- MonetaryMetals: The Importance of Interest
- SCMP: Asian Shoppers Drive Gold Demand
- FXStreet: Did Silver Break its Bond with Gold?
- Kitco: Can Gold Provide the Big Short Term Gains the Market Craves?
MonetaryMetals: The Importance of Interest
Keith Werner, the CEO of Monetary Metals gave a presentation at the Austrian Economics Research Conference about monetary and non-monetary effects on consumer prices, the importance of interest rates, and the cycle of prices, interest rate and borrowing.
Werner begins his speech by defining a concept he calls non-monetary force or “useless ingredients”: this means all actions by regulatory authorities that raise the costs of business (and the final product) without providing additional value, for example forcing businesses to provide hand sanitizer and free masks to customers, but also demanding additional work from the business such as providing nutritional information on food they serve. The non-monetary force can drive up the price of goods and be mistaken for inflation, because the consumer does not see what causes a particular price increase.
Next he focuses on how monetary force affects prices and names two important factors that act like a seesaw: the bond prices and interest rates – when one of them goes up, the other goes down, which is how the central banks can control the interest rate and, through that, price level of the economy. In a natural free market the interest rate is organically bounded by the time preference and return on capital, but when the central banks manipulate the interest rate, it might fall or rise over either limit – which can cause a feedback loop that either raises or lowers prices uncontrollably, which is what happened in the years between 1933 and 1971.
Keith encourages people to read his paper on the subject for more information.
26.3.2021, Michelle Agner
SCMP: Asian Shoppers Drive Gold Demand
Chinese and Indian jewelry demand increases as the gold price drops near a nine-month low. Many people are now shopping for jewelry due to price drops, easing worries about the virus and an annual springtime festival.
A precious metals analyst Suki Cooper says “the physical market becomes increasingly important for setting the floor for prices” when there’s little financial investment. Last Monday spot gold dropped 0.9% to $1,729.60. This was good news for consumers deterred by August’s record-high prices of $2,075.47. Indian jewellers are optimistic about this coming quarter thanks to an annual spring festival of Akshaya Tritiya in May. According to early estimates gold purchases are higher since February 2019.
Gold jewellery consumption is expected to rise 28% in China during 2021. Premiums on kilobars have also increased in Singapore, Hong Kong, and Thailand since February. The probable reason is the material difficulties faced by the refineries.
FXStreet: Did Silver Break its Bond with Gold?
Silver’s relationship with gold has relaxed during the first quarter of 2021, and investors wonder if this deviation becomes more than temporary. Investment Analyst Christina Parthenidou explains the potential of silver in the post-pandemic world.
Both gold and silver reached record highs in August 2020 with gold rising up to $2,079 and silver rallying to an eight-year high of $29.83. Both metals have since stabilized though silver hasn’t followed the yellow metals bearish plunge – instead it became more volatile and managed to reach another high of $30.03 at the start of 2021. It remains to be seen, if this deviation is just a quirk or start of a permanent change.
Silver has kept a foothold above $22.50 – $21.87 support area, remaining technically positive. It has the potential for another run towards the $30.00 level, while a step higher could trigger a move towards $34.60. Silver’s fundamentals look promising: it’s more abundant than gold and has many industrial uses, which will benefit from President Biden’s stimulus package as well as China’s industrial evolution. While silver reserves and production have somewhat declined, the extraction in copper, lead, and zinc mines keep the supply outlook positive. Meanwhile gold suffers from increasing confidence in the US economy and the Fed’s pledge to keep interest rates close to zero.
29.3.2021, Christina Parthenidou
Kitco: Can Gold Provide the Big Short Term Gains the Market Craves?
Cory Fleck of the KE Report interviews John Rabino of the Dollar Collapse about gold and the state of the economy.
John doesn’t believe the current low state of gold is anything to be alarmed about: the yellow metal moves in cycles and is more attractive at the end of the year than in the middle. He reassures that the market is merely going through a boring part, which needs to be weathered through to reach the interesting times.
Still, the world’s current state ought to generate excitement: debt is increasing and governments are running massive deficits, while printing new money they are practically handing out. At the moment investors are interested in so-called story stocks – Bitcoin, Big Tech and innovations such as the NFT’s, which attract a lot of money with their seemingly unlimited potential. There is so much money in the economy that it is easy to get lucky – and why trust a safe haven asset like gold, when you’re a rich genius, John asks and explains that we are just seeing the early stages of inflation, boosted to its extremes by the Internet.
Laws of economics can be bent but not broken, which means that these bubbles will burst, once the governments cannot stretch the economy any longer. These current conditions can only last as long as the free money spigot remains open – and once it closes, gold equity buyers will have a much better time.
30.3.2021, Cory Fleck