Bernanke The Return Of The U.S. To The Gold Standard
Posted: April 1, 2013 Filed under: Bernanke, Central Banks, Forecasts, Gold | Tags: April Fools Day, Ben Bernanke, Bernanke, Chairman, Federal Reserve System, Gold Standard, Great Depression, United States 1 Comment
Ben Bernanke dollar (Photo credit: Gage Skidmore)
here is the headline for Gold Bugs and Conspiracy Advocates –
it is not the position of THE AMP
Bernanke Announces Return To Gold Standard
For years, investors and analysts have heavily criticized the actions of Federal Reserve Chairman Ben Bernanke. Bernanke has earned himself a slew of nicknames for his money printing, with the most popular being “Helicopter Ben.” After studying the Great Depression for many years, Bernanke felt that the reason the U.S. slipped into such a rough patch was because of the lack of money supply in the economy. This is one of the main reasons that he has maintained his quantitative easing programs that have involved exorbitant money printing.
But after pumping trillions into the system, Bernanke seems to have found himself cornered. National debt is at an all time high, and the Chairman has decided that a bold and abrupt change is needed if the U.S. wants to continue on the path to prosperity. Late yesterday, Bernanke made the shocking announcement of the return to the gold standard, which was abandoned decades ago. “The safest way for the economy to proceed is through a new system that holds more accountability for the U.S. dollar and its value in the global markets,” Bernanke said in his statement [for more gold news and analysis subscribe to our free newsletter].
The Gold Standard
In something of a mea culpa moment, the Chairman admitted that while his increased money supply has done well to prop up markets for the time being, it is not a sustainable solution. The reversion to the gold standard, he hopes, will allow the economy to march forward in a more stable manner. “The flexibility of a fiat currency has guided the U.S. through the toughest era since the Great Depression, but the time has come for a change,” said Bernanke.
The move comes after a wave of fears sparked by the Cyrpus banking scare. At a time when investors have little to no confidence in their local bank, the Chairman wanted to ensure that savings and investments will always be safe on American soil, hopefully giving citizens peace of mind to continue to trust local financial entities [see also 50 Ways To Invest In Gold].
One important thing to note is that the timeline for the return will be relatively drawn out and smooth. The Fed mandates that by 2015 all currency must be backed by at least 30% of its value in gold. That figure will increase to 50% by 2017 and to 100% by 2020. The move brings up a number of big questions, like whether or not the Fed will audit For Knox or other institutions that conspiracy theorists have been attacking for years. For now, we will have to wait for more specifics, but investors can already begin preparing.
Prepping for a Gold Standard
With a hard seven-year timeline, investors can already begin allocating to gold as this move will surely spark interest in the commodity. Some may choose to utilize stocks and ETFs, but physical bullion will likely be the most popular, as this will likely spark fears of a gold confiscation in order for the Fed to have enough bullion to justify the move. While a confiscation is extremely unlikely, there are those who still fear such a move.
The final question that remains to be seen is what happens in 2014 when Bernanke’s term ends. The Chairman has already hinted that another term is likely not in the books for him, so what will happen when someone else takes the reigns? Hopefully the change will be relatively seamless, but it will be worth keeping an eye on [see also Investing In Gold: The Definitive Guide].
The Bottom Line
With such monumental news coming seemingly out of nowhere, there is something that investors need to keep in mind. Today is April 1st April Fools day. Let’s be honest, Bernanke is going to print money until the U.S. runs out of ink. But for a few paragraphs, it was fun to live in the fantasy world of a gold standard reversion. Happy April Fools Day to all, feel free to get your friends and co-workers with this article!
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Currency Wars
Posted: February 13, 2013 Filed under: Central Banks, Federal Reserve, Forecasts | Tags: Credit Suisse, Currency war, Exchange rate, Financial Times, Foreign exchange market, Gold Standard, Niall Ferguson, Richard Nixon Leave a comment
Great Depression Food Line (Photo credit: Kevin Burkett)
Yesterday, the G7 issued a statement about everyone’s favourite topic: Currency Wars.
