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Category: Gold

Gold: it’s the season for buying

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It’s been a stellar year for gold so far, and the way things are shaping up 2019 is but a precursor to the major event ahead. In any terms, whether the US dollar, the pound Sterling, or the Chinese Renminbi, gold has significantly risen. There has been a change in sentiment towards gold, driven by fundamentals in the market that are not going away easily or soon. As a result, you are seeing gold do what it is supposed to do in situations that we are seeing unfold around the world. The real tilt in gold’s story is that there has been a shift in its narrative. For years it has been ignored by the investment community, as many were put off by its non-yield paying tendencies, but now we have an explosion in negative yielding debt. With negative yields set to be here for some time, we believe the story of gold has moved into a positive regime. As well as that inflation in the US looks as though it is starting to get a grip, as the chart shows.

Along with a significant shift in the backdrop surrounding gold, we are now in a good seasonal spot. Seasonality plays a major role the gold market, which is now entering a positive period. Demand for gold should ramp up with Diwali (in India) kicking off the festive period in November. During this period, gold is given as a gift and therefore there tends to be a significant jump in demand. Following on from Diwali, we will quickly move into Christmas and then the Chinese New Year. As India and China continue to expand and wealth grows within both countries, demand for gold is set to become more pronounced, especially given that people within these nations will be aware of how depressed the long-term price of gold really is. With a natural increase in demand for gold, prices will be pushed higher over the coming months.

Never a dull moment with gold

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In the past six months the Sterling price of gold has gained more than 21%, a remarkable rally. Yet in the past week it has lost more than 4%, although a little less in US Dollar terms, almost 3%. For the novice investor this rollercoaster might be alarming but for the long-term saver in gold all the comforting signs are still there – and even the bigger banks, usually somewhat hostile to gold, are starting to take note. Citigroup put out a note this week citing macroeconomic reasons why it believes that the US Dollar gold price could surpass the previous record price of $1,900/oz and reach $2,000/oz within the next two years.

 

Despite the short-term outlook for gold remaining weak, any move lower will be limited. Last week, the yellow metal had its biggest daily loss in more than three years after an optimistic tone from Jerome Powell, chairman of the US Federal Reserve Jerome Powell, who suggested that the US economy was performing well. Regardless of this the core market themes and worries are still intact and therefore allocating to gold during these next two weeks could offer a good entry point. The near-term weakness might have come at the right time. Trade tensions, weakening macroeconomic conditions and increased stock market volatility will continue to support the gold price. Gold is getting a tailwind from plunging bond yields, currency wars and elevated debt levels across the world. We would expect to see a substantial period of US dollar weakening, similar to that seen in the 2008 the financial crisis. Whichever way you look the relationship between the US dollar and gold is changing (and at times confused), which could lead to a sustained upward move in Gold. Currently, we are in a period where we will see some short-term consolidation but this is healthy and required for gold to make its next leg higher.

 

Gold, Time, and Interest

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What would you sooner have: £100 today or £115 next month? There’s no obvious answer. It all depends on your present and expected needs. If you lend something, you expect that something back, plus a little extra. So someone who lends his gold expects to receive it back, plus an extra amount – the interest. But what happens when we live through an era of very low-to-negative interest rates, like today? Lending anything becomes much less attractive; the best you can hope for is that you get your original loan back. Not much incentive there.

Gold has always a medium of exchange. It’s widely held by central banks and other institutions as a store of wealth. In the 1980s, gold was used as collateral for a carry trade, which worked like this. A central bank loaned a bank some gold, at a very low rate of interest. The bullion bank then sold the gold and invested in securities with a higher rate of return, such as government long-term bonds. The bullion bank effectively sold the gold short.

Now suppose the loan was called in by the central bank. If gold has risen in value, the bullion bank will have to go into the market and purchase higher priced gold. Indeed, if many banks are short, the unwinding of the gold carry trade could drive the gold price even higher.

The depressed price for gold and the gloomy noises about the future price of gold meant that central banks happily lent their gold; bullion banks happily borrowed it and invested in US treasury bills; and there was an explosion in the bullion business. Everyone was (more or less) happy – except for holders of physical gold, who blamed gold miners for helping to depress the gold price.

