In Gold We Trust Report 2019

[Paul799]

"Since 2007, the annual In Gold We Trust report is THE authoritative report on gold investing, and is required reading for anyone interested in the precious metal market. As a team, Ronald-Peter Stöferle and Mark Valek analyze the state of the global financial markets, monetary dynamics and their influence on gold price developments like no other.

Ronald-Peter Stöferle is a partner of Incrementum AG and is responsible for research and portfolio management. After graduation, he worked at Erste Group in Research, where he published the In Gold We Trust-Report for the first time in 2007. Over the years, this goldstudy has become the industry standard publication on gold, money and inflation."

https://ingoldwetrust.report/wp-con...old-We-Trust-2019-Compact-Version-english.pdf
https://ingoldwetrust.report/wp-con...ld-We-Trust-2019-Extended-Version-english.pdf

Below, a very interesting video presentation of the report (13 min.)

https://www.youtube.com/watch?v=ncWcgJv7Eus

"People seems to have lost confidence in politics and media, but not yet in central banks"

 

[Paul799]

Some takeaways out of the first 30 pages

The official announcement of the Hungarian central bank on its first gold purchases since 1986 states:
“In normal circumstances, gold has a confidence-building feature, i.e. it may play a stabilising role and act as a major line of defence under extreme market conditions or in times of structural changes in the international financial system or deep geopolitical crises.
In addition, gold continues to be one of the safest assets, which can be related to individual properties such as the limited supply of physical precious metal, which is not linked with credit or counterparty risk, given that gold is not a claim on a specific counterparty or country.”

“Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
Ben Bernanke

"Diminution in the dollar’s value was so slow there seemed no cause for public alarm. It was like watching an ice cube melt. It happens, yet slowly."
Jim Rickards

"Like Liberty, gold never stays where it is undervalued."
John S. Morrill

Gold always moves out of countries whose capital stock is declining and flows into countries where capital accumulation is taking place, the economy is prospering, and the volume of savings is increasing.

 

[Paul799]

p30-70

In buying 657 tonnes of gold in 2018, central banks made the largest purchases of gold since the end of Bretton Woods in 1971.
Russia (274 tonnes), Kazakhstan (50 tonnes), and India (42 tonnes) were the largest buyers.

In an earlier In Gold We Trust report, we described three groups of people whose worldviews differ fundamentally in their assessment of the overall economic situation.

1) “Believers”: persons with high trust in the status quo.
This group of people has no fundamental doubts about the status quo.
They consider the measures implemented in the wake of the Great Financial Crisis to be fundamentally correct and expedient.
Following this view, the economy is in a healing process, even if it is healing slower than expected. All in all, however, “the patient” is on the road to recovery.
This view is currently the most widespread.
The proportion of gold in the portfolios structured by these individuals has been low or zero in recent years.

2) “Skeptics”: people who had initial doubts about the recovery but who regained trust in the status quo.
In this camp are people who had an initial, timid distrust of the sustainability of the extreme economic policy measures taken in the last decade.
In the portfolios they manage they allocate gold on a pragmatic basis.
In the years following the Great Financial Crisis, a lot of gold was accumulated, but in the meantime these positions have been reduced and often completely eliminated.
Due to earnings pressure, in recent years these investors have increasingly relied on the classic “risk-on” investment classes such as equities, high-yield bonds, etc.
This group of marginal buyers will play a particularly important role in the future development of the gold price. They will enter the gold market without hesitation if it seems interesting again

3) “Critics”: people who question the viability of the status quo.
This group is convinced of a systemic error in the structure of the monetary system; from their point of view, most of the rescue measures of recent years only addressed the symptoms, not the root cause of the problem.
This group is characterized by a high affinity for investing in gold and sees gold as the ultimate investment hedge against the erosion of economic, political, and social trust.


"From now on, I will only spend as much as I earn – even if I have to borrow money for it."
Mark Twain

 

[oyarde]

" A nickel ain't worth a dime anymore " . Yogi Berra

 

[Paul799]

I took a shortcut and switched to the short version of the IGWT Report


There were only two other occasions when commodities were similarly undervalued relative to equities: just ahead of Black Thursday on October 24, 1929, and during the excesses of the dotcom bubble.
p41


Our tour de force has also brought the following findings to light:

• Gold and blockchain technology: This liaison is not a brief summer flirt, but an ever closer relationship. As in any relationship, there will still be some problems to solve until the partnership is consolidated. However, we are convinced of the viability of this relationship.

