by David Smith, Money Metals:
GLD (SPDR Gold Shares NYSE) is the world’s largest gold-centric Exchange Traded Fund (ETF). On Friday June 21, 2019 – one day after The Gold and Silver Volcano is Ready to Erupt was posted on this site – a record single day’s inflow (gold buying) of over $1.5 billion took place.
This stampede, led by hedge funds and “algos” (automated computer buy/sell programs based upon volume flows and trigger price points) involved dollar amounts substantially eclipsing the record set during the 2008 global panic.
The price of gold rose to a 6-year high, left a series of gaps on the way up, and smashed through all sorts of technical “resistance” points on traders’ charts around the globe.
At the same time, silver – almost unnoticed because its rise was relatively muted – broke out on the strongest volume since 2011, printing its second highest Up Volume ever!
So what is going on? When a major market movement like we witnessed in late June takes place, everybody looks for an answer. And everyone has an opinion.
But the only opinion which really matters – that of the Market – usually takes a while to reveal itself. David Morgan with a track record in resource sector prognostication as good as any in the business, never fails to remind his readers who the real guru is: Mr. Market him/herself. David wrote,
I certainly have my opinions, based upon decades of trading, research, and experience. But no matter how strongly I feel about a given situation, I never hesitate to step back and see if price action supports what I think is taking place.
Whether you’re an individual investor, a giant brokerage firm, even a sovereign wealth fund, or a central bank, it helps to keep in mind the fact that – sooner or later – the market always has the final say.
In a Money Metals interview archived here Steve Forbes recently commented:
Gold is like a measuring rod, a ruler. It just measures value. It’s not using gold coins to buy stuff at Walmart. It’s like 12 inches in a foot or 60 minutes in an hour. And it’s worked for 4,000 years when people have done it and done it right…
Gold keeps its intrinsic value better than anything else. When you see the nominal price change, that’s not the value of gold changing, that’s the value of the dollar or whatever currency you’re talking about, changing in value. Gold is the constant, like the North Star.
On a number of occasions, Porter Stansberry has posted in the public domain for readers (of which I am one) via his Stansberry Digest, lengthy, no-holds-barred essays focusing on systemic risk – and the potential for ensuring against or profiting from it.
Recently, he wrote just such an essay. The title, “The Most Important Digest Porter Has Ever Written?” is not an exaggeration.
Part of his premise is that as “the expected real return (after inflation)” by 10-year bond holders drops below 2%, the system becomes unstable.
If it falls below zero – as now seems likely, interest rates “invert” – with rates on short term fixed-income securities (e.g. bonds) issued by the U.S Treasury exceeding long term rates.
This harbinger of recession causes the Fed to respond by “printing” more money.
The extra currency creates financial bubbles and massively more debt before the bubbles themselves inevitably collapse. It also generates enormous global demand for gold.