Time moves on. Today, the gold lending market has become so developed that for every ounce of physical bullion in the possession of banks there may be hundreds of paper liabilities. No one has a real idea of the true level of paper gold leverage that we have now reached. One thing is certain: a low and positive gold leasing rate has led to a substantial uncovered position. From a central bank’s perspective, if a lease is coming due then there is no incentive to renew it – would they really want to, given the unknown counterparty and systemic risks that may occur in today’s unstable economic climate?

It is clear that there is no real incentive today to lend gold. The appetite for doing so has vastly diminished. The gold price has recently moved rapidly from $1,200 to $1,550/ounce. With yields converging towards zero and even going negative, the likelihood that gold will be lent by anyone is illogical – and that ought to mean that as the supply dries up, the price can only go higher.

 

Making a virtue of necessity

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Is Mark Carney, the Governor of the Bank of England (BoE), a conservative or a radical? It’s doubtful that Carney is a bomb-thrower, but maybe his grey suits are hiding a desperado who yearns to overturn the apple-cart.

One the boring side of the scales are: he’s Canadian; he spent 13 years at Goldman Sachs; is a former Governor of the Bank of Canada; and his wife, Diana Fox Carney, likes to rub shoulders with the great and good. In six years as the head of the BoE he has made few waves, apart from his gloomy (and incorrect) warning that the UK’s departure from the European Union would bring disaster to the UK economy. That has yet to happen – three years after he made his guess. Who knows? It may yet turn out to be correct. On the other hand Carney knows his time at the BoE is running out – he leaves in January 2020 – and maybe he wants to go out with a bang.

Evidence for this is the speech he gave at the Jackson Hole Symposium last week. It was a remarkable speech – even a daring speech, the dull-as-ditch water title of which (The Growing Challenges for Monetary Policy in the current International Monetary and Financial System) seemed deliberately designed to throw journalists off the scent of something very meaty indeed. For Carney did nothing less than trash the US dollar as the international reserve currency. He pointed out that some $16 trillion “of global debt is now trading at negative yields”, a fact that should send a shiver up the spine of anyone, central banker or otherwise.

Carney spoke about the “international monetary and financial system” (IMFS), and said the consensus view that countries “can achieve price stability and minimise excessive output variability” through flexible inflation targeting and floating exchange rates was “increasingly untenable”. What do central bankers want? Stability of course and, if possible, growth. For Carney, the current IMFS is “not only making it harder to achieve” this stability but is also “encouraging protectionist and populist policies which are exacerbating the situation.” He told his audience that “in the new world order, a reliance on keeping one’s house in order is no longer sufficient. The neighbourhood too must change….We are all responsible for fixing the fault lines in the system.” In his view the “deficiencies of the international monetary and financial system have become increasingly potent…Even a passing acquaintance with monetary history suggests that this centre won’t hold.”

Parsing his central banker-speak, what Carney was saying is that the current international financial system is broken. The US dollar is losing its status as the world’s most sought-after reserve asset, while the Chinese currency, the renminbi, the leading candidate to replace the dollar, is not yet ready for the task. So, Carney reasoned, what the international financial system needs right now is “multiple reserve currencies.” He floated the idea of a “Synthetic Hegemonic Currency (SHC)” a kind of globally dominant public sector-managed digi-money, perhaps run by the International Monetary Fund, as an international reserve asset – although the IMF already has the SDR (Special Drawing Rights) as its unit of accounting.

Carney came up with the right diagnosis – the current international financial system is bust – but prescribed some very peculiar medicine, which was in any case undermined by his own analysis. For he mentioned the immense difficulty posed for the world by the shift away from sterling to the dollar in the early 20th century, driven by the First World War. Quite correctly he said that the “resulting world with two competing providers of reserve currencies [the UK and the US] served to destabilise the international monetary system” and “worsened the severity of the Great Depression.” If it was such an upheaval to swap one reserve currency for another, what might be the risks of letting several currencies compete for reserve status?

What to conclude from Mark Carney’s major farewell address? Several points emerge. We are living through a time when the house of cards – the world’s mammoth dollar indebtedness – could topple at any moment, or might just blithely carry on, for now. Central bankers are floundering when it comes to providing practical solutions, but then they are only human. Carney’s speech was the central banker’s equivalent of holding up a sign which says “your guess is as good as mine”.