• Gold mining stocks: After several years of creative destruction in the sector, most companies are now on a much healthier footing. The recent M&A wave reinforces our positive basic assessment. From an anticyclical point of view, there are probably few sectors that are more exciting. In our investment process we are currently concentrating on high-quality producers and mid- tiers. If the gold/silver ratio falls, silver miners should be put back on the watchlist.

• Technical analysis: The technical structure of the market looks predominantly positive. It will be decisive whether gold is able to break through the resistance zone at USD 1,360-1,380, the technical Rubicon of the present.

• Technological innovations: Innovations such as AI, drones, and digitalization have not bypassed the gold sector; they are revolutionizing it. This process is far from complete and represents a major challenge for both existing and new projects. However, the gold industry has already shown that it can meet and profit from these challenges.

• Gold is green: Gold is a green product due to its extremely high degree of recycling. Of course, way too often working conditions could be improved and pollution reduced (problems that are not specific to the gold sector). To improve the situation, the ESG guidelines have gained a foothold in the gold sector and are no longer merely given lip service.
p88-89




In such experience as I have had with taxation... there is only one tax that is popular, and that is the tax that is on the other fellow.
Sir Thomas White
p83

 

[Paul799]

If the dollar or any other currency would be universally accepted at all times, central banks would see no necessity to hold gold at all. The fact that they do so, shows that such currencies are not a universal replacement for gold.

Alan Greenspan



What is interesting, is that the general price level in terms of gold is still back where it was. In other words, the change in the price of gold is equal to the change in the price of commodities or the general price level, which tells you that there’s something about gold – I’ve thought about this for a number of years and I’ve reached a blank.
It’s almost as though, technically speaking, the ability of having a stable price has great value.

Alan Greenspan



Lenin was certainly right. There is no subtler, nosurer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

John Maynard Keynes

 

[pmbug]

3) “Critics”: people who question the viability of the status quo.
This group is convinced of a systemic error in the structure of the monetary system; from their point of view, most of the rescue measures of recent years only addressed the symptoms, not the root cause of the problem. ...

All fiat money systems break down eventually. They have all throughout history. I liken the game played by central banks to the old classic Shoot the Moon:

They are playing this game (metaphorically) with infinitely long rails. The ball is going to drop eventually.

 

[Zippyjuan]

All fiat money systems break down eventually. They have all throughout history. I liken the game played by central banks to the old classic Shoot the Moon:

They are playing this game (metaphorically) with infinitely long rails. The ball is going to drop eventually.

How have gold based systems performed? Have many survived into today?

 

[pmbug]

How have gold based systems performed? ...

I prefer a system where the markets impose practical restrictions on government and banks and not the other way around. Ron' Paul's original Competing Currencies proposal would give people (ie. the markets) the opportunity to protect themselves from malfeasance and that fact will constrain government and banks.

 

[Zippyjuan]

I prefer a system where the markets impose practical restrictions on government and banks and not the other way around. Ron' Paul's original Competing Currencies proposal would give people (ie. the markets) the opportunity to protect themselves from malfeasance and that fact will constrain government and banks.

We tried competing currencies. Check out the "free banking era". It was chaos.

 

[Paul799]

How have gold based systems performed?

Pretty good.
No currency crises

Have many survived into today?

Why do they have not survived?
Was it due to free currency markets or to the coercive powers of the Central Banks?

 

[Paul799]

Another Swiss Bank Can't Find Their Client's Gold

Egon von Greyerz: “Don’t let your bank hold your gold. They might not find it. A gold investor told us recently that his Swiss bank had moved the client’s gold from the the bank’s safe to a private vault in the name of the bank, in Zurich. The client was aware of this move. But then the problems started…

The gold was allocated and the client had the bar numbers. The client wanted to store the gold through our company and instructed the bank accordingly. But the gold wasn’t there any more. The gold was supposed to be segregated but the bank had stored it in the collective vault. And the client’s allocated, numbered bars were not to be found anywhere.

Presumably, the bank will accept liability and buy new bars for the client. But again this proves that it is not safe to keep your gold in a bank. We have regularly experienced similar problems with many different Swiss Banks, big or small.

https://kingworldnews.com/greyerz-another-swiss-bank-cant-find-their-clients-gold/

 

[Zippyjuan]

Pretty good.
No currency crises


Why do they have not survived?
Was it due to free currency markets or to the coercive powers of the Central Banks?

