SEASONAL GOLD

 

Seasonally, gold peforms as it does because of the Chinese and Indian wedding and festival seasons which provide a massive support of physical gold buying,

There are all sorts of charts you can look up but the one above provides a pretty good summation of stronger and weaker periods for gold - based heavily on the Chineses and India physical gold buying seasons.  That's about 3/8th's of the world's population that stores its wealth and passes it along from generation to generation in thre form of gold.

You can simplify this down to say that Feb thorugh June and into early July is the traditional weaker period.  August through January is the tradtional strong period.

Beyond this there is the eight year cycle with three strong up years and 5 down years that many technical analysts follow.  The beginning of the new technical up cycle is January of 2025.  Some eminent technicians like McClellan believe the yearly parameters are worth sticking to, others like Zulauf believe the upcycle has already begun here in 2024 and that it can last more than three years.

Obviously we've been in a strong upcycle since oct of 2023 and a pronounced upcycle since January of 2016.  And an overall upcycle since 2001 - and a permanent upcycle since Nixon took us off the gold standard in 1971.  Long term charts bear all of this out.

There are many secular factors that outweigh the Eastern festivsal and marriage buying season that affect these cycles.

First and foremost, without the gold standard the US has been free to churn out as much debt as it wants as it can always be paid back with printed dollars.

But a slew of secualr developments have had a huge effect on the gold price more recently.

Among them:

1. Central Bank buying has shifted heavily away from US dollars and towards gold especially in the last few yars.  This is because of A) the massive buildup of dollar denominated debt and B) the weaponizaion of the dollar through Tarrifs, Sanctions, and Confiscations.

2. Gobal Inflation fears which have exploded in about 2016 and went into overdrive after covid.

3. Faith in integrity, fairness, and competence of major Dollar/Euro/Yen driven governements that dominate western economy.

4. Fears of war, trade war and violence fueled by income inequality and the morally bankrupt demagogues seaking to profit from this inequality which has led the United States to the brink of civil war, while hot wars rage throughout the Middle East and Eastern Europe.

5. De-globalization which is a highly inflationary secular movement bound to last decades.

All of these trends are intensifying by the minute. 

But when you add these trends to a technical backdrop which is shifting powerfully to the advantage of gold and a coming commodity supercycle and you get the potential for a powerful upward move in the price of gold that could/should last at least through 2028.

Technically the better season is about to begin for gold after perhaps one more selloff to scare the weak holders out of their positions.

So you get the Eastern buying season somtime this fall and that coincides with the most extraodinarily incendiary election season since the 19th century with two of the most unpopular and underqualified candidates in the history of elections,

This  coincides with the beginning of the powerful 8 year technical upcycle in gold.

And add to this the most technically overbought stock market in history which can provide little competition for the hard assets market.

And you get perhaps the most powerful support for an upward gold move in our lifetime.

Of course, all of this could fail and gold could fall.  Nothing is certain in life.  

But the current odds are really in the favor of the gold buyer

GOLD and the RARE COIN MARKET: Market report

 

A ‘Petition Crown’ of Charles II has been sold for CHF 949,375 ($1 million) to become the most expensive British silver coin ever sold at auction. The coin was included in a joint sale on May 8, 2024, by Numismatica Ars Classica, Classical Numismatic Group and Numismatica Genevensis 

The rare coin market - like the gold market - is being dominated by the Eastern countries.  Japan and China have both become voracious buyers of high grade ancient and European Rare coins and medallions. 

The US rare coin market it dominated by US buyers - as always.  But the Ancient and European markets - especially the coins of Great Britain in high grade has been very hot for over three years  now, principally because of Eastern Buyers.

Amercans have been moving into Ancients too.  But they have been quite slow to pick up on the the hot European areas which right now include (but are not limited to):

Gold Coronation medals: British, French, German, Holy Roman, 

Gold 5 guinea and 5 pound pieces.

Gold Triple Unites.

Silver  Victoria Gothic Crowns

British and French proof coinage and essais.

Any coins of particular rarity and beauty like the British Petition Crown.

Large Gold medals, Salvator Mundi medals, Bank Portugalosers, multiple ducats of the German Kings and Holy Roman Emperors.

Italian presentation multiples.

in Ancients the popular areas right now are:

Gold Alexander Staters

Gold Kroisos Staters

Gold Oktodrachms 

Large gold and silver pieces of Arsinoe.

Gold Julius Caesar Aurei

Very High grade gold and silver 12 Caesar coins.

Silver Decadrachms.  Especially of Kimon.