The statement was seen as very weak and of no implication at all: “We, the G7 Ministers and Governors, reaffirm our longstanding commitment to market determined exchange rates and to consult closely in regard to actions in foreign exchange markets. We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates. We are agreed that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will continue to consult closely on exchange markets and cooperate as appropriate.” To compare what’s going on today with the “currency wars” of the 1930s may be wrong.
Economic historian, Niall Ferguson, recently highlighted in the Financial Times (via Credit Suisse), “Back in the 1930s, it was obvious who was waging a currency war. Before the Depression, most countries had been on the gold standard, which had fixed exchange rates in terms of the yellow metal. When Britain abandoned gold in September 1931, it unleashed a wave of competitive devaluations. Today, however, we live in a world of fiat money and mostly floating rates. The last vestige of the gold standard was swept away in August 1971, when
Richard Nixon suspended the convertibility of the dollar into gold. For one country to accuse another of waging a currency war in 2013 is therefore absurd. The war has been going on for more than 40 years and it is a war of all against all.”
Gold Standard Ventures
Posted: February 11, 2013 Filed under: Exploration Companies, Speculative | Tags: Carlin Unconformity, Dave Mathewson, Drill, Gold Standard, Gold Standard Ventures, Nevada, The Ventures, TSX Venture Exchange Leave a comment
English: Nevada Test Site. Big Hole Drilling. (Photo credit: Wikipedia)
GSV
TSX-V : $1.13
Nevada-focused gold explorer, Gold Standard Ventures, announced Thursday that recent drilling has significantly expanded the gold envelope along the North Bullion Fault Zone (NBFZ) on its Railroad Project, Carlin Trend, Nevada.
Phase 1 drilling results extend the 1-3 g/t envelope of gold mineralization at NBFZ to the north and to the south by more than ~500 m, confirming continuation of mineralization to the south. Management highlighted that the gold envelope now appears to stretch for a total of more than ~1,000 m, and it remains open in multiple directions.
The high grade zone that lies
within this envelope ranges 5-15 g/t gold and has been traced to date for about 300 m. Commenting on the results, Gold Standard’s Vice President of Exploration, Dave Mathewson, stated, “Phase 1 drilling has affirmatively answered the question as to whether or not the NBFZ deposit has the size and continuity to support a large, Carlin-style deposit. At this point, we understand enough about the deposit’s controls to begin the process of definition drilling, initially in the central portion of the deposit. We expect the change in drill orientation to cut additional high grade feeder zones.”
Gold Standard Ventures
Posted: January 24, 2013 Filed under: Exploration Companies | Tags: Area, Copper, December 2012, Gold Standard, National Instrument 43-101, Nevada, Precious metal, TSX Venture Exchange Leave a comment
Campaign poster showing William McKinley holding U.S. flag and standing on gold coin “sound money”, held up by group of men, in front of ships “commerce” and factories “civilization”. (Photo credit: Wikipedia)
(GSV : TSX-V : $1.08)
Shares of Nevada-focused Gold Standard Ventures were moving higher after announcing assay results from a new, previously unknown zone of copper and silver mineralization in the historic Central Bullion target area.
Management highlighted that hole RRB12-03 intersected 65 feet of 3.06 oz silver per short ton (Ag/st) with 0.80% copper (Cu) and 0.08% molybdenum from 45 to 110 feet within a 250 foot thick zone of 1.3 oz Ag/st and 0.25% Cu, and a second higher-grade zone of 44 feet of 6.42 oz Ag/st with 2.48% Cu from 913 to 957 feet within a 187 foot thick zone of 1.7 oz Ag/st and 0.78% Cu.
Up to now, the Central Bullion target area has received only limited exploration due to drill permitting limitations. With the Plan of Operations finalized in December 2012, GSV can now proceed with a more aggressive drilling program. Commenting on the new results, GSV’s VP of Exploration, Dave Mathewson, stated “The Central Bullion target area has been of compelling interest from the onset of our Railroad exploration program because of the exceptional high grades of metals historically mined in the area combined with the presence of a large area of strong surface rock and soil geochemistry, and the limited amount drilling, especially with core, conducted in this target area.”
He further highlighted, “RRB12-03 is by far the best hole we have drilled in the area, and it appears to be indicative of an important new zone of mineralization.”
