My new podcast episode is out.

My new podcast episode is out.

My new podcast episode is out.

Zero Hedge — Hundreds Of Billions In Gold And Cash Are Quietly Disappearing

"Squirreling money under the mattress?" 😮

Zero Hedge
Hundreds Of Billions In Gold And Cash Are Quietly Disappearing

Tyler Durden

With the Hong Kong protests showing no sign of letting up, a new narrative has emerged; that anti-government activists are "sliding into terrorism with home-made bombs" designed to inflict mass casualties.

On Sunday, Hong Kong police reported that they foiled a second bomb plot in under a week - arresting three men who were allegedly testing home-made devices and chemicals in a secluded area, according to SCMP....

Zero Hedge
Hong Kong Police Report Second Bomb Plot Foiled

Tyler Durden

Gold Reminds Governments That They're Still Not In Control — Jeffrey Snider

This is not your typical gold buggy "argument" against MMT although it is pro-gold standard. Jeffrey Snider goes through the history and lays out a case. It is worth a read. 

Edison was exactly right about the nature of gold as money. Everything boils down to who gets to control it. If you believe as Edison and Ford the government can be and most often is a force for good, then monetary restraint is a barbarous evil. But what if the government is populated, always, by bumbling incompetents masquerading themselves as technocratic geniuses?

Real Clear Markets
Gold Reminds Governments That They're Still Not In Control
Jeffrey Snider | Chief Investment Strategist of Alhambra Investment Partners

Physical Gold Withdrawals from the Shanghai Gold Exchange and The New Silk Road Jesse

I would add to government accumulation the likelihood that as incomes rise in the East there will also be increased demand from households. There already is. 

In the West, physical gold is mostly bling, with much of the saving in gold held largely in derivates as financial saving. And, as Jesse observes, the "paper gold" — "digital gold" really — is an issue owing to hypothecation and re-hypothecation.

In the East physical gold doubles as ornament and real saving. In addition, in Hindu India physical gold serves as a temple token. Some of the great temples have enormous stores of gold.

With global turmoil extending to the money system governments, especially in the East, and rising incomes there, with people traditionally desiring to hold physical gold, physical gold is being accumulated in that part of the world more than others.

While the gold bugs may be over the top in their assessments, demand for physical gold seems to be strong, it seems to me, for some of these reasons.

I don't want to get into the controversy over whether gold is "money," but a whole lot of people treat it as "money," and central banks have traditionally dealt in it and vault gold is considered the foundational real reserve. So, while there are many technical reasons for not considering gold to be "money," there are also a lot of practical reasons that many people do view it as "money." 

More precisely, physical gold is the historical numéraire, along with silver as secondary and copper third. For example, in the Bretton Woods system, the value of the dollar was fixed by a conversion rate into gold. Gold ceased to be the de jure numeraire when Nixon ended international settlement in gold, but many still view gold as the de facto numéraire.

Economists don't put much emphasis on the monetary significance of gold – with silver and copper now being chiefly industrial commodities, especially copper. However, conventional economists still tend to assume a gold standard and they reason "as if" on a gold standard. 

The financial world is much more focused on precious metals as not only commodities but "an asset class" that serves as a saving vehicle that can be the basis for derivatives. Thus, this asset class includes both the physical metal as real saving and derivatives based on it as financial saving.

If one wishes to integrate economics and finance, then the gold becomes important as a bridge concept.

Jesse's Café Américain
Physical Gold Withdrawals from the Shanghai Gold Exchange and The New Silk Road

Jesse

‘In Gold We Trust’: Waning confidence in US sends world’s central banks on buying spree — Darius Shahtahmasebi

I think this is partly correct. Probably more significant is the weaponizing of the USD in the economic aspect of hybrid warfare that the US is now carrying out against a number of countries a
d sending a message that "you are either with us or against us" (ht G. W. Bush). Wars run two ways.

Historically, gold has been the most secure reserve asset — the ultimate in safety, if one can protect one's gold holdings. Powerful nations are betting that they can do do in the event of loss of trust in the USD as "fair coin."

RT
‘In Gold We Trust’: Waning confidence in US sends world’s central banks on buying spree

Darius Shahtahmasebi

See also

Zero Hedge
Iran Calls For 'Elimination' Of Dollar To Stop US 'Economic Terrorism'

Tyler Durden

Not just government buying.