Great Depression happened with a Gold Standard. No crisis there. Recessions every few years (no currency or money system can avoid economic ups and downs).

 

[Paul799]

Great Depression happened with a Gold Standard. No crisis there.

Exactly.
No currency crises during the Great Depression.
Thanks for strengthening my point

 

[Paul799]

Currency crises and economy crises, two different things.

Economy crises... recession... depressions... how do you want to define it? Substantial / prolonged decrease of production of goods and services?
Anyway, they always existed and will always exist.

Currency crises is something different.
It means people lose trust in money.
Money loses purchasing power.

Currency crises is much worse than economy crises.
During economic crises, your little money can buy few things.
During currency crises, your lot of money can't buy anything.

Gold is a guarantee against currency crises, not - of course - against economy crises.

 

[Zippyjuan]

Currency crises and economy crises, two different things.

Economy crises... recession... depressions... how do you want to define it? Substantial / prolonged decrease of production of goods and services?
Anyway, they always existed and will always exist.

Currency crises is something different.
It means people lose trust in money.
Money loses purchasing power.

Currency crises is much worse than economy crises.
During economic crises, your little money can buy few things.
During currency crises, your lot of money can't buy anything.

Gold is a guarantee against currency crises, not - of course - against economy crises.

There was a currency crisis. That is why the government tried to seize people's gold and banned private ownership- to try to support the currency.

 

[Paul799]

Iran Launches Gold Backed Cryptocurrency “Covenant


Iran’s move to issue cryptocurrency backed by gold reserves is to provide a way for Iran to trade around US-sponsored sanctions, which have been increasing under Donald Trump’s push to dump the Obama-era “Iran deal.” The currency, known as Paymon in Iranian (“Covenant” in English) is based on the Stellar Lumens XLM network, an open-source codebase, and will trade in “special exchange offices.”

A initial 1 billion Covenants are expected to be issued in the initial offering and will be issued by the Central Bank to permit G2G trade. Countries such as China, Russia and Turkey – and several EU, Middle-Eastern and South-East Asian nations are also likely to accept the new virtual coinage.

The new Cryptocurrency may also be extended for commercial and public use. In a second roll-out phase, the convenant would be traded by Iranian citizens in the country, who are also cut off from the global SWIFT network, depriving many ordinary Iranians from receiving personal remittances such as pensions and allowances from the Iranian overseas diaspora.

The currency is not the first Cryptocurrency to be in use – that accolade falls to Venezuela, another oil-rich country under strict US sanctions.

Russia is also interested in the scheme and has also called for national currencies to be backed by proven reserves in the past.

China will want to take a different path in promoting the internationalization of the RMB Yuan as a currency, however is amenable to accepting asset-backed cryptocurrencies on a Government to Government basis.

The BRICS grouping of Brazil, Russia, India, China and South Africa are also examining the potential for the introduction of an asset-backed BRICS coin.

https://www.silkroadbriefing.com/news/2019/06/18/iran-launches-gold-backed-cryptocurrency-covenant/

 

[Paul799]

Ray Dalio
Dalio is the founder and co-chief investment officer of Bridgewater Associates, a hedge fund firm that manages about $160 billion in assets. The Westport, Connecticut-based company invests globally and has about 350 institutional clients including endowments, governments, foundations, pensions and sovereign wealth funds.


Paradigm Shifts

I think that it is highly likely that sometime in the next few years,

1) central banks will run out of stimulant to boost the markets and the economy when the economy is weak, and
2) there will be an enormous amount of debt and non-debt liabilities (e.g., pension and healthcare) that will increasingly be coming due and won’t be able to be funded with assets.

Said differently, I think that the paradigm that we are in will most likely end when
a) real interest rate returns are pushed so low that investors holding the debt won’t want to hold it and will start to move to something they think is better and
b) simultaneously, the large need for money to fund liabilities will contribute to the “big squeeze.”

At that point, there won’t be enough money to meet the needs for it, so there will have to be some combination of large deficits that are monetized, currency depreciations, and large tax increases, and these circumstances will likely increase the conflicts between the capitalist haves and the socialist have-nots.
Most likely, during this time, holders of debt will receive very low or negative nominal and real returns in currencies that are weakening, which will de facto be a wealth tax.

