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Category: Bullion Bulletin

Bullion Bulletin: Gold doing its job

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The first half of 2022 was rotten for investors in most assets – except gold, which according to various commentators is “doing what it’s supposed to do” which is preserving its value “and your capital”.

Warning lights in late 2021 that inflation was getting a firm grip in many places started to flash with increasing frequency in early 2022, thanks to the Russian invasion of Ukraine. The UK is probably headed for 11% inflation this year, according to the Bank of England. Turkey’s latest inflation is close to 80%. The multi-trillion Dollar ‘stimulus’ give-aways by governments to bat away the possibility of a global recession flooded economies with ‘free’ fiat money (and raised government debts) tilled the soil for global inflation. Russian tanks (and Western sanctions) sowed its seeds. The plants have grown and the harvest is being gathered.

That provides the context for the first half of 2022 – investors knew that the major central banks would belatedly get around to pushing up interest rates to try to quell inflation. Their biggest fear became that the medicine for high inflation – high interest rates – would taste so bad that it would bring about a recession. Thus, they got out of just about everything except those assets clearly in strong demand and short supply – crude oil, natural gas, wheat, commodities generally – and the supposed safe haven, the US Dollar. But gold ended the first half of the year just 1.2% lower in US Dollar terms and was up an average of 5.5% against a basket of nine currencies (including the Dollar). Those assets perceived as having high risk, such as tech stocks, were the worst performers. In the second quarter of this year Tesla’s share price suffered a 38% decline, its biggest drop since its 2010 public flotation.

US stocks had their worst first-half drop in 50 years, with a loss in market value of more than $9 trillion since the end of 2021.

Will the second half of 2022 be any better, or will losses get worse? That very much depends where people think we are in the business cycle – still in the downswing or poised for an upturn? Many economists and business executives envisage a recession ahead. Robert Dent, a former analyst with the New York Federal Reserve, told Bloomberg that the “good news is there’s a limit to how severe it’s going to be… The bad news is it’s going to be prolonged”. He foresees a contraction of about 2% that begins in the fourth quarter of this year and lasts through next year. There have been a dozen recessions in the US since World War 2, lasting an average 10 months, the economy contracted by 2.5%, unemployment rose about 3.8% and corporate profits fell around 15%.

The major central banks – the European Central Bank, the Bank of England, and the US Federal Reserve – seem more united than for many months in recognising the need to raise interest rates to stifle inflation. The danger is that they may lag events and make money and credit more expensive as their economies are already weakening. In three-quarters of all market recessions since that of 1976 the value of gold has increased significantly, while the S&P 500 has sunk.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

Bullion Bulletin: Russia’s gold exports

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It might come as a surprise but the G7 group of industrialised nations (Canada, France, Germany, Italy, Japan, the United Kingdom and the US) has only just got around to imposing a ban on imports of Russian gold. The G7 used to be the G8; Russia was kicked out of this informal yet influential club in 2014 after a previous violation of Ukraine’s territorial integrity.

On 26 June, as the latest G7 summit was starting, US President Joe Biden said in a tweet “together, the G7 will announce that we will ban the import of Russian gold, a major export that rakes in tens of billions of dollars for Russia”.

The gold price barely reacted, largely because the London Bullion Market Association (LBMA), which regulates the world’s biggest and oldest market for trading physical gold and silver, had already suspended dealing by all six Russian gold miners and refineries, on 7 March this year. The G7’s ban on Russian gold imports looks “largely symbolic” said Warren Patterson, head of commodities strategy at ING group.

Russian gold became a pariah in Western markets after its invasion of Ukraine, although mystery lingers over more than three tonnes of Russian gold imported into Switzerland in May, almost all of which was marked as being for refining, according to data from the Swiss Federal Customs Administration. The Swiss Association of Manufacturers and Traders of Precious Metals (ASFCMP) said that none of its members was responsible for the imports. It gave a statement in which it said “dubious” gold “has no place in Switzerland”. The gold arrived from the UK but had a Russian ‘destination of origin’. In 2019, the UK was the destination for about 90% of Russia’s gold exports. In 2021, Russian gold exports were worth £12.6 billion ($15.45 billion). The export ban applies to newly minted or newly refined gold, not to previously exported metal.

In 2021, Russia produced about 363 tonnes of gold, and has tripled its output in the last 20 years. According to the US, Russia had prior to 24 February gold worth $140 billion (20% of its total reserves) in its central bank. It has tripled the gold it holds since 2014.