Gold BUY Signals Flashing
Posted: September 20, 2012 Filed under: AMP Books and Seminars, Forecasts, Gold | Tags: August, Denver Gold, Deutsche Bank, Gold Standard, Great Depression, Milton Friedman, Morgan Stanley, Precious metal Leave a comment
As Milton Friedman once said, “Only government can take perfectly good paper, cover it with perfectly good ink and make the combination worthless.”
In its long-term asset return research charting economic history in comparison to current markets, Deutsche Bank illustrates multiple ways how “the world dramatically changed post-1971 relative to prior history.” While the research firm makes it clear that returning to the gold standard would be “disastrous,” DB finds that the “lethal cocktail of unparalleled levels of global debt and unparalleled global money printing” are relatively new governmental developments.
Prior to the last four decades, deficits only occurred in extreme situations of war or severe economic setbacks, such as the Great Depression. Balanced budgets were a “routine peace time phenomena in sound economies.” Since 1971, surpluses have been rare. The U.K. has had an annual budget deficit 51 out of the past 60 years and Spain has had 45 years of deficit spending over the past 49 years, according to DB.
Many developed countries are in a predicament, as fiscal austerity attempts have led to weaker-than-expected growth in Greece, Ireland, Portugal, Spain and Italy. DB asks, “Can we really be confident that the developed economies that we have created over the last 40 years have the ability to withstand the effects of austerity and cut backs? Do our modern day econometric models have the ability to understand the impacts of fiscal retrenchment after a financial crisis having been calibrated in a period of excessive leverage?”
Countless discussions over fiscal and monetary policies will carry on, but time will tell. Ian McAvity, editor of Deliberations on World Markets, says, “Excessive debt creates deflationary drag that they repeatedly fight by throwing fresh ‘liquidity’ or ‘stimulus’ at, to debauch the currency of that debt … For private investors, gold is the best medium for self-protection and preservation of purchasing power in my view.” I agree. Rising money supply, declining purchasing power and annual deficits are giving the all-clear to include gold in your portfolio.
Many others appear to agree with us, as sentiment has shifted in favor of the metal in recent days: According to Morgan Stanley’s survey of 140 institutional investors in the U.S., gold sentiment was at its highest bullish reading since July 2011 and the largest month-over-month increase during the survey’s three-year history!
So, gold investors, if you haven’t put in your orders, consider getting them in quickly, because the bulls are buying. Credit Suisse saw “massive inflows” into gold exchange-traded products in August after experiencing significant outflows compared to crude oil and the broader market in March, April, May and July. August shows a clear preference toward gold.
We generated lots of interest when we showed our standard deviation chart a few weeks ago, so I updated it through September 13. Although gold has been on a tear recently, breaking through the stumbling block of $1,600 and climbing to $1,770 by Friday, bullion still looks attractive, with a low sigma reading of -1.7.
A look at a histogram shows how many times gold bullion historically fell in this sigma range. Today’s sigma of -1.7 has occurred only about 2 percent of the time. Bernanke and Draghi only made the decision more obvious for gold and gold stock buyers.
n 1988, M1 was $800 billion, gold was $500/ounce. In 2008, M1 doubled to $1600 billion, gold also doubled to $1000/ounce. The recently announced QE3 will once again triple the federal reserve’s balance sheet (which is similar to M1) to $5 trillion in two years from now, which means gold will again triple to an estimated $3200/ounce in 2 years from now.
Posted by jackbassteam on September 19, 2012
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RAY DALIO: There’s No Sensible Reason To Not Own Gold
Posted: September 12, 2012 Filed under: Gold, Precious Metals | Tags: CNBC, Council on Foreign Relations, Gold, Gold Standard, Hedge fund, Japan, Maria Bartiromo, Ray Dalio 1 CommentCampaign poster showing William McKinley holding U.S. flag and standing on gold coin “sound money”, held up by group of men, in front of ships “commerce” and factories “civilization”. (Photo credit: Wikipedia)
Ray Dalio, one of the most successful hedge fund managers of all time, spoke with CNBC’s Maria Bartiromo at the Council on Foreign Relations this morning.
The hedge fund god made some interesting comments on gold.