High Grade Signed Tetradrachms - especially of Eukliedes.

These are only some of the hottest areas.  Right now the emphasis is on technical grades.  The temptation - especially for novices - is to buy the holder rather than the coin.

The holder is an excellent starting point.  But when dealing especially with ancients the holder will tell you very little about the long term value of a coin which is also dependent on Beauty, Rarity, and Historical Importance.  And the the holder can shed little light on these attributes.  Nor is it supposed to.   It supports authenticity and state of preservation - both crucial starting points.  So Ancients is still an area for experts - or at least those who have put some time into study.

On machine made modern and early modern coins the holder is more instructive, as coins tend to be more uniform.  But and MS61 gold coronation medal maybe 61 because of an invisible rim knock and some light cleaning marks that can hardly be seen when you turn the medal in the light - or perhaps it is MS61 because of some nasty marks right on the King or Queen's face.  It makes a difference to many collectors.  Some 61's are quite attractive.  Some 58's are quite attractive.  Some are not.

And as always, the best opportunities are in coins and medals of great rarity, beauty and historical importance that have not yet found wide popularity.  Because over time what is popular shifts.  

What is historically important does not.

Will the dollar be replaced by a Gold Backed BRICS Currency?

 

Will the dollar be replaced by a Gold Backed Brics Currency?

This has become a hotly debated issue. It has huge implications for the ability of the US to fund and service its massive debt.  Thus it has huge implications for US inflation.

This massive debt and the political stupidity of weaponizing our greatest financial advantage in the world, and thus turning our financial clients into our financial enemies is what is at the root of the problem.

The answer however, is that the dollar can not be replaced as a debt instrument because there are many hundreds of trillions of dollars in dollar denominated debt already in the world when you take into account the Eurodollar market.  And Quadrillions of dollar denominated debt when you take into account the OTC derivatives markets.

How do you replace that?  You can't.

HOWEVER - the real issue is what do GLOBAL CENTRAL BANKS use as reserves given the debt and weapnonization of the dollar?

The debt makes the dollar a depreciating asset.

The weapnonization makes the dollar a completely unstable asset.

The massive instability of our entire political class is the nail in the coffin,

The answer is upon us.

The GLOBAL CENTRAL BANKS are in the process of selling Treasuries and buying gold.  This has been going on at an increasingly faster pace for the last seven years.

Then the issue is for large internationals commodity trades is what currency do you use if not the dollar?

Do you really want Yen or Rubles or Yuan or even the Euro?

Or do you want something that has held its value and even appreciated against all other commodities and currencies of the the last 50, 100, 1000 years?

That would be gold.  At least sufficient gold in the Central Bank Reserves to assure that the currency will be stable enough against the traded commodity.

Or preferably a gold backed unit of settlement.  A BRIC settlement currency for example.

Commodities are already bein settled outside the dollar in bilateral trade agreements.  It won't be long before a settlement currency is in use.

This is real and happening.

Americans are not buying gold.  Yet.

The rest of the world is buying gold for these reasons.

This is a trend in its infancy.

If  you think you've missed out on the move, think again.

Because when Americans catch on, the trade will take its full force.

What could dethrone the dollar and send the US into economic crisis?

 

Having the world's reserve currency for a long period of time, as the US has had with the dollar since the Second World War, gives the impression that all the benefits that accrue from this situation are premanent.

There are many who still feel this way.

In spite of an aggressive global central bank program of buying gold and selling US Treasuries.

In spite of the loss of the petrodollar.

In spite of China and Russia - and others - engineering bilateral trade agreements around the globe for commodities that settle in currenies outside the dollar.

YET - all this could amount to a very gradual process of dedollarization that takes decades and would not provoke any crisis here in the US as we'd have ample time to deal with this shifting landscape through intelligent policy.

UNFORTUNATELY the thing that would greatly hasten this process - and tip the US into an economic debt crisis - is the economic weaponization of the dollar by ignorant US political regiems.

AND UNDFORTUNATELY this process was begun suddently in 2016 with a regiem of Tarrifs, and then kicked into overdrive in 2020 with Sanctions, confiscations and the removal of Russia from the Swift system.

The problem all of these aggressive economic moves that may make sense in the very short run is that they provide massive incentive for other countries to aggressively dedolarise.  So a process that could have taken decades is transpiring in years and could possibly tip the US into crisis at any time.

