HOW TO VALUE GOLD?

Now that gold has broken out into new all time territory the question remains: How do you  value gold?

How high can it go? 

How far can it fall?

Is it fairly valued here?

You can not answer this question without understanding the very first principle of gold valuation: 

GOLD NEVER MOVES.  THE PRICE OF GOLD OVER TIME IS ABSOLUTELY CONSTANT AND HAS BEEN SO FOR THE LAST 6000 YEARS OF HUMAN HISTORY from about 3500 BCE to about 1973 AD.

What moves NOW - since 1973 -  is the purchasing power of the Reserve Currency; the US dollar.

THE US dollar's stability was originally  pegged A) to NATO and B to the Petrodollar, the two underpinnings of a unipolar world.   Furthermore the US Treasury was the reserve asset of choice in a world wherein the US ran a trade deficit and a fiancial account surplus, which enabled other countries to keep buying our debt and financing our liflestyle.

At the same time the dollar's stability was regulated by the LBMA and COMEX.

NOW: NATO is dead.  The Perodollar is all but dead.  The US has weaponized Treasuries so nobody wants them anymore.  The world has become multipolar.  And the LBMA and COMEX have been neutured by stand for delivery Contracts as the world's reserve banks sell US Treasuries and load up on gold.

At the same time the US debt has spiraled completely out of control.

And it is a about to get much worse with a new round of tax cuts.

The "savings" from geting rid of some government workers will add to the debt as they will all have to go on the dole rather than providiing essesntial services.  And if there is no dole, the savings will simply go into "Sovereign wealth funds" which buy Crypto and other useless assets.

So in this new world what is the value of GOLD?

Nobody knows.

All you can know for sure is the direction things are moving.

And right now things are spinning faster and faster towards a world where nobody want Treasuries (except domestically as a short term hedge against recesssion) and everybody wants Gold.

Invest accordingly.

POP QUIZ; ANSWER THIS AND YOU WILL UNCOVER THE SECRET TO INVESTING:

 

QUESTION:  WHAT ARE  THE TIER ONE RESERVE ASSETS THE GLOBAL CENTRAL BANKS ARE ALLOWED TO HOLD UNDER BASEL 3? 

ANSWER:  US TREASURIES AND GOLD

QUESTION: UNDER THE CURRENT ADMINSITRATION WHICH CENTRAL BANKS ARE ADDING US TREASURIES AS THEIR TIER 1 RESRVE ASSET:

ANSWER: ONLY THE US CENTRAL BANK

QUESTION: UNDER THE CURRENT ADMINISTRATION WHICH CENTRAL BANKS ARE ADDING GOLD AS THER TIER 1 RESERVE ASSET?

ANSWER: CHINA, RUSSIA, POLAND, INDIA, GERMANY, FRANCE, AUSTRIA, INDONESIA, ITALY, SWITZERLAND, NETHERLANDS, THAILAND, SAUDI ARABIA, KHAZAKSTAN, UZBEKISTAN, TURKY, SINGAPORE, UAE, EGYPT, QATAR, BRAZIL, VENEZUELA, CHILE, ETC ETC ETC

NOW WORK INDUCTIVELY AND FIGURE OUT WHY THIS IS SO.

THEN YOU TOO CAN INVEST LIKE A BILLIONAIRE - OR A CENTRAL BANK

GOLD: US VS THE REST OF THE WORLD: ONE OF THESE THINGS IS NOT LIKE THE OTHERS

 

Central banks stay bullish on bullion in January

• Central banks reported 18 percent of net purchases at the start of 2025 
• Emerging market central banks remain at the forefront of net buying, with Uzbekistan, China and Kazakhstan the top three buyers 
• Poland and India also continue to accumulate gold reserves 2025 – both central banks added 3t to their respective reserves in January

China sees record gold ETF inflows in February, jewelry demand should stabilize as the economy improves – World Gold Council

“European funds saw their largest monthly inflow since March 2022," with strong demand in the U.K. and Ireland dominating trading activity. Regional ETFs added 39 tonnes of material to take total holdings to 1,327 tonnes. AUMs rose $3.4 billion, to $120 billion.

Gold breaks records, US ETF retail investors pull back—inflows crash 47%!

   Someone is missing the boat,  You decide who it is.

GOLD MAKES ANOTHER ALL TIME HIGH - EVERYONE NOTICES BUT AMERICA

Gold  made another all time high, and another all time closing high today.  Still nobody in the United States seems to notice or care.  Everybody here is still looking for a bottom in risk assets.

But all around the globe everyone else is buying gold.

Central Banks around the world are buying gold because ithe only Tier One Reserve Assets are gold and US Treasuries.  And nobody wants to hold US Treasuries any more.  There is no longer any guarantee the debt will be honored.  Everyone must prepare for the possibility that it will be seized and confiscated, or simply defaulted upon at the whim of our chief executive.

That may seem absured to most Americans.  The problem is it doesn't seem absurd to the other central bankers of the world.  That's why the comex is being overwhelmed with Stand For Delivery orders and the price of bullion is rising.

Similarly Gold is the only monetary asset that has no counter party risk.

Think about that.  It can not be hacked or hypothicated or confiscated or diluted or defaulted upon.

And is has a liquid and easily disvoverable value anywhere in the world.

That gives it a pretty special status in today's Kleptocratic Economy.

It is the citizens' only monetary defense against the State.