This Is Just the Beginning for Gold

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Gold has risen significantly in the past few months but this is only the start as the USA’s Federal Reserve is on shaky grounds. The fundamentals behind the recent move remain in place and, while the price may be edging lower, a period of consolidation, or price correction, is needed before the next rise.

What’s fascinating about the current bull run in gold is that it’s happening partly because various central banks are converting some of their US dollar reserves into gold. Central banks bought 224.4 tonnes of gold in Q2 2019, and more than 370 tonnes over the first half of the year. New mining output has found it difficult to keep up pace with the market’s requirement.

During the past decade of Quantitative Easing the value of the dollar has been protected by global money printing, which in turn has helped to ensure that currencies around the world have not risen dramatically in value relative to the dollar. The Federal Reserve needs to continue to protect the value of the dollar so that it is able to maintain its role as the reserve currency around the globe. If it was to lose its safe haven status, then the United States would be unable to print its own currency to pay its bills. Furthermore, if the US dollar was to lose significant value relative to other global currencies, investors could move away from the dollar, making it very difficult for the Federal Reserve to accommodate America’s vastly expanding US budget deficit and continue its policy of lowering interest rates.

Total US debt has now reached around $21.03 trillion, which is greater than all the combined debt around the world.[1] Several central banks have converted their US dollar reserves (in the form of government bonds) into gold, suggesting that demand for US government debt will not keep up with supply, which is driven by the United States’ rising budget deficit. As a result, this will force the Federal Reserve to print more dollars in order to purchase the unsold amounts of new debt that the government issues. How can they? Isn’t the Federal Reserve planning to end the United States QE programme? Money printing will have to continue in some shape or form. Printing more currency will inevitably put further pressure on the value of the dollar. In order to protect the currency, the central bank needs to make it more attractive to investors by raising rates significantly. If the US economy moves towards or goes into recession, raising interest rates would be disastrous as unemployment rises.

Gold may have already risen rapidly this year, but this is only the beginning of its rise. US debt is rising, the value of paper-money is declining and interest rates are being forced towards zero. The only currency worth holding is gold.

 

[1]United States Government, ‘U.S. National Debt Clock –  https://www.usdebtclock.org’, (14th August 2019).

 

 

 

 

 

Gold gets to $1,500 easy-peasy

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In the last 30 days the US dollar price of an ounce of gold has gone up by more than $97 – that’s almost 7% in a month. The S&P 500 index is just about holding onto positive territory – it’s gone up by just 1.30% since the start of the year. The gold price hit $1,500/ounce on the US COMEX futures market on 7 August, taking its gain since the start of this year to a remarkable 17%.

What’s going on?

The world’s investors are getting very nervous, that’s what – and when they worry, they turn to gold. Because, unlike paper currencies, gold doesn’t let you down.

This week started with the Chinese authorities responding to the USA trade war by weakening the Renminbi by more than 1%; the Korean Won then fell by almost 1%; the Malaysian Ringgit, Indonesian Rupiah, and Australian dollar all dropped too, like tumbling dominoes.

And today (7 August) New Zealand and India followed Thailand and cut their interest rates, as Asia reacted to the slide in the Chinese currency.

When interest rates are cut, paper currencies lose value and the gold price goes higher.

How high might gold go? That really isn’t the point, unless all you are concerned about is making a quick buck.

You keep gold because in any situation of global turmoil – such as we are living through now, wherever you look – gold keeps its value.

Get your Glint Mastercard today and start using gold – the only real money.

Gold hits new all-time high in Sterling

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The gold price today (30 July 2019) has risen to a new all-time high, of more than £1,175 per troy ounce, more than £14/oz or about 1.3% over the previous day. The previous record was more than £1,160, in September 2011.

Jason Cozens, CEO of the fintech company Glint, said: “This rise to a fresh record high in Sterling demonstrates the power of gold to retain people’s confidence when paper currencies are looking vulnerable, as a result of macro-economic uncertainty. The turmoil over Brexit, the decline of the pound, the likelihood that the US Federal Reserve will cut interest rates tomorrow, the probability that Christine Lagarde will be forced to extend Mario Draghi’s quantitative easing programme at the European Central Bank, all underpin this tremendous bull-run in gold. The world’s economies are in trouble, and it is natural for people to turn to gold as a defence.”

Glint’s account and debit Mastercard, which is available in the UK and launched in the USA this week, enables users to save and pay for goods and services in pounds, euros and dollars, and also gold. The Glint card means that “clients can protect their wealth by holding physical allocated gold, and spend it as money,” added Cozens.