The G7 suspects that Russia may resort to nefarious means of selling some of its gold to help fund its war in Ukraine. An opposition Venezuelan politician said last year that Russian-chartered planes picked up gold from Venezuela to be refined in Mali and then resold in the United Arab Emirates for dollars and euros. However, the pressure to sell gold has eased considerably since the invasion and G7 sanctions on Russia’s oil pushed international oil prices much higher. The US blacklisted the Latin American country’s central bank in 2019, isolating Venezuela from the global economy. Russia helped Venezuela to harness its gold wealth by transporting some of its gold around the world, to sell in unregulated markets, beyond the reach of sanctions.

Bullion Bulletin: Pandora’s Box opens

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In ancient Greek mythology, Pandora supposedly opened a container which was left in the care of her husband – and out of the box sprang a host of curses that caused global misery. ‘Pandora’s Box’ entered the lexicon as a metaphor for a gift that actually contains horrors. Maybe it’s unfair to the blockchain technology to see it as a latter-day Pandora’s box; but it’s certainly created a lot of pain for a lot of people recently. And the pain is unevenly distributed.

Blockchain is most famous for facilitating the development of cryptocurrencies, Bitcoin especially, although the technology has many other non-cryptocurrency uses.

There has been a slew of bad news about cryptocurrency in the past couple of weeks. Bitcoin has lost 70% of its value since last November and the estimated value of the total cryptocurrency market over the same period has fallen by two-thirds.

Some commentators argue that instability is inherent in the cryptocurrency world, such is the volatility of some tokens. Instability took a firmer grip last month when a ‘Stablecoin’, TerraUSD, failed to maintain its peg to the US Dollar, causing the peg of its larger Stablecoin peer Tether to wobble. The panic rapidly spread to another Stablecoin and its associated cryptocurrency, Luna. Ripples have gone through the cryptocurrency world, with other cryptocurrency entities, such as the Hong Kong-based Babel Finance, pausing withdrawals and redemptions; the Singapore-based cryptocurrency hedge fund Three Arrows failed to meet margin calls from lenders; and Celsius Network, which provides “a platform of curated services” for cryptocurrency users to “introduce financial freedom through crypto” (according to its website) has suspended all withdrawals.

The problem for cryptocurrency is that it is “being hammered by the broad re-pricing of risk assets in the wake of accelerating inflation, higher interest rates and a possible recession” says the Financial Times.

For those who bought cryptocurrency in its early days, the losses may be tolerable. Bitcoin started trading in July 2010 at $0.0008. The fact that it has dropped to around $20,000 today will not bother an early buyer – but it will create hardship for many who bought when the price was much higher.

That pain may include El Salvador, which introduced Bitcoin as legal tender last September, when the Bitcoin price was around $50,000. Bloomberg has estimated that the Central American country has lost almost $56 million on the deal, although as the country’s minister of finance correctly points out, if the country has not sold any of the coins no loss has been incurred.

But individuals who cannot take a long-term view of their investments may have to crystallize their losses. The Pew Research Centre published a report last year that found Asian, black and Hispanic adults are more likely to have bought cryptocurrency than their white counterparts. A survey by Ariel Investments and Charles Schwab, published in April this year, found that what it called “risky” investments “are growing in popularity, especially among younger Black investors”; worse, almost a third of those surveyed invested in something they did not fully understand because it seemed like “a sure deal”. Buyers who are late to the cryptocurrency party will have to nurse their wounds; in the UK, the US, and the European Union, cryptocurrencies do not carry regulatory protections.

Pandora’s box has been opened. As in ancient Greece, it will be difficult to get all the freed nuisances back inside it. On the bright side, Glint’s Creative Director last week saw one of his creations lit up on an enormous screen in Manhattan’s Times Square, as part of the blockchain linked, NFT.NYC Conference.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

Bullion Bulletin: Listen to Grandpa Ben

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Bullion Bulletin Federal Reserve

Who’s ‘Grandpa Ben’? Ben once advised David Einhorn, who set up the US hedge fund Greenlight Capital, which is doing well this year and so far is up more than 20%.

