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Looks Like There’s a Whale Snapping Up Gold Bullion Below $1,800
Spot gold is again bobbing along near $1,800 an ounce, as it has been since mid-2020. The stickiness of that level, particularly as fundamentals turned more bearish, suggests there’s a big buyer somewhere in these waters.
Since breaking above the round number in July 2020, the gold price dipped below it 19 times on a closing basis, only to regain its footing. In the past year, the modeled value of gold, based on a regression study that includes the dollar, real rates and ETF holdings, dropped nearly 10%. Yet the metal’s price only fell around 2%. Clearly, there is a big buyer who considers the metal a long-term hold.
Such whale activity, which shows up neither in ETF holdings nor in futures positioning, would require a substantial buyer, accumulating in size in the London over-the-counter market. Yet vault holdings reported by the London Bullion Market Association, which include both ETF and some central bank-owned metal, show only a fractional increase in the year through December, from 307 million to 309 million troy ounces.
That would suggest that whoever is buying is able to buy in scale, leave little footprint in the market and then take delivery and store the metal in secure, invisible vaults. And that points strongly toward a sovereign buyer.
Mitsui & Co. to issue cryptocurrency linked to gold prices TOKYO -- Japanese trading house Mitsui & Co. plans to issue a digital currency called ZipangCoin (ZPG) as early as this month, Nikkei has learned. The currency will be linked to gold prices and sold to retail investors through cryptocurrency exchanges.
Last year saw something of a row between central bankers, who absolutely insisted that any inflation you could see around was entirely transitory (and would be gone in a matter of months) and the rest of us who weren’t so sure. Today, consumer prices in the US are rising at 7.5 per cent, the fastest since 1982. In the UK the figure is 5.4 per cent. That’s frighteningly high. Given how hard it is to imagine central bankers being able to do much about global supply problems, it’s also clearly not very short term. It’s beginning to have an all-too-obvious effect, not just on living costs but on investment portfolios as well. That’s unlikely to end soon. The market has long preferred fun tech stories and has discouraged oil and gas companies and miners from investing in exploration and production. So they haven’t. Now we find ourselves in something of a supply crunch: we need more energy, more copper, more lithium and more steel — but none of these things are readily available. So energy prices are high and rising, as are metals prices. Food prices will soon follow (they are linked to energy prices via fertiliser prices but with a delay due to long-term supermarket contracts with providers).
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If there is any part of the argument around market performance that is settled at all it is surely that over the very long-term gold is one thing you can rely on to hold its value. Best to have some.
One thing I can say about Stephanie Pomboy is that she never disappoints and always delivers. Those who are long bullion and bonds are definitely going to find solace ?in what she had to say on this webcast. And one area of total agreement between us was on how the Fed's bark will not turn to bite, and we provide a framework on how to make money by betting against the multiple rate hikes now being widely discounted across all asset classes.
One century, six trades and 17,773 ounces of gold...
We don’t give investment advice in these daily columns. We just try to connect the dots. And one thing we notice is that they form patterns. Hope… despair. Empire… destruction. Summer… winter. Birth… death. Money-printing… inflation. One thing follows another, shaped by some age-old template.
Looking at the stock market, we see long cycles of boom and bust.
The problem with just staying ‘in the market,’ may leave you with a losing position for decades. In the US, after the crash of ’29, it took 26 years for stocks to recover, in inflation-adjusted terms. And in Japan, stocks crashed in 1989; they still have not recovered.
Trying to ‘time the market’ rarely pays off. But rarely is good enough for us. The most dangerous periods – when stocks are extremely overvalued – are rare too. And even an imperfect system for screening them out can be remarkably helpful.
There are times to hold ‘em, in other words, and times to walk away. There are also times to run. In preview, this is a way to tell when to put on your running shoes.
What we aim to do is only to dodge the “big loss.” When you’re young, the ‘big loss’ may be a learning experience. But when you are approaching retirement, losing a substantial part of your wealth can be a bummer. ... ... Gold is real money. It is not perfect money, because it is heavy and hard to carry around with you. But it is still the best money ever discovered.
When you compare it to the Dow, you are juxtaposing two things that are in constant opposition, like fighting bucks whose horns have gotten locked together.
The Dow represents the flower of American prosperity; gold is the age-old measure of value. The Dow is hope; gold is experience. The Dow is the future; gold is the past. The Dow is dreams; gold is reality.
Companies can create an almost unlimited amount of wealth; but there is only so much gold to measure it. So, in terms of gold, the price of America’s top corporations (the Dow) goes up and down… but never strays too far from its long-term mean – around 10 ounces of gold to the Dow.
One Century, Six trades
Just go back to when the Fed was set up, in 1913. Imagine that you followed a simple rule: you bought stocks when the Dow traded for 5 ounces of gold, or less… and you sold your stocks and bought gold when the Dow sold for 15 ounces of gold or more.
Right off the bat, you would have taken your nest egg – say, $100 – and bought stocks. They were trading at 4 ounces to the Dow in 1913. Then, they got even cheaper as WWI began. But you don’t have to read the news or study the claptrap put out by economists. You just stick with the system.
You sell your stocks and buy gold in 1929, when the Dow/Gold ratio goes over 15… and buy back into stocks in 1932, when the ratio collapses to under 5 again.
The next move is a stock sale 27 years later, when the ratio crosses the 15 mark… followed by another buy in 1974. That is the beginning of another bull market. You stick with it until it reaches a Dow/Gold ratio of 15. Then, you make your final move – selling out of stocks. You’ve been in gold ever since.
What? You missed the biggest bull market in history… from the depths of the mortgage finance crash in 2009 to today’s peaks. You also missed the glory years of the dot.com bubble – from 1996 to 2000. How could this be a good trade?
Well, after the Dotcom crash… and the Mortgage Finance crash… the ratio never fell to our 5 target. So we never bought back into the stock market. We’ve been out of stocks for the last 26 years, patiently biding our time in gold.
And yet, with this trading system – with only 6 trades in the last 100 years – you would have turned 4 ounces of gold in 1913 into 17,773 ounces of gold today. Your original $100 would now be worth about $33 million.
The current Dow/Gold ratio is 18. And by almost all other measures, US stocks are at an all-time high. Do you have your running shoes on yet?