Zero Hedge
Indian Gold Demand Surged In April And May
Tyler Durden

Banikinkar Pattanayak — Indian Households Hold More Gold Than the World’s Top 10 Central Bank Holders Combined

This is nothing new. India households have always been holders of gold. Chinese households also have a preference for gold.

As India and China become more prosperous, this demand will likely increase.

Checkpoint Asia
Indian Households Hold More Gold Than the World’s Top 10 Central Bank Holders Combined
Banikinkar Pattanayak

JRL NEWSWATCH: “Russia’s New Gold Rush Could Shake Up the International Monetary System; Russia and China might be considering a gold-backed digital currency.” – Moscow Times/ Bruno Macaes

Gold Watch.

Johnson Russia List
JRL NEWSWATCH: “Russia’s New Gold Rush Could Shake Up the International Monetary System; Russia and China might be considering a gold-backed digital currency.” – Moscow Times/ Bruno Macaes
Bruno Maçães is a senior fellow at the Hudson Institute and a former Europe minister of Portugal

Warren Mosler —Central Banks buying gold

Gold buying like this functions as ‘off balance sheet deficit spending’. It’s off balance sheet as the payments by the CB don’t count as fiscal expenditures as they are accounted for as CB asset. And it’s functionally state deficit spending as the purchases add income in the form of net financial assets to the non government sectors:

China’s on a bullion-buying spree. The world’s second-largest economy expanded its gold reserves for the fourth straight month, adding to optimism that central banks globally will continue to build holdings.

The People’s Bank of China raised reserves to 60.62 million ounces in March from 60.26 million a month earlier, according to data on its website. In tonnage terms, last month’s inflow was 11.2 tons, following the addition of 9.95 tons in February, 11.8 tons in January and 9.95 tons in December.

China, the world’s top gold producer and consumer, is facing signs of a slowing economy, even as some progress is being made in trade negotiations with the U.S. The latest data from the PBOC indicate that the country has resumed adding gold to its reserves at a steady pace, much like the period from mid-2015 to October 2016, when the country boosted holdings almost every month. Should China continue to accumulate bullion at that pace over 2019, it may end the year as the top buyer after Russia, which added 274 tons in 2018.

Governments worldwide added 651.5 tons of bullion in 2018, the second-highest total on record, according to the World Gold Council. Russia quadrupled its reserves within the span of a decade amid President Vladimir Putin’s quest to break the country’s reliance on the U.S. dollar, and data from the central bank show that holdings rose by 1 million ounces in February, the most since November.

So far, it's only the MMT folks that I have seen saying that central bank gold buying is "off balance sheet deficit spending."

Gold price is sensitive to central bank buying and selling.

The Center of the Universe

Auto sales, Lumber, Rail loadings, Global survey, Profits comments, Las Vegas Real Estate, Central Banks buying gold
Warren Mosler

Zero Hedge — Maduro Scrambles To Repatriate Venezuela's Gold After Trump Crackdown

Just four days after president Trump signed an executive order last Thursday enabling new sanctions on Venezuela’s gold sector, in a bid to disrupt trade with Turkey which U.S. officials believe is undermining efforts to cripple Venezuela's economy and force Maduro and members of his government out of office, Maduro is now seeking to repatriate about $550 million in gold bars from the Bank of England over fears it could be caught up in international sanctions on the country.

US economic warfare.
Zero Hedge
Maduro Scrambles To Repatriate Venezuela's Gold After Trump Crackdown

Tyler Durden

See also

Not just the Venezuelan oil that the colonizers want.

There in the Bolivar province of Venezuela lies the site of one of the world's largest undeveloped gold reserves known as: Las Cristinas. But the story of our modern day "El Dorado" is a darker tale, of greed, deception, betrayal, and ruthlessness which rival even the most complex and convoluted plots of a John Le Carre novel. The intricate web like interplay spun by this true story is not easily disentangled.

Banderas News

Who Owns Las Cristinas Gold?
Michael Werbowski - PVNN

Paul Antonopoulos — Russia Acquires Record Tonnage Of Gold

The world’s central banks have acquired a record amount of gold in the third quarter of 2018 since 2015. The biggest buyer was Russia’s Central Bank, according to the World Gold Council (WGC) report.