Einhorn invoked his grandpa at a conference, where he said that the Federal Reserve is pretending it can tame inflation and that the price of gold is likely to go higher amid the current environment of rising prices. He thinks that the US Federal Reserve is “bluffing and not fighting inflation”. The reason Einhorn thinks the Fed is bluffing is that if it put up interest rates sufficiently highly to rein-in inflation, the resulting higher interest payable on the US national debt (now more than $30 trillion) would become unsustainable.

Paul Volcker, a former chairman of the Federal Reserve, showed in the 1970s that double-digit inflation could be crushed by very high interest rates – but only at the cost of a deep recession, which pushed up unemployment to more than 10%. In a febrile political context – President Biden’s Democrats are probably going to take a beating in the November mid-term elections – a recession is politically toxic.

With US consumer prices in May rising 8.6% on an annual basis and energy prices still climbing (crude oil is now forecast by commodity trading firm Trafigura reaching a “parabolic state”), it seems unlikely that the inflation peak for this year has yet been reached. And this isn’t even factoring in the extra costs that are inevitable if the world succeeds in moving to “net zero”; the BlackRock Investment Institute estimates consumer prices could rise by as much as 4% a decade from now if the transition costs to net zero carbon are fully passed on to households.

US consumers are certainly fearful – the renowned University of Michigan latest consumers’ survey suggested that consumer sentiment fell by 14% from May, reaching “its lowest recorded value, comparable to the trough reached in the middle of the 1980 recession”. Einhorn is merely saying what others are. Mark Carney, for instance, who ran the UK and Canadian central banks, has said the “long era of low inflation, suppressed volatility, and easy financial conditions is ending”. “Large structural forces pushed inflation down for the last 40 years… Those structural forces are now reversing”, according to Kevin Warsh, who was on the board of governors of the US Federal Reserve. Grocery prices rose by almost 12% on an annualized basis, the most since 1979.

Inflationary pressures remain in place – the continuing war in Ukraine is pushing global fossil fuel prices higher, the global grains output this year is likely to be 16 million tonnes lower than in 2021 (the first decrease in four years), and Covid-19 continues to stop-start the Chinese economy.

The “bluffing” Federal Reserve might be forced to “loosen” policy and accept an inflationary “spike”, said Einhorn, who continued: “At that point, it’s best to have some gold. That’s what Grandpa Ben taught me”.

Perhaps we all need an Uncle Ben.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

Bullion Bulletin: Central European banks get more gold

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Bullion Bulletin European Czech

A new governor and an old policy.

The 44 year-old Aleš Michl, who will take over as governor of the Czech National Bank in July, plans to increase the bank’s gold holdings almost tenfold, from the current 11 tonnes to around 100 tonnes, “gradually, over several years”. He says, “gold is good for diversification, it has zero correlation with stocks”.

The Czech Republic, or Czechia as it now is officially, joined the European Union in 2004 but, like Bulgaria, Croatia, Denmark, Hungary, Poland, Romania, and Sweden it has not adopted the Euro, even though more than half its trade is with Eurozone countries. Only a third of the population reportedly favours ditching the national currency, the Koruna, for the Euro. Earlier this year, a survey found private holdings of gold in Czechia amounted to more than 19 tonnes.

Czechia’s central bank is thus following a path trod by the Hungarian central bank – which revealed it had raised its gold holdings by 10 times, to 31.5 tonnes, in October 2018 – and Poland’s central bank, which bought 125.7 tonnes during 2018-19.

This gold buying by central banks doesn’t have an immediate effect on the spot price of gold – that price is established via bullion bank trading on the paper markets. But it does play a supportive role, indicating that governments and central bankers in the current deeply uncertain environment are looking to diversify their reserves into gold and, in the words of Michl, to better “mitigate the effects of disasters…”

Inflation in Czechia is now running at more than 14% a year, against average Eurozone inflation of about 8%. The country’s central bank has raised its main interest rate to 5.75% in the past year and looks likely to push it even higher when it next meets on 22 June.

Czechia gold reserves

Michl is supposedly reluctant to put up interest rates, which has raised a few eyebrows locally; he seems to share the view of Turkey’s President Recep Tayyip Erdoğan, who despite Turkey’s inflation now at more than 73% regards low interest rates as the key to combatting runaway inflation. Michl said at his appointment ceremony: “I will propose the stability of interest rates for a certain period of time… I expect inflation to continue at record highs of around 15%. My main objective will be to bring it back to 2%. I expect it will take two years”. In an interview with a local weekly he said: “Supply-side inflation will fly through the economy and nobody in the world can do anything about it… The key is to prevent it becoming demand-side inflation”.

