Speaking of a developing stories, thankfully precious metals took a well-earned breather last week, after a hard run-up in recent times.
As we noted two weeks ago, it was Gold producers that led the spot price down.
This sure would have given the old “Bare Foot” type non-believers some relief and, perhaps, belief that it was all just a dream, again.
For most mainstream financial commentators, the “store of value” concept, as it relates to gold, is just too hard to understand; especially if one’s definition of economic history is limited to the last 50 years.
Cripes, even Warren Buffets Berkshire Hathaway has joined the gold dots.
Their (Berkshire) latest filing included further selling of US Financials and the commencement of a 20 million share position in Barrick Gold (formally the world’s largest producer), which was valued at $564 million at the end of the period.
Opportunistic? Maybe. Do we know how far Gold could correct? No, steadied at USD1950 pretty quickly though.
Do we know whether there will be much daylight between the next share market sell off and the next round of trillions? Yes, not much daylight at all, it will be almost immediate.
Do we find it amazing that share markets can be this close to all-time highs during an evisceration of global GDP? You bet.
And as rates move lower and lower we are wondering whether savers and retirees are looking forward to some negative interest rates to enjoy with breakfast.
We’ve seen many chase riskier assets for a chance to lose 20%, permanently, for an extra 1% in income.
It’s no wonder investors continue to ponder how this ends, or, if the current monetary madness is even sustainable.
We certainly have some theories we look forward to sharing over the next few months.
There are some very smart macro analysts that call the US 10yr bond yield the absolute “Maginot Line”, once it goes negative, it’s game over. Governments will at this time lose, or will have lost control.
As usual, markets will “pick this up” this before it happens. The question will be, how will one be positioned when this happens?
So far on March 9th, it bottomed at 0.31% and is currently at 0.55%.
All good for now – The US Fed is the largest buyer of bonds anyway. What is happening in Bonds has NOTHING TO DO WITH REAL ECONOMY.
When one takes real – i.e. inflation adjusted – rates into account, the “Maginot Line” is already crossed. Did someone say inflation?
NOT THE REAL ECONOMY
This next chart below is something we’ll have a closer look at in coming weeks.
It’s obvious that “Gold” investors use Gold Price linked ETF’s like GLD to “invest in gold”.
Well, if you’d like a claim to an ounce, or part thereof, stored in a HSBC London vault, possibly controlled by whomever, then go for it.
As we illustrated above, gold miners get no love, yet.
Can you imagine how little money it will take to really get things going for precious metals and miners, in the context of investable global assets, should confidence in the current system continue to erode (how is there any left).
Quite possibly, as illustrated below, the party for good quality miners is only just getting started.
Anyway, we’ve had some money printing this year.
When all this finishes, people will be so distrusting of authority it’s hard to see how any replacement “currency” cannot include the 5000 year member, precious metals.
Oh, there’s an election coming too.
All the best.
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