Over the past three months, global gold purchases totaled more than 148,000 tonnes, up 22% year-on-year, reports the World Gold Council.

The leaders in purchases were Russia (99.2 tonnes of gold) and Turkey (18.5 tonnes).
Russia’s central bank gold reserves surpassed 2,000 tonnes for the first time. Currently, Russia accounts for 17% of the world’s reserves. The value of Russian gold is estimated at more than $78 billion.

Kazakhstan, India and Poland also increased their gold reserves. Hungary increased its gold reserves tenfold in the last quarter (from 3.1 to 31.5 tonnes).…

Nations moving out of USD, providing a strong argument that gold is money and going to gold as going to ground.

Professor Moscone explained: “Russia especially has solid reasons for dropping dollars in exchange for gold.

“As Russia is facing political sanctions from western countries in general, it may want to play it safe and bet on gold.

“Unlike currencies, gold cannot be declared ‘worthless’.”...

Fort Russ News

Russia Acquires Record Tonnage Of Gold

Paul Antonopoulos

See also

Among the many legacies that US President Donald Trump received from his predecessors is a "secondary sanctions" regime that allows the US to bar malign actors from most of the global economy. Under Trump, however, this sophisticated set of tools has become a bludgeon with which to threaten allies...

Russia Insider
US Now Using Dollar as Weapon Against Allies

Mark Leonard

See also

RT
US threatens to smack SWIFT with sanctions if it fails to cut off financial services to Iran

FRED Blog — Alternative money for transactions : What if gold or Bitcoin replaced the dollar

What if U.S. retail prices were not denominated in U.S. dollars, but instead were denominated in gold or Bitcoin? Paying for a loaf of bread with gold wouldn’t be very practical, as you’d need a very small speck of the precious metal. But one can imagine a system of gold substitutes, such as notes giving you ownership of a fraction of an ounce of gold, thereby overcoming the small-change problem. With Bitcoin, it’d be much easier, as a virtual currency can be divided any way you want.

Now, let’s look at actual prices. FRED doesn’t have price data on just a loaf of bread, but it does have the consumer price index for cereals and bakery products, so let’s use that. The blue line shows the evolution of the U.S. dollar price of a basket of baked goods. The red line shows the price in gold, and the green line shows the price in Bitcoin. It’s apparent that the dollar price is much more stable and has slowly increased over time. The gold price has considerable fluctuations from month to month. While the gold price seems to have a tendency to decrease, this isn’t always true, which you can see if you enlarge the sample window. As for Bitcoin, the fluctuations are extreme, even when you restrict the sample period to the past year.

What’s behind the differences? The Fed’s mandate is to stabilize prices as expressed in U.S. dollars, and this is quite apparent in this graph. The Fed does this by adapting to changes in the demand for dollars. That isn’t possible with gold, as its supply is determined by worldwide mining success, which is outside of the control of any institution. The same applies to Bitcoin, with the additional constraint that mining success keeps dwindling....

FRED Blog — FRB St. Louis
Alternative money for transactions : What if gold or Bitcoin replaced the dollar

See also

Noahpinion (2 March 2013)
Blogger smackdown: Robert Waldmann vs. David Glasner

Noah Smith

I simply cannot tell who is stupider anymore, Trump or Putin.

This just in.

Read.

Putin talks about a big new fiscal expansion, which will be "paid for" with spending cuts and new taxes even though he has unlimited spending power in ruble.

And we now find out Russia's been stupidly buying gold for years. Why??

This is a total waste of financial and real resources and an even stupider subsidy to the mining industry.

Then there's this...

Russia's empty threats about retaliation against U.S. strikes on Syria. "We'll shoot down the missiles and target launch sites."

What happens? Russia sits by passively and watches an ally, Syria, get bombarded.

Russian whining about U.S. and the West "not being fair and not subscribing to international law," as if the West could give a shit.

Russia allowing the people in Donbass to get slaughtered by the Ukrainian Nazi regime that the U.S. put in place.

Russia selling its oil bounty to the U.K, preventing U.K. residents from freezing to death, while the U.K. smears Russia with baseless allegations, false flags, etc.

In bed with China now? The two are natural enemies over the long term.

