GOLD FLOWS EAST: US INVESTORS REMAIN CLUELESS

 

GLD, the major US stock tracking the price of gold has been rising steadily, to new highs week after week.  And week after week US gold investors have been pulling money out of the fund.  So accordingly the fund divests gold holdings. 

CEF the Sprott gold and silver fund most favored by US investors is trading at a 5 perent discount to NAV.  When US investors are bullish on gold the fund can trade at a 15 percent premium or higher.

At the same time gold funds in China are selling at a 30 percent premium to NAV.  This reflects the Chinese public appetite for gold purchases.

And the Eastern Central Banks are buying hand over fist.

I track gold purchases of all sorts of semi-bullion collector coins: Limited central mint runs of coins that were either circultion coins like French 100 franc gold angels or Peruvian 100 soles gold coins, or coins intended primarily as limited run bullion like certain Chinese Pandas or British Mint collector bullion, and many pieces that have interest for Asian collectors have gone crazy in price in the last year.

Gold is flowing from West to East.

And US traders and technical analysts are bewildered.  Gold keeps going up in spite of the fact that yields are also going up, stocks are going up, and nominal inflation is coming down.  And the charts have gone hyperbolic.

Nobody here gets it.

Yet.

The fact is everybody in the world can see that the US is spinning out of control in terms of debt, debt service, debt refinancing, and there is no Political Will to do anything about it.

The whole world can see that either outcome in this election will lead to more debt and less Poltical resolve to address it.  Because the both candidates have already pledged to increase the debt.  Biden through massive social spending and Trump through tax cuts, tarrif wars, and dropping rates back to zero.

Both are a recipe for greater inflation.  Though one leads to stagflation and the other leads to hyperinflation.  

So a death by a thousand cuts.  Or death by a massive blow to the head.

Nobody in the world is waiting to find out which, because it doesn't matter.

The Fed is in a box.  They can't raise rates without provoking a debt crisis.  They can't drop rates without stoking inflation.  Meanwhile, they're losing control of the long end of the rate curve.

The billionaire class doesn't care.  They get richer either way, because inflation leads to asset inflation.

If you're not a billionaire and you care, think about protecting yourself the way the rest of the world is doing.

Sooner or later you'll have to.

Sooner is probably better.