China, Russia, Iran, North Korea, the oil producing middle east Countries and South American Countries constitute a huge block that doesn't want to be hostage to unstable and aggressive US financial regiems.  And add in most of commodity producing Africa, as well as the Stans that are rich in uranium and oil and gold and add in India which would like to modernize in a western way but is geographically situated within the other Block and dependent on them as trading partners - and you get a huge area of the world actively engaged in dedollarisation.

Some like India and Saudi Arabia are moving tentatively away from the dollar - others like China and Russia are moving quickly.

Every Sanction, Every Tarrif, every confiscation speeds up the dedollarisation process.  Because every country realizes they could be next.  

And most unfortunately we have an election coming up that pits two cantankerous old men who are competing to be the toiughest and most belligerent in ways that are guaranteed to to do the most harm to the dollar.

This deosn't mean the dollar itself will fall in value.  It does mean our ability to fund our debt by printing dollar denominated treasuries will become much much more expensive.  It does mean our rates will rise while our debt is spriraling out of control. 

And it does mean the inflation will be a virulent problem for a very long time.

GLUE: Dollar as Reserve Currency.

 

The Glue that's holding the entire structure that is the United States of America together is the dollar serving as the world's reserve currency.

What this means is that the US is the only country in the world that can print money to pay back its debts.

Every country can print their local currency to buy there Government debt.  Though this is highly inflationary.  But they can not print US dollars to pay back internationally settled US dollar denominated debt.

We can.

The advantage this gives us economically is huge.

This advantage is predicated on the stength of the major US institutions: The Fed and depth of the US financial markets for issuing and controlling debt.  US Judicial System for settling debt disputes.  The US army for enforcing disputes.  The US government for maintaining an even handed and mature grip over those who control and regulate threse other institutions.

It's a delicate balance.

Because of the advantage of the Reserve Currency and the great depth of the Financial Markets we have had a huge leeway with the rest of the structure.

But the rise of the China/Russia/Iran block that has made great inroads with oil producing nations in the middle east and South America, and has bought up much of the commodity producing areas of Africa is pressuring the reserve status of the dollar for the first time.  Bilatteral trade agreements for settling major commodity trades outside of the dollar are proliferating.  This greatly lessens the need for other countries to buy US tresuries.  And this at a time when our debt is exploding so we need to issue ever more Treasuries.

AND just as this is happening - here in the US we have bcgun a massive home grown attack on the institutions that support the dollar and our entire debt structure.

Our Governement is split into two parties that have no interest in governing other than to attack each other and their constituents.  Faith in the Governement stands at about 15 percent.  Other countries notice this astonishing instability.

Our Judiciary is attacked daily - by our own Government officials!  Faith the in the judiciary here in the US stands at about 35 percent and declining quickly.  Other countries notice this alarming instability.

The army is still strong but public appetite for using it for anything is at an all time low.  Other countries notice.

That leaves the Fed and the depth of our Financial/Debt markets.  So far, faith in the Fed is holding.  Though there is serious talk of turning the Fed into anotther partisan institution.  Some are beginning to claim that it already is.  

The big problem will come when Inflation - which is already well into the process of destroying the viability of the bottom 90 percent of the US economy - gets worse - and at the same time a debt crisis provoked by higher rates and massive debt gets out of control.

It's bound to happen at some point.  It almost did with SVB but the Fed bailed everyone out and got away with it again.  But as some point the bailout will be so big and so visible and so obviously the cause of a new round of even more virulent inflation, that faith in the Fed will crack.

Once that goes, the dollar as reserve currency will be in real trouble.

Then we'll see how long the center can hold.

THIS TIME IT'S DIFFERENT

 

AGGREGATE COMPOUND INFLATION RATE OVER THE LAST FOUR YEARS: %25

https://truflation.com/methodology

The paper currency/ debt based Financial system is reaching some sort of critical mass.

The dumbest thing you can ever say in economics is "this time it's different."

But this time it's different.

Because: We've reaching a point in the Global Debt system where all the old remedies no longer work, they just make things worse.

Case in point: Supply Side Economics.  When introduced in 1980 the US was in surplus and the top tax bracket was still 70 percent.  So cutting tax rates and regulations and using debt to create new business all made sense.

Now the top tax rate for many businesses and many of the top 1 percent of the country is ZERO.  because there are so  many loopholes and exceptions, deductions, tax havens, and complex trust structures. 

And the US Total debt is 120 percent of GDP.  And the global debt structure is 350 Trillion dollars.  About a third of that is dollar denominated if you take into account Eurodollar debt.

So what happens now when you cut taxes?  You go farther into debt.

What happens now when you cut regulations.  Goods become more expensive which drives the economy farther into debt.