 

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About Glint
Glint – Money’s New Standard – is a FinTech that uniquely enables physical gold to be used as money digitally, along with offering a multi-currency account and debit card. Its vision is a world where everyone has an equal opportunity to prosper, made possible by providing everyone with a reliable form of money, gold. Glint, in partnership with Mastercard, enables its clients to buy, save, exchange and spend physical gold, and other currencies, anywhere in the world Mastercard is accepted. Glint’s clients know their gold is secured in a Brinks Vault in Switzerland and insured by Lloyds of London. Gold, and all currencies purchased via Glint, are in safeguarded and segregated accounts. Already available in Europe, Glint launched in the UK in February 2018 and is set to launch in Canada, Japan, Scandinavia, and the USA in 2019.

The Company has tens of thousands of clients to date. Gold is the world’s alternative to government-controlled fiat currencies and has been a secure and globally accepted form of payment since 4,000 BC. Glint is a tangible alternative to cryptocurrencies, because it provides ownership of physical gold and permits instant gold-based purchases. Glint interacts with the global banking system and is a form of instantaneous payment for goods and services.

Glint Pay promises consumers an easier way to transact in gold

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Glint Pay promises consumers an easier way to transact in gold
London fintech firm basing U.S. operations out of Boulder
Denver Post
By Aldo Svaldi
29 July 2019
https://www.denverpost.com/2019/07/29/glint-pay-boulder-us-headquarters/
If entrepreneur Jason Cozens has his way, the United States will return to the gold standard, one consumer downloading one mobile application and transacting on one debit card at a time.
Glint Pay Inc., the company Cozens founded, launched a gold-backed debit card in the U.S. on Monday. Based in London, the company has made Boulder its U.S. base of operations.
“We want gold to be considered like any other currency,” said Cozens. “We want to give a reliable currency to the world.”
Glint Pay rolled out its debit card early last year in Europe and has had more than 50,000 downloads of its mobile application and more than $50 million in transactions. The company launched a U.S. debit card Monday, with Boulder serving at its U.S. base of operations.
Users can download the Glint application on their mobile devices and quickly register. Money is wired from an existing bank account to purchase physical gold held in a vault in Switzerland. The exchange is made at the spot gold price, less a 0.5 percent transaction fee.
Registered users are provided with a Glint Debit Mastercard, pursuant to a license from Mastercard USA. Glint is an agent of Sutton Bank, and the accounts are regulated under the Federal Deposit Insurance Corp. A customer retains ownership of his or her gold until it is spent, and the vault holdings are audited daily.
Why go through the hassle? For starters, Cozens said the U.S. dollar has lost 86 percent of its buying power after the country went off the last vestiges of the gold standard.
Back in 1970, a cheeseburger would have cost 55 cents, but last year it was up to $3.47. A gram of gold would have purchased two cheeseburgers back then. Today, it can purchase 12 cheeseburgers, he said.
One of the knocks against gold is that it is not that convenient. It may store value, but it isn’t easy to spend. McDonald’s and Wendy’s aren’t going to accept a gram of gold in return for 12 cheeseburgers.
Glint gets around that by allowing people to draw on the gold reserves to make purchases through a debit card, which can be used around the globe. The technology allows users to effectively buy meals at restaurants or book a room for the night using grams of gold, something that was done in the Colorado’s earliest days.
When the gold runs out, the debit card stops working, just like it would if a checking account gets overdrawn.
But many early adopters are using Glint as a way to earn a higher return on their savings. As countries continue to pile on debt, the United States included, they risk devaluing their currencies. Gold’s relative value would increase in that scenario.
And if debt levels get too high and the global economy crashes, gold can provide a hedge. As long as the internet and the payment system are working, consumers should be able to access their funds. And if that isn’t the case, users can claim their physical gold, Cozens said.
Cozens said the idea for Glint came to him after watching banks such as Lehman and Northern Rock collapse during the 2008 financial crisis. He began to question the whole idea of money.
“Banks aren’t necessarily a secure place for your money. They lend out more than they have,” he said.
Thomas Frey, a futurist based in Westminster, said some firms have tried to create currencies backed with hard assets, including one example he knows about based on diamonds. His bet, however, is on cryptocurrencies, which he expects will transform the financial system.
They have been unstable and aren’t widely accepted in commerce yet. But big firms from J.P. Morgan to Facebook are coming onboard and a lot of money is being invested in building an infrastructure.
“Gold is complicated,” he said.
Cozens counters that Glint, like cryptocurrencies, has sprung out of the distrust of the existing monetary system. Bitcoin’s developers mimicked the supply of gold to limit that currency’s supply and they reference terms like mining. Why not go for the original?
“Glint is an alternative to the banking payment system and we think it is a more reliable one than crypto,” he said.
Glint is starting out small in Boulder, with six people. But the headcount should grow as it expands to add functions. That includes the ability to send grams of gold as gifts to people and expanding the global currency wallets that the U.S. platform can handle, Cozens said.