There are some suggestions that Michl’s reluctance to raise interest rates results from his advisory role to populist former premier Andrej Babis, whose fertilizer trading company, Agrofert, is not keen on higher interest rates as that would increase Agrofert’s costs.

Babis has said that Michl belongs to the “sensible wing” of the bank board and added: “I’ve been saying for a long time that the CNB [Czech National Bank] is making policies that are harmful to the economy, harmful to people and harmful to mortgages. Basically, the more the central bank raises rates, the higher the inflation”. Which, despite considerable historical evidence to the contrary, might of course turn out to be true; as pigs might one day fly.

Bullion Bulletin: Central Banks and Gold

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Bullion Bulletin Gold Bar Banks

Last year, the collective total gold holding by central banks was the highest in more than 30 years, around 36,000 tonnes according to the World Gold Council (WGC). Why do central banks own gold?

It’s partly a matter of history – holding gold was long a habit for central banks because of its status as money – and partly sound economic policy. Gold has proved itself a useful diversifier (and thus can help in providing stability), as it has an inverse relationship with the US Dollar – when one dips in value, the other usually rises.

Gold vies with the US Dollar for ‘safe haven’ status – in times of economic fragility both are regarded as providing some protection, for different reasons. Gold partly because it carries no counter-party risks, it is no-one’s liability, and more supply cannot be created. The US Dollar because it’s the world’s reserve currency and used for the majority of international transactions, and has the backing of the world’s economic superpower.

The value of the US Dollar against gold has however dropped sharply over the last decade, thanks to low interest rates and cheap money, which in turn follow an increase in the US currency supply, used to bail-out the bankrupt and subsidise those forced to stay at home during the pandemic. The ripples from the 2008 financial crisis, when trust in the Dollar faltered, are still lapping at economies today; so too are the 2020-21 pandemic waves.

Essentially a central bank is in charge of the conduct of monetary policy, aiming to achieve price stability – i.e. ensuring low and stable inflation. A central banker is obsessed with risk, and how to reduce it. Protecting a national currency from becoming devalued and managing economic fluctuations are two main responsibilities of a central bank. Since the late 1980s targeting inflation has become the leading framework for monetary policy.

It might be said that they’re not doing a great job at the moment: inflation in the Eurozone (with the European Central Bank, ECB, in charge) reached another high, of 8.1%, in May; in the UK (where the Bank of England, BoE, runs the shop) consumer prices rose 9% in annual terms in April; in the US, the annual rate of inflation in April was 8.3%, marginally down compared to March, but the consumer price food index rose by 9.4%, the biggest 12 month increase since April 1981.

The US has the most gold, more than 8,100 tonnes, which is almost 78% of its total foreign reserves. Some central banks of leading economies have sold some or all of their gold – the Banque de France sold 588 tonnes during 2004-08; the Swiss National Bank sold 1,550 tonnes during 2000-08.

Germany has the second biggest gold holdings, after the US. For Jens Weidmann, president of Germany’s central bank (the Bundesbank) from 2011 until the end of 2021, “anyone in Germany… will say that [gold] is synonymous with enduring value and economic prosperity”.

The US Dollar however has lost almost 90% of its value since 1970, thanks to an inflation rate averaging almost 4% a year, which has produced a cumulative price increase of more than 645%. Prices in Dollar terms are 7.45 times higher than average prices in 1970; a Dollar today buys around 13% of what it could get in 1970.

A long-term and for many an imperceptible decline in the Dollar’s value is perhaps one reason why some countries have decided to diversify from the Dollar, and are often choosing to hold more of their reserves in gold.

The freezing of internationally-held assets belonging to Russia – the ‘weaponisation’ of the Dollar – will only further discourage nations from relying on the US fiat currency. By sanctioning Russia in such a fashion the US Dollar has damaged its status as a reliable asset in tough times. Russia has in any case increased its gold holding from 883 tonnes at the end of 2011 to more than 2,300 tonnes today; Turkey has acquired 278.55 tonnes since 2017; India’s gold reserves have swelled from more than 557 tonnes at the end of 2016 to more than 754 tonnes at the end of 2021. Brazil, Hungary and Thailand all bought gold last year.

Fun fact, to help you to picture how much gold these countries hold; a tonne of gold is about the same weight as a Fiat 500 car, or a baby Blue whale.