What happens now when you lower rates to help the economy?  You go farther into debt.

A big problem is that the smart guys at the top of the Financial Industry have figured out how to profit off of debt.  It doesn't have to be productive any more.  The more of it, the more money can be made off it a the very top of the lending pyramid.  

And the more of it the less the currency is worth in terms of buying real things.

We are there.

So what's the solution?

There isn't one.

Sorry.  

That's the reality.

Not until there's a new currency system. Which won't be any time soon.

The real solution is protect yourself.  Because nobody will  do it for you.

Understand this debt based Financial System.  Invest accordingly.

THE GLOBAL FINANCIAL MARKET IS THE NOW THE GLOBAL DEBT MARKET

 

Private Equity is  now Private Lending.   Investment Banking is now Debt refinancing Banking.  And the business of the Central Banks is Debt issuance and management.

The Debt Financing and Refinancing Market is the driver of global financial activity and it dwarfs the Real Economy in size and as a driver of Global Liquidity.

There is currently 350 trillion dollars of global debt with an average lifespan of about 5 years.

Every year there is about 75 trillion dollars that the financial markets need to refinance.

For perspective: Global GDP is about 120 trillion dollars.

Debt refinancing has replaced Capital Investment Financing as the major activity of the Global Finsancial Establishment.  

The Debt Finance industry is three times the size of the Global Real Economy.

We've shifted from a world of New Capital Raising to Debt Financing and Rollover.

The question is: what is the global Balance Sheet supply of Capital necessary to roll over this ever increasing amount of debt?

Or where is the Funding Liquidity for all this debt coming from?

1) Central Banks create liquidity by creating money out of thin air and injecting it in various ways directly into the economy.  (this is not just about Balance sheet expansion or shrinkage or interest rates.  There are a myriad ways for central banks to inject liquidity.  Think of the massive funding facility for SVB and many other undercapitalized banks.  Or think the Repo market)

2) Collateralized loans from Private Investment Banks are the driver of the new Private Lending Facilities.

3) Traditional Commercial Bank lending which has come under massive pressure as the capital requirements have been raised after the banking collapse of 2008.  Many commercial banks are still undercapitalized.

The Financial Capital available to fund debt rollover is about 170 trillion dollars.  So about half of the debt in the system.  

The real economy is still driven by innovation, productivity, enrepreneurship. drive etc.  Just as it has always been.  But the Liquidity available to drive economic activity comes from the Debt Markets.  The debt market are the Financial Markets.  So the Real economy is dependent on the Financial economy rather than the other way around.

This is new.  This has happened over the last 10 years or so.  And it is accelerating at an alarming pace.

In order to keep the economy moving you need an ever greater amount of debt added to all the debt that needs to be refinanced.

AND THE KEY IS THIS: DEBT IS NEVER REPAID.  

IT IS SIMPLY ROLLED OVER.  

THE MORE THERE IS THE MORE YOU NEED TO GENERATE TO FINANCE THE REAL ECONOMY WHICH NECESSARILY SLOWS UNDER THE BURDEN OF DEBT REFINANCING.

So the real economy slows as the Debt/Financial econ0my grows ever larger.

Think about that.  Then add the costs of the current economy that are growing while debt is growing and real economic activity is slowing:

1) an ageing population that needs to be serviced through massive Medicair, Medicaid and Social Security payments.

2) Growing Global Tensions - wars and trade wars - that necessitate ever greater Defense Spending.  and Tarrifs that make all goods more expensive.

3) the Politcal reality that no politician will ever have the guts to raise taxes to pay for anything because it's political suicide.  In fact politicians brag about Tax cuts which add ever more debt to the deficit, fuel inflation and slow the economy (which was not the case when the financial economy was investment based rather than debt based).  Just as no politician will cut transfer payments to their elderly constituents because they are the sector of the electorate most likely to vote.

4) US treasuries are now being sold globally at the margins rather than bought.  The current instability in the United States works against the treasury market that is our major economic advantage in the global economy.  This makes it ever harder to finance our own debt burden.

5) MOST IMPORTANT: The effect of compound  interest means that now Interest Payments in the US are more than a trillion dollars a year and growing exponentially.

So how do you fund all this?  (ha ha ha)

Print money to buy the debt.  That is the only answer.  

Monetize the Debt.  

Which devalues all paper money.

Which makes inflation intorlerable for all who do not benefit from asset inflation.

It's a one way process with no end game.

The only true protection over time is Gold and Hard Assets.

That way you become one of those who benefit from Asset Inflation.

That is the only protection.