I believe that it would be both risk-reducing and return-enhancing to consider adding gold to one’s portfolio.

https://www.linkedin.com/pulse/paradigm-shifts-ray-dalio/

 

[Paul799]

Monetary Metals Don’t Need a "Gold Standard" Proxy System

Never mind the fact that the post-World War II Bretton Woods gold window that existed until 1971 was meant to ensure U.S. dollar hegemony in international trade – not sound money for the people.

Sound money has intrinsic value, is stable, is trusted, is fungible, and has widespread acceptance. It need not necessarily be gold, although thousands of years of history have shown the yellow metal ably fills that role – even today.

Often overlooked, even among some sound money advocates, is silver. It arguably has a longer history than gold of being circulated as money.
The Founders wrote a bi-metallic gold-silver standard into the United States Constitution.
Article 1, Section 10 makes it explicit: “No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts…”

The Coinage Act of 1792 defined a dollar in terms of silver. Specifically, a dollar was to be 371.25 grains (equivalent to about three-fourths of an ounce) of silver, in harmony with the Spanish milled dollar.

Even before the creation of the Federal Reserve in 1913, certain banking and political interests had worked to de-monetize silver.
In 1873, Congress moved to sideline the silver dollar. That sparked the so-called Free Silver Movement, which stood for allowing the supply of silver coins to be increased in accord with demand.

In 1893, populist orator William Jennings Bryan gave his famous “Cross of Gold” speech before the Democratic National Convention: “We shall restore bimetallism… If they dare to come out in the open field and defend the gold standard as a good thing, we shall fight them to the uttermost…by saying to them, you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.”
At the time, Bryan saw gold as the money of the elites; silver as the money of the masses. At the least, both were needed.

https://www.fxstreet.com/analysis/m...eed-a-gold-standard-proxy-system-201907171657

 

[Paul799]

SWISS BANK LOSES CLIENT’S GOLD

Don’t let your bank hold your gold. They might not find it. A gold investor told us recently that his Swiss bank had moved the client’s gold from the bank’s safe to a private vault in the name of the bank, in Zurich. The client was aware of this move. But then the problems started. The gold was allocated and the client had the bar numbers. The client wanted to store the gold through our company and instructed the bank. But the gold wasn’t there any more. The gold was supposed to be segregated but the bank had stored it in the collective vault. And the client’s allocated, numbered bars were not to be found anywhere.

https://goldswitzerland.com/swiss-bank-loses-clients-gold/



German Bank Refuses To Return Client’s 1/2 Tonne Of Gold

Following at least 10 similar reports to us of banks refusing to deliver clients’ physical gold bars, this week a very wealthy client sought to remove 500 kilos of his physical gold from a German bank for safekeeping in a secure, independent vault. The bank refused delivery of his gold bars.

https://kingworldnews.com/major-ale...t-refused-to-hand-over-clients-physical-gold/



A Swiss Foundation Cannot Get Their Gold Out Of Their Swiss Bank

“In that last KWN interview we drew particular attention to a German bank refusing to deliver 500 kilos of a client’s physically allocated gold. In this case, the 500 kilos only represented 10 percent of the client’s overall bank holdings. The condition laid down was that the client would first have to deposit an equal value of stocks, bonds, or cash to release the gold. Such a condition strongly suggested that the gold was in fact held in unallocated form and needed to be physically purchased.

Since drawing attention on KWN to this specific situation, we received many concerned phone calls where I advised people to do exactly what we suggested they do in our KWN interview, to test the water and to make a physical delivery request from their banks. As a result, we are now hearing of a slew of refusals to physically deliver anything of size.

So, we thought we would test the water. This week, a Swiss foundation sought delivery of their 420 kilos of gold (which is nearly 1/2 tonne of gold). They were refused. Seeking assistance, the bank was approached by a well-known vaulting partner with an offer to purchase the kilobars directly from the bank at a commercially acceptable premium to spot. This offer should have been immediately accepted as it would have been profitable for the bank. However, this offer was also refused, and the foundation was told to settle their gold account for cash. Clearly the foundation’s gold was not held by the bank in allocated form.

https://kingworldnews.com/wtf-is-go...t-refused-to-hand-over-clients-physical-gold/