Bullion Bulletin: In gold we trust

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Bullion Bulletin Gold Trust

The latest edition of the mammoth In Gold We Trust annual report, from the Liechtenstein-based asset management company Incrementum, is titled ‘Stagflation 2.0’. As always the comprehensive (and humorous) report is a feast of charts and absorbing analysis and, remarkably, it’s free!

The report characterises what’s happened to the world economy in the past two Covid-19 years as being a steady but relentless growth in strength of ‘the wolf’, swiftly chased by ‘a bear’ – inflation followed by recession, an inexorable road to stagflation; high inflation combined with slow or no economic growth.

The generalised hope that a post-Covid economic recovery would happen has been undermined by mistaken “brute” monetary and fiscal policies, the report suggests, which rushed to fend off outright depression. These policies worked – only too well. All the extra money injected into the economy as anti-Covid measures has pushed up asset prices and distorted valuations. As the report says, the “S&P 500 rallied from its Covid-19 low” (in March 2020) “to a new all-time high in just five months and the Nasdaq soared 134% from low to high in just three months… The price paid for rescuing markets was steadily rising inflation…” Markets believed central bankers and governments when they repeatedly advised that inflation was ‘transitory’. Flooding markets with cheap money via Quantitative Easing (QE), as happened in the US and the Eurozone, might have created a wide ‘feel-good factor’ but it also encouraged some absurd bubbles; the Incrementum report quotes (incredulously) an invisible sculpture that sold for €18,300 in May 2021.

The report understandably pays great attention to the Ukrainian invasion by Russia and the sanctions patchily imposed by the West.

The sanctions’ immediate aim was to crush Russia’s Rouble, thus hindering its ability to trade and hence stifle its military capacity. This seems to have failed – the Rouble has actually risen in value prior to what it was before the invasion, helped by a relatively high base interest rate, reduced to 14%/year on 29 April and to 11% on 26 May. The Rouble is around 30% higher against the US Dollar for this year. Moreover, as Incrementum‘s report points out, the weaponization of fiat money (as has been done by the European Union and the US) is a double-edged sword; by freezing the reserves of the Russian central bank the US and the European Union have shown “many US-critical nations how quickly US dollar reserves can transform from a highly liquid asset to useless pieces of printed paper”. This undermining of what has long been regarded as one of the safest of havens – US Dollars and anything denominated in them such as US government bonds – is one of the unintended consequences of the Ukraine war, alongside the threat of food shortages and inflationary pressures.

Incrementum sticks to its long-term gold price forecast of $4,800/ounce by 2030. It believes that the efforts by central banks to fight inflation (pushing up interest rates) without triggering a recession will not work: “we therefore firmly believe that a return to sustained positive real interest rates” (that is, rates above inflation levels) “is as likely as a remarriage between Johnny Depp and Amber Heard”.

Inflation’s progress in the Eurozone and the US


Klarna, the Swedish ‘buy now, pay later’ firm that was founded in 2005 and which has grown at a red hot rate (300% in the first half of 2021 ) in the recent years of easy credit and low interest rates, will cut around 700 jobs as its CEO warns of a ‘likely recession’. At the Davos annual meeting of the World Economic Forum the German Vice-Chancellor and Economics minister Robert Habeck said last week we “have at least four crises, which are interwoven. We have high inflation…we have an energy crisis…we have food poverty, and we have a climate crisis… if none of the problems are solved, I’m really afraid we’re running into a global recession with tremendous effect…on global stability”.

Bullion Bulletin: China and India gold purchasing

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Bullion Bulletin India China Gold

At the start of 2022, the World Gold Council (WGC) took a cautiously optimistic view of the prospects for China’s gold buying this year. Wang Lixin, the Council’s managing director in China said in January the “relatively stable gold price outlook will provide support for gold jewellery demand in China’s market for 2022”. Much has changed since January, not least in China – gold demand this year will be hit by the country’s zero-Covid policy.

Gold demand in China, which vies with India for the position of the world’s biggest gold consumer, was hit by the Covid-19 pandemic in 2020. Last year saw a big rebound in its gold imports, which were 36% higher than in 2020 at 818 tonnes, according to Chinese customs’ data.