On and on.

Let's face it...Russia has no "long game." It's long game is subservience to the West and the neoliberals who are salivating over the country's vast resources.

Dumb. This country is so badly run. I used to stick up for Russia. I can't anymore. I can't support idiots, just like I am off the Trump train and now I am off the Putin train. This guy is maybe a bigger idiot than Trump.

I simply cannot tell who is the stupider of the two right now.

CGTN — China Gold keeps positive on global gold industry

China is the world's largest gold importer, producer, processor, as well as consuming nation. In 2016, the country produced 453.49 tons of gold, ranking the first for 10 years consecutively. China's gold consumption reached 975.38 tons in 2016, the first on the list for four continuous years....

ECNS

China Gold keeps positive on global gold industry
CGTN

Potentially explosive situation in the gold market.

Disclaimer: I am not a gold bug, nor do I think gold is money or any other kind of nonsense like that. However, I am a trader and when I see a potentially explosive situation like the one in gold right now I have to act on it.

Newsflash: Gold producers (a.k.a. "commercials" in the parlance of futures trading) are massively, massively, over-hedged (short) gold right now.

I started looking at Comex warehouse stocks of gold. You can get it here at this link.

You will see that there is a total of 8.6 million ounces of gold in Comex warehouses. That's equivalent to 86,000 contracts of gold. (Each contract being 100 ounces.)

The problem is, commercials are short 157,000 contracts of gold and "net short" 140,000 contracts. That means there's only enough physical gold to "cover" about 62% of their position.

It also means the market is unbelievably vulnerable to a "squeeze" if someone big enough were to undertake it and it wouldn't take much. Purchasing 50,000 contracts of gold would cost roughly $61 million. (Or, much less, on margin). Any big hedge fund could do that easily. That would put the commercials in a position where they would be unable to cover their shorts with the amount of physical gold on hand.

Too bad I wasn't running a big hedge fund. It would be fun to put the squeeze on these guys.

And by the way, why are the commercials so short, anyway? You look at the gold "curve" and a hedge one year out (long spot, short futures one year out) yields you a whopping 1.3%. That's equal to a one-year T-Bill when you account for storage and other costs. Why bother?

Yet they call these guys "smart money?" They're idiots. I can run a better gold mining operation.

This situation can't last. I remember the last time producers were so heavily hedged (short). That was in the mid-1990s when they were selling like mad at $265 an ounce. What happened after? Gold ran up nearly $1700 an ounce.

Dirk G. Baur — Central Banks and Gold

Abstract:

Central banks hold gold reserves that are designed to build confidence in fiat currency. This confidence is undermined if the price of gold falls significantly or rises significantly. Central banks thus have an incentive to manage the price of gold. Such management is evident in fixed gold prices in the early 20th century, in Central Bank Gold Agreements more recently and in the asymmetric correlation between monthly central bank gold reserve changes and gold price changes. The empirical analysis further analyzes gold lending by central banks, linkages between central banks, bullion banks and mining companies and the gold carry trade. We conclude that coordinated and shadowy gold operations by central banks are necessary for successful gold price and gold reserves management and demonstrate the power of market forces relative to central banks.

The world may not be on the gold standard any longer, but gold is still very much in the picture as far as central banks are concerned.

Gold remains the numeraire. Many people compare valuation relative to gold and historical standards.

Central banks manage gold price as a matter of maintaining confidence.

SSRN
Central Banks and Gold
Dirk G. Baur, University of Western Australia - Business School;

Inflation picking up. Wage pressures mounting.

I have been saying that wage pressures are mounting. The evidence is clear. In my MMT Trader report I have included this chart below.

This is the current. up-to-date, snapshot on Employment and Withholding Tax Deposits flowing to the Treasury. It is accelerating. This is an indication of mounting wage pressures and a significant tightening in the labor market.

Producer prices up 0.5% in today's report. Forecasts were for a 0.3% rise. Tomorrow, CPI and that will be a shocker, too.

Treasuries are a sale. Fed will resume rate hikes soon.

Dollar going down. Commodities, gold, stocks, emerging markets, all going up. That's where you want to be.

Central banks are becoming huge drivers of deflation. Fed adds to this today.

The Fed held interest rates steady today. It was the wrong decision. 

