally change.
After two months of net global declines in gold holdings, central banks became net buyers again in October.
Gold-buying by central banks has slowed from the record pace we saw in 2018 and 2019, but many countries continue to load up on the yellow metal. In October, central banks added a net 22.8 tons of gold to their reserves, according to the latest data compiled by the World Gold Council.
The money supply continues to grow at a torrid rate.
Based on the “true” or Rothbard-Salerno money supply measure (TMS), the money supply grew by 37.08% year-on-year in October. That was down just slightly from September’s record rate of 37.54%.
The US government is increasingly relying on the Federal Reserve to prop up the Treasury market and absorb the trillions of dollars in bonds it’s issuing in order to fund its massive budget deficits. The Fed now holds a record 16.5% of US debt. And it’s going to have to buy trillions of dollars of additional Treasuries in 2021 to keep pace with government borrowing.
In other words, there is no end in sight to quantitative easing. In fact, the central bank will have to double its scheduled monthly QE in 2021 to catch up to where it was in 2020.
The stock market is booming as everybody anticipates an end to the coronavirus pandemic with the rollout of a vaccine. But as Peter Schiff pointed out in this podcast, the rally isn’t really about a cure for COVID. It is being driven by government and central bank policies meant to shield us from the pain of the pandemic. The problem is this government “help” really isn’t helping. In fact, it’s made a bad situation much worse.
Even as market mania continues over hopes for a coronavirus vaccine, the economic devastation caused by the government response to the pandemic continues to ravage the economy. Seventeen million households are behind on rent or mortgage payments, and nearly 6 million Americans say they are at risk of eviction in the next few months.
Pierre Lassonde has said gold could skyrocket to $15,000 to $20,000 an ounce as the Dow-to-gold ratio falls to 1-to-1. Has his view changed?
Lassonde is the founder of Franco-
Over the last year, the US government had borrowed over $4.2 trillion. The national debt now stands well above $27 trillion. There is no end in sight to the borrowing and spending and that raises a significant question: who is going to buy all of the bonds necessary to finance the government spending machine?
Not too long ago, Uncle Sam could count on foreign investors to gobble up a big chunk of his IOUs, but times are changing. In 2008, foreign investors held more than half of the outstanding Treasury debt. Today, that amount has plunged to the lowest level since the turn of the century.
Peter Schiff spoke with Jay Martin backstage at the Cambridge Gold Summit. During the discussion, Peter and Jay took a step back from the immediate market volatility and news of the day to look at the big picture. Gold was a topic of discussion and Peter emphasized that the yellow metal has stood the test of time when it comes to preserving wealth.
Well, it’s another Black Friday and I didn’t go shopping.
That’s my tradition.