 

Gold’s Silver Lining

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Gold’s Silver Lining

Gold and silver have always had an almost symbiotic relationship, and while it would be untrue to say they move in lockstep, what happens to the silver price often indicates the future for that of gold. Gold is going through a long-term rally, but silver has gone through an eight-year bear market since its all-time peak of $50/oz, in 2011. One metric used to track the relationship between these two metals is the price of gold divided by the price of silver – the gold:silver ratio. The price of gold has risen faster than that of silver since the end of May, and we may have seen a peak in the gold:silver ratio late last month at 96:1. The last week of June 2019 marked only the third time in modern monetary history that this closely watched metric has risen above 90:1. Given the symbiosis between gold and silver, any significant rally in silver helps keep the gold price elevated, as the focus on the precious metals complex intensifies.

In the past week silver has moved higher, breaking the $16/oz resistance line for the first time since February this year which, given the relationship between silver and gold, should excite gold investors. With silver lagging during the recent gold rally, gold needs silver to keep buyers on board and maintain interest. Towards the end of last week, US manufacturing numbers forced the 30-year US government bonds to lose value, but gold remained stable and created a new high, with much of the credit being given to silver’s supportive rise.

With the gold/silver ratio this high (see chart), a significant rally in the silver market is overdue and that will help gold to remain elevated. Glint isn’t in the business of using silver as a currency – but we are happy to see such interesting support from gold’s little sister. Choose Glint, buy gold, and protect your wealth today.

Interest in Gold ETFs Spikes

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With the precious metals sector receiving significant attention, gold ETFs have recently been hitting their 52-week highs. Global investors have increased their positions in gold exchange traded funds pushing the year to date flows into all gold focused ETFs into positive territory. ETFs are a good representation of what retail clients are thinking in the gold space being the main vehicles used to allocate their savings to gold, away from physical purchases. Primary drivers of gold demand include global central banks, long-term investors, including those buying gold bars and coins and ETFs like GLD, and industrial users. However, short-term speculators remain important in driving gold prices. From the charts below, we can see that there has been a significant spike in gold flows over the last three months. It is relatively unusual to see the quantity of current inflows that we are seeing in gold, occurring at a time when stocks have been rising as well.

Gold has rallied for the past two months due to continued uncertainties around trade, the USD, Iran and U.S. politics. It is a time when economic reports covering May and June were by and large lower, and even GDP forecasts using Fed-models were slowing down to sub-2% growth.

We believe gold has moved into a new range, and while much of the recent monetary policy shift was priced in very quickly, we believe asset allocation flows will continue to offer near-term support. With a trend towards central-bank de-dollarisation accelerating and ongoing annuity demand from ETF flows, we are certainly in a precious-positive environment, and one which should be supportive of gold pricing and gold equities, particularly as the gold price in many producer currencies looks extremely strong. Notably, the chart below shows the relationship between the nominal share position in the largest ETF, the GLD and the gold price. As we have commented last month, the gold price is substantially higher relative to the size of GLD positions compared to the last few years. We would argue this is a strong positive for the gold price going forward as despite the spikes in retail interest, positions have been much larger before on a strong gold price and should see continued buying and price rises to accompany that.

While many ETFs ‘claim’ to be physically backed by real gold, none has been tested in a crisis scenario.  Investors, most probably have that added risk, many of whom are not even aware of how these products are structured. For those retail clients wanting to take exposure to the gold market, Glint offers assurance in its ability to any individual to access, buy and hold real physical gold across the wealth spectrum at whatever size. Chose Glint and protect your wealth today.