Russia's shift to Gold strongly hits global currency war on punitive Dollar Hegemony | Eurasia Diary -

25 September, Friday

Russia's shift to Gold strongly hits global currency war on punitive Dollar Hegemony

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Gold has been ticking higher since late May 2019, driven by recessionary indicators, economic volatility and scares within the overnight lending market, says American economic analyst Pye Ian, a private equity executive and former precious metals commodities trader. He explains how the price of the yellow metal could go beyond $5,000/troy oz.
Gold demonstrated impressive performance gaining over 17 percent in 2019 and continues to rally: on 31 December, February Comex gold settled at $1,523.10, up $4.50.
Major Eurasian nations, including Russia, China and India are boosting the yellow metal's positions by acquiring and producing bullion. In late December, Russian Finance Minister Anton Siluanov said that Moscow could consider investing part of its National Wealth Fund in gold. Being worth $124 billion as of 1 December 2019 Russia's National Wealth Fund amasses revenues from the country's crude oil exports.
Sputnik: What factors are behind the yellow metal's steady rise, in your opinion? Will the trend continue in 2020 and can we expect the gold price to break the $1,530 ceiling?
Pye Ian: The standardised answers to why gold’s “price” rises in general, let alone it’s recent spikes, include investor nervousness over the wider state of the economy, inflation or deflation, volatility and uncertainty in equities and bond markets, the weakening of confidence in fiat currencies or rising threats of conflicts or outright war.
​Since recessionary indicators returned last year – ranging from the 10-year Treasury yield falling below the 3-month yield, to factory orders dropping, to continuing retail closures – gold’s price started consistently ticking higher from around late May 2019. Said factors, coupled with scares within the overnight lending market, where the US Fed has been forced to essentially reprise its past Quantitative Easing program by injecting hundreds of billions of dollars into repo lending because at least one major financial institution is broken or insolvent, have kept gold’s “price” above $1,450/oz. and rising.
Yet in all honestly, the core reason why I listed gold’s “price” in quotation marks is that the economic fundamentals between the US Dollar as global reserve currency and finite gold bullion would dictate that gold’s genuine value should be well north of $5,000/troy oz. This is due to the sheer size of public and private debts the US faces, the volume of actual dollars in the system (cash or digitally), as well as the aggressive manner in which “money” is being printed out of thin air to further bail out speculative misadventures in dark pool finance.
The “prices” of gold and its close monetary cousin silver hint at two of the most politicized and thus poorly misunderstood aspects within global finance.  Said prices are tactically suppressed in order to lend credence to, and confidence in, fiat reserve currencies while also calibrating interest rate setting mechanisms. Thus, a $5,000 gold price, or a $100 silver price, would spook global markets, wreak havoc on interest rates, trigger bond dumping en masse, and other horror shows for western central banks.  It’d also strip the globe fairly immediately of actual physical gold and silver bullion.
I was trading precious metals back in 2011 when gold’s price reached an unprecedented high just shy of $1900/oz before then being aggressively taken down. The same with silver reaching nearly $50/oz before its most serious correction in decades, almost like their price movements were being manipulated by a kid with an old video game joystick. So why did said “prices” reach those much higher values 9 years ago, and at the paces they did, while silver’s oddly capped at under $20/oz and gold’s merely ‘allowed’ to creep gradually higher?
The answers have to do with modern mechanisms for gold price fixing out of London, the need to ‘curate’ perceptions of the dollar while lightly acknowledging rising risks & volatility across markets, and yet also allow prices to rise just enough to presumably slow the ongoing hoarding of physical bullion by Eastern central banks and players (who may be awaiting price dips in order to purchase further).
So to answer your “pricing trends” question, yes, intuitively, one could expect gold and silver prices to continue to rise, with the gold to silver ratio ideally moving toward 17 to 20, which would reflect the actual ratio of available gold to silver in the earth’s crust. Yet – again - it’s not a genuinely free global marketplace for precious metals, run on pure supply & demand.
Hence the only thing I would bet on is the reality of both metals prices being vastly undervalued in dollars. Especially as the probabilities for global conflicts rise alongside those for another fiscal transatlantic meltdown a la 12 years ago.



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