Similar growth cannot be expected this year. China’s macroeconomic data from April were alarming: real estate activity collapsed, with construction starts falling 44%; export growth was 4% against 15% growth in March; and retail sales were down 11% year-on-year, against an expected decline of less than 7%. Xi Jingping’s China increasingly resembles that of Mao Zedong – the authority of the communist party is as important as the economy. President Xi’s zero-Covid policy with its enforced lockdowns is hitting everything from microchip production to consumer purchases. China has an official growth target for 2022 of 5.5%, which would be its lowest official target in three decades, but without a rapid easing of its lockdowns it will struggle to achieve that.

In India it’s the recent high price of gold that’s having a negative effect on gold demand. The WGC Q1 2022 Gold Demand Trends report says that India’s gold demand in that quarter fell by 18% to 135.5 tonnes against the same period of 2021. The WGC attributed the decline to higher prices, which it said rose by 8% in the first quarter, to more than Rupees 140,890 (around $1,817) per troy ounce. The Reserve Bank of India (RBI) bought eight tonnes during the first quarter of this year; the central bank began buying gold from late 2017, and since then, has bought 200 tonnes.

The International Monetary Fund (IMF) in its latest World Economic Outlook growth projections sees India’s economy this year growing almost twice as fast as China’s, 8.2% versus 4.4%. In 2021 India’s economy registered 8.9% growth and China’s 8.1%. Last year, according to the WGC, global gold demand rose by 10% year-on-year, thanks largely to a staggering 50% surge in demand in the final quarter of the year. Russia’s Credit Bank of Moscow (MKB), one of the country’s biggest private banks, has obtained a gold export licence from the government, becoming the latest Russian bank to turn to precious metals to try to offset the impact of sanctions.

Central banks have been adding gold to their portfolios in the past few years according to the IMF. Interest in the diversification of assets, away from the Dollar, has increased after Russia’s invasion of Ukraine incurred international sanctions against the former. Thailand’s central bank added 90 tonnes of gold last year, one of the highest purchases among emerging markets.

Bullion Bulletin: Our currency but your problem

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Bullion Bulletin Currency Dollar Question

Control of money is inextricably linked with the exercise of power. Nowhere better illustrates this than Russia’s attempt to enforce on the citizens of the occupied Ukrainian city of Kherson the use of the Rouble, displacing Ukraine’s currency, the Hryvnia. Russia has blitzed the city with missiles. Kherson has been under military Russian occupation since early March. The Russian-backed ‘authorities’ in Kherson are now insisting that only Russian currency is legal tender. Russia is fighting this war on several fronts, including the financial – it is demanding that countries deemed to be ‘hostile’ pay for its exported gas in Roubles.

Control of money and what can be used as money is synonymous with the power of government, reinforced if necessary by punishment. If the ‘hostile’ gas importing countries refuse to pay in Roubles, Russia has threatened to cut off their supply. In Kherson people have come out on the streets against the removal of Ukrainian flags, the re-routing of Internet access through Russian-annexed Crimea, that schoolteachers must adopt the Russian curriculum, the currency diktat and other symbolic demonstrations of Russian authority. But such protests have dried up after people have been arrested, abducted, tortured and otherwise harmed. Enforcing a switch of money has its brutal side.

The US Dollar has for many years been seen as a place of safety, thanks largely to US economic hegemony and trust in US judicial institutions; recently the Dollar has reached its highest levels since 2002 and has gained nearly 9% against a basket of currencies since Russia invaded Ukraine. It is still seen by many investors, governments and individuals as the world’s reserve currency.

But the Dollar’s position as top dog is increasingly being questioned. The International Monetary Fund (IMF) points out that a strong Dollar is piling pressure on low-income countries, with about 60% of them at risk of debt distress. A former US Treasury Secretary, John Connally, said in the 1970s the dollar is ‘our currency, but it’s your problem’. That’s still true today.

Attempts to bypass the Dollar’s dominance and achieve monetary ‘independence’ need not be as crass as what Russia is trying. The creation of Bitcoin was seen (at least in part) as a means of dispensing with the Dollar, of trying to avoid it being ‘your problem’. But even cryptocurrencies are not impervious to questions of confidence. Cryptocurrency fans had a nasty jolt last week. More than $200 billion was wiped from the entire crypto market in a day. The spark for the collapse was the tanking of a Stablecoin, TerraUSD, which was supposed to mirror the value of the Dollar. But it slid to less than 30 cents on Wednesday last week.

