Important News Nuggets From the Gold Bull Market
US Productivity Collapse
The US has paid a steep price for the COVID-19 shutdown. US productivity has fallen by a third.
The Bureau of Economic Analysis’ reports that, for the April-May-June quarter, US annualized quarter over quarter Gross National Product has fallen 32.9 percent.
That is worse than a Depression era collapse. Does Washington have a switch it can flip that will restore the economy?
No.
All it has is the printing press. Which brings to mind the expression that when you’re holding a hammer, everything looks like a nail.
By the way, the financial news media isn’t saying a lot about how much capital has been destroyed along the way, but it is over the cliff.
Every family that saved for years to open a small business, perhaps a restaurant or a retail store, that will now never re-open, has lost capital that has been years or even a lifetime in the making.
Putting the Gold Price in Perspective
Even though gold has reached a new all-time high, it’s nowhere near its old highs!
That’s because the value of the dollar has been diluted by the Fed along the way. It is a dishonest unit of measurement, just like a ruler of 12 inches one year, 10 inches the year after, and 8 inches the next.
The World Gold Council point out that in constant (not shrinking) dollars, the nominal price of gold, even at our present record highs, is about $200 below its 2011 high, while matching gold’s prior record high in January,1980 would require a price of about $2,800 in today’s dollars.
The gold price more than doubled from about $900 during the mortgage meltdown in 2008 to its 2011 high, while it is up only about 30 percent since the beginning of the COVID-19 pandemic struck.
China Suppressing Gold Buying… But for How Long?
Several Chinese national financial institutions have taken steps to limit domestic gold and precious metals complex purchases, according to a report from Reuters:
“Industrial and Commercial Bank of China (ICBC), the country’s biggest lender, said on Wednesday it would bar its clients from opening new trading positions for platinum, palladium and index products linked to precious metal from Friday. That directive, according to the lender’s customer service department, was in response to ‘violent price volatility’ and ‘the need to control risks.’
“Agricultural Bank of China said it had recently suspended new businesses related to gold, while Bank of China said it halted new account openings for platinum and palladium trading.”
One hidden motive may be to support China’s stock markets by preventing investors from moving funds from stocks to gold. Most important for our friends and client is to note that unleashed, Chinese gold buyers can drive prices to unimaginable levels.
The financial site ZeroHedge writes, “It is neither in China’s, nor any other government’s interest, to see gold prices soaring as they likely would if tens of millions of Chinese speculators rushed to bid up the precious metal.”
ZeroHedge tweeted, “All gold needs to hit 2,500 is for China’s momentum maniacs or the Robinhooders to start chasing it.”
Spending Our Way to Riches?
We just read a New York Times columnist—where do they get these people?—who advises the US government to “spend our way toward a better tomorrow.”
In case you find that as incredible as we do, here’s a link to the piece called, “America Looks Hopelessly Broke. It Isn’t.”
Okay. And that’s why we’re in this predicament.
Thanks, New York Times. Now can the adults enter the conversation?