Central banks are increasingly becoming big drivers of deflation. Look at the ECB last week and its announcement that it was now going to buy high yield bonds. That was the day the markets topped out. Stocks and many materials markets turned south and have been heading down since.

The ECB has been driving massive deflation in Europe via its negative interest rate policy and ongoing asset purchases. Now it's buying high yield. That's HIGH YIELD income that would have gone into the economy. And Draghi wonders why deflation has been so hard to counter? For chrissakes, he's the one driving it.

Now we have the Fed and Yellen and her extreme cautiousness. The Yellen Fed is probably the most cautious Fed that I have ever seen. She did one rate hike back in December. That's it. Even so that was a success. It got things going. In fact if you go back and look at what happened after that December 16 hike you will see that gold bottomed and commodity markets all started moving higher. Stocks climbed, etc. Growth started to pick up. 

We've been lucky because so far this fiscal year government spending has been strong. It's up bout $90 billion over last year and last year was the strongest spending in five years. It's been the only thing that has kept us out of recession, but not by much. We're only growing at 0.8%. That's not enough..

We've been lucky with this government spending. However, we continue to face extremely strong headwinds most of those being injected by central banks and their insane deflationary policies. It's like a diseased academic dogma that's taken hold of policy and it's literally killing the global economy. Negative rates, income removal and the belief that all of that is stimulative? Utterly insane.

I have been correctly bullish since last year on the economy, stocks and risk assets. I have not been calling recession for the past three years like others because of the deficit. By the way, the deficit is now $93 billion higher than last year. Where are those people who have been screaming that the deficit is too small? Maybe it is, but at least acknowledge the fact that it's growing again. They don't. Why? Because they don't even know. They're too lazy to even look.

What we're facing now is probably a stall. I'm hoping that's the worst case. Maybe we continue to grow real, real, slow as spending continues to rise, but no acceleration. Not with the central banks fighting this recovery with everything they've got.

Let me finish by talking about gold. I've been bullish on gold since last December. That's when the Fed raised rates for the first time in 9 years. I wrote in this blog, BUY GOLD and gold's been going virtually straight up since that call. 

Last week it was all over the news that George Soros was buying gold and selling stocks. I laughed. Here's a guy who, recently at least, has been talking lots of nonsense. About China credit bubbles and global "uncertainty," and more. Based on this "rationale" it's an amateur move, buying gold. "Uncertainty" is not a reason to buy gold.

With deflation ratcheting up this could be 2014 all over again for gold. In other words, the beginning of a big decline. George better watch out. 

Had the Fed raised rates today I would have been bullish as hell, but that didn't happen and not only didn't it happen, but what came out of that meeting at least for me was a timid and confused Fed. Yellen's frightened and confused as hell. This is probably what a Hillary Rodham Clinton presidency will look like. Immense caution when it comes to the things we really need and bold, irresponsible action on the things we don't need. Like wars.

Great.

Anyway, I'm not saying dump stocks. Not just yet. The spending could pull us through. Barely. But right now it's all we got.

Druckenmiller, another billionaire hedge fund guy who knows jack shit, just gave you the green light to buy stocks

Another guy who's probably more luck than smart. Yeah, he's a billionaire, don't ask me how. This is the guy who was screaming, for years, that we were going to get hyperinflation because of "money printing by the Fed." And he runs some organization reduce America's debt. Another dangerous, educated, fool.

Well, he's back now saying the bull market has "exhausted itself."

Listen...

“I have argued that the myopic policymakers have no end game,” Druckenmiller said. "They stumble from one short-term fiscal or monetary stimulus to the next despite overwhelming evidence that they only produce a sugar high and grow unproductive debt that impedes long-term growth. Moreover, the continued decline of global growth despite unprecedented stimulus the past decade suggest we have borrowed so much from our future and for so long that the chickens are now coming home to roost."

Stumble. Sugar high. Chickens coming home to roost.

Jesus. WTF????

Why? Because it's 3% from an all-time record high?

He blames it on a "radical monetary experiment."

And what is his brilliant investment idea? Buy gold of course.

This is a 100% green light to buy stocks. We can all laugh and look back on this moron's "call" in six months.

Buy stocks. Fade the idiots.

#Fadetheidiots