There are growing signs that we could be on the verge of a bear market. The S&P 500 is on the edge of moving into bear market territory, which is usually held to be a drop of 20% or more from its last peak. By Thursday last week, the index was down about 18% from its 3 January peak. The Nasdaq Composite is well into bear market territory, down 29% from its November high. The last serious bear market started on 11 October 2007; two years later stock markets were down by around 35%; the gold price was up by 40%.

In a bear market, there is generally a ‘dash for cash’ – liquidity becomes more important. Gold tends to do well. With Glint you have gold in an ultra-liquid form, gold that can be used as money. At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

Bullion Bulletin: Hard and Soft Assets

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Bullion Bulletin Assets Rabbit Image

Mark Twain once gave a piece of investment advice: “Buy land”, he said. His justification was “they’re not making it anymore”.

Except of course ‘they’ are.

At the end of November last year, DappRadar, a crypto analytics site, reported that people had spent – it feels wrong, somehow, to describe this as ‘invested’ – more than $100 million in one week alone on fake land, land that exists only in the Metaverse, the network of 3D virtual worlds.

The craze to hunt down new assets that might give a better yield (or indeed any yield) has only intensified as inflation has turned more serious (about 60% of advanced economies now have inflation above 5%) and we are still living in a world of real negative interest rates.

The decentralisation of the right to issue ‘money’ (and, further along, the decentralisation of what constitutes ‘value’), which is essentially what cryptocurrency is all about, has brought in its wake a less useful phenomenon – it’s divided the world into believers and doubters.

For the former, of course it make sense to be into cryptocurrency or spend millions on fake land; for the latter, such activities are nothing more than a very clever Ponzi scheme – returns from later investors are the means of profit for earlier investors. An entire universe is being erected on the basis of a business model built on a speculative bubble that drives up prices (value).

Cryptocurrencies, non-fungible tokens (NFTs), and the like may just be for the technical elite. But the revolution that Web3.0 is bringing about has delineated one important matter: it’s questioned an assumption we all share, which is that money is what our governments define as legal tender, fiat currency. In 2022, the status of money has been, is being, thrown into question. This rabbit is never going back into the hat.

Agustín Carstens, general manager of the Bank for International Settlements (BIS), has called bitcoin “a combination of a bubble, a Ponzi scheme and an environmental disaster”. That may be true. But as Bloomberg pointed out on 1 May: “when the pandemic began, you really were well advised to put some money into Bitcoin and Ethereum. Relative to January 2020, your investments are up by factors of, respectively, 21.7 and 5.4. Your gold position is up just 25%”.

What are you buying when you purchase an NFT? According to Samson Mow, Chief Strategy Officer at Blockstream, a Canadian-based blockchain technology company, that “can vary drastically from issuer to issuer. Some… don’t really entitle you to anything — all you can do is look at them inside an app and brag about owning them” – a bit like hanging a painting on a wall in your lounge. With others, you are buying entry into a very select club, with very real benefits. You’re NFT token is your key to unlocking both real world and Metaverse treats and experiences that would otherwise be out of reach.

The Bloomberg writer Matt Levine has a lot of fun writing about NFTs and value. This week he wrote: “An NFT of the first tweet from Twitter Inc. co-founder Jack Dorsey sold in March 2021 for $2.9 million to Sina Estavi, the chief executive of Malaysia-based blockchain company Bridge Oracle.

Earlier this year, Mr. Estavi put the NFT up for auction. He didn’t receive any bids above $14,000, which he didn’t accept… .

‘I will never regret buying it because this NFT is my capital’, he said.

It’s true, 99.5% drops are possible in any market! And yet! In general, when you buy something and its price drops 99.5%, you say things like “oops” or “boy I regret buying that thing”. “I will never regret buying it because this NFT is my capital”! Not anymore it isn’t!”

One of the most popular NFT collections is known as the ‘Bored Ape Yacht Club’. The creator of the Bored Apes, Yuga Labs, on 2 May launched a sale of virtual land deeds for its yet-to-be-released metaverse project called ‘Otherside’. Yuga did very well – it made $320 million selling these so-called ‘Otherdeeds’ in a single weekend. But the blockchain became choked and froze for several hours; a record amount of cryptocurrency was permanently destroyed, and the price of ApeCoin, the cryptocurrency linked to the Bored Ape Yacht Club, collapsed. Buying land that does not exist in the real world seems insane to some but entirely reasonable to others. It depends on how literal you’re being and how open to something’s potential. To each his or her own.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.