If you don't think that is valuable right at this moment, then don't buy it.  Now.

You can just as well buy it later.  Though it may be much harder to find.

THE BULLION PREMIUM STARTS TO MOVE - DON"T BE THE LAST ONE IN

1 oz American Gold Eagle Coin BU (Random Year)

Top Pick 

$3,047.89

GoldPrice. 
WHERE THE WORLD CHECKS THE GOLD PRICE

Holdings 

2,911.17

-9.02

-0.31%

Premium over spot gold: %4.6 

The above is the basic gold price for a quantity of US Gold Eagles at Apmex the largest US bullion dealer. The premium in historical terms is still quite low.  This tells us that despite the impressive run up in the gold price, very few Americans are buying gold.

It also tells us that this is currently changing.  The spread has widened a almost 2 percentage points in the last 2 weeks.

The US domestic economic situation it rapidly deteriorating.  All those who thought that Tarrifs were simply a clever bargaining ploy have been proven wrong.  They are now premanent policy.  And they accomplish three important things for GOLD.

1) They are highly inflationary, as they are paid for almost entirely by American business and consumers.

2) They are a massive drag on business activity and economic growth.  These two factors spell Stagflation, which has entered the vocabulary of almost every economist not employed by the current administration.

3) Perhaps most important for Gold: Tarrifs weaponize the US dollar thus destroying the usefulness of the US dollar as a reserve currency. 

Even as the US was running a current account deficit (trade deficit) we were also running a commensurate financial account surplus.  This meant that while other countries sold us goods they also bought the US dollar which they then recycled into US DEBT thus financing the US lifestyle, keeping goods cheap, inflation under control and growth humming.

This game is DEAD.

And the only beneficiary is gold.  Every Central Bank in the world now understands this.  The central banks of the world are selling US debt and buying GOLD.

At some point the US consumer will catch on to this new game.  Then Gold will really move.

Don't be the last to catch on.

 

\\\\

 

THE NEW GOLDEN AGE: THE AGE OF GOLD

If this is a GOLDEN AGE I would think that term should be taken most literally, the one asset everone should hold is gold:

A Trade War is bad news for  everyone in the global economy.  I know there a many who would wish that it were otherwise.  But trade wars slow global growth and raise global prices.  That is true for every economy.  Especially the United States because so many of our companies are multinational.  And so many of our products of choice are imported.

Every dollar raised by Tarrifs are raised from the American Consumer.  This makes everyone who is not a billionaire poorer.  Billionaires are excepted because it makes no difference to them if a car is 40 or 50 or 60 or 150,000 dollars.  It's just not an amount large enough to matter.

If you are not in that catagory, you need to protect yourself now.

If you don't believe me look at the data:

ISM: The new orders index fell to 48.6 from 55.1 in January. The prices index jumped to 62.4, up from 54.9 in January.

Atlanta Fed GDP revision; Last wednesday Atlanta Fed GDP estimate stood at %2.5.  Friday it was revised to NEGATIVE %1.5.  

Unit Sales for consumers have been decreasing for the last year.

Consumer sentiment has fallen sharply the last 2 months:

Bloomberg: Consumer Sentiment Plummets to 15-Month Low Amid Tariff, Inflation Worries

Inflation expectation has increased sharply the last 2 months.

Bloomberg: US Consumers Long-Run Inflation Views Rise to Highest Since 1995

US consumers' long-term inflation expectations rose to the highest level in almost three decades on concerns President Donald Trump's economic agenda.

Annualized CPI currently stands at 4.8 percent.  (not close to the 2 percent the Fed needs to start easing)

Credit spreads have started to widen noticeably:

Bloomberg: "Global corporate bond spreads have widened for eight trading sessions in a row, ending a period of remarkable tranquility, as investors start to turn defensive amid fears about the impact of tariffs."

And today the ADP employment report which is much more reliable than the BLS report showed 77,000 new jobs created in Feb.  That is against an estimate of 140,000.

It's early days in this Trade War.  The effects are only just beginning to be felt. Wait until the tax cuts blow a massive hole in the budget.  Then our debt requirements will blow out at the exact same time our economy is slowing and prices are rising.

That's when you'll really need gold.  But by then it may be difficult to find.

ISM GIVES FIRST CONFIRMATION OF STAGFLATION:

 

Institute for Supply Management’s Purchasing Mangers Index slipped to a reading of 50.3 in February, below economists' expectations at 50.5, according to FactSet. The new orders index fell to 48.6 from 55.1 in January. The prices index jumped to 62.4, up from 54.9 in January.

This if the first real confirmation that the regime of firing, deportations, and Tarrifs are creating an environment of slow growth and high prices.

Throw in an extra 5 trillion dollars of new debt from tax cuts for the top 1 percent and you get the perfect storm.

This is otherwise called STAGFLATION.

It is impossible for the Fed to combat stagfation.  If they attack the slow growth by loosening monetary conditions,  inflation carreens out of control

If they attack inflation by tightening monetary conditions, the economy could spin into a depression.

This wound is entirely self inflicted.

Yet once the geers are in motion it is very difficult to stop them from griding on into oblivion.

Of course, there seems to be no interest in turning things around.  According to the current administration there is no inflation except that which was caused by the previous administration, and growth is entering into a GOLDEN AGE.

Sounds good.  If you're holding a cellar full of gold.