Here’s what we’ve transcribed from his interview. (emphasis ours)
“Gold is a currency. Throughout the history, I won’t tell you in length, money was like a check in a checkbook and what you would do was get your gold and gold was like a medium. So gold is one of the currencies– We have dollars, we have euros, we have yen and we have gold.
And if you get into a situation where there’s an alternative in this world, where we’re looking at ‘What are the alternatives?’ and the best alternative becomes clearly one thing, something like gold, there becomes a risk in that.
Now it doesn’t have the capacity. The capacity of moving money into gold in a large number is a extremely limited. So the players in this world that I have contact with that move that money really don’t view gold as an effective alternative, but it could be a barometer and it is an alternative for smaller amounts of money.
To this, Bartiro
asked if he owns gold.
“Oh yeah. I do. I think anybody, look let’s be clear, that I think anybody who doesn’t have…There’s no sensible reason not to have some. If you’re going to own a currency, it’s not sensible not to own gold. Now it depends on the amount of gold. But if you don’t own, I don’t know 10%, if you don’t have that and that depends on the world, then there’s no sensible reason other than you don’t know history and you don’t know the economics of it.
But, I. Well, I mean cash. So cash…view it in terms as an alternative form of cash and also view it as a hedge against what other parts of your portfolio are. Because as traditional financial assets, and so and in that context as a diversifier, as a source of that, there should be a piece of that in gold is all I’m saying.
“But anyway, in that notion, what I’m talking about here, in terms of your reflection, that putting aside gold, I don’t want to draw an inordinate amount of attention toward gold, but I would want to say in this world of liquidity and the world trying to find out ‘What is the place?’ in which also think about it for basically you get no interest rate. So the question is, ‘Is cash under the bed better than treasuries?’ You could be quite close to cash being under the bed better than treasuries, right? Because essentially you know you’ll get it back if it’s under the bed or in a bank and they’re not giving you any money on it anyway.
And so when you’re looking at an international investor, someone like I don’t know a Chinese investor or something, and you say ‘I’m going to do this and you’re going to give me zero interest rate for that.’ We are at one level and the question is ‘does there become emerging some clear alternative?’ And if there becomes a clear alternative we have to worry about that because that will be the notion of let’s say Japan. If we think, in Japan, there’s all this Japanese save and they buy their bonds and that can go on for a very long time and it can go on here for a very long time. The question is ‘what are the alternatives?’ and that is create shifts.
Watch the full hour long video here:
Read more: http://www.businessinsider.com/ray-dalio-on-gold-2012-9#ixzz26I5aYYZE
Gold Poised To Break Above $ 1700
Posted: September 3, 2012 Filed under: Central Banks, Forecasts, Gold, Politics, Precious Metals, Quantitative Easing, The Federal Reserve | Tags: Ben Bernanke, Commodity Futures Trading Commission, Federal Reserve, Federal Reserve System, Gold dollar, Gold Standard, January, Republican National Convention, Short (finance), Standard & Poor, United States 1 Comment
US Gold Standard Balance (Photo credit: hyperion327)
Gold and silver prices posted very strong finishes to the end of last week, and look like they could at long last be at the start of a significant trending move higher. Gold gained 3.46% over the week, with silver recording an impressive 8.98% weekly gain. The white metal has broken above an important resistance level at $30, and judging from the price action this morning looks like it could launch a quick assault on $32.50 – a level that marked stubborn resistance for much of the first half of this year.
Our Exclusive Richardson / Bass quant continues to forecast $ 2000 gold before the next 12 months – and the momentum of the call for stimulus is likely to increase after Fridays job report. Forecasts are now at the 125,000 level – down from the last month and confirming Ben Bernanke‘s gloom at the speed of the recovery.
Shorts May Be forced To Cover
Over at KingWorldNews Dan Norcini notes the rash of short covering that took place in the silver market last week. He points to $35-$35.50 as the last “line in the sand” for these speculative shorts, and thinks that we could see a huge new influx of money on the long side of the market if this price level is bested. $40 will then be in play again.
The story is similar in gold. If the yellow metal rises above $1,700, we can expect to see speculators dashing to cover their short positions. Aside from the increasing likelihood that the Federal Reserve is getting ready to launch another money printing scheme within the next few weeks, gold bugs have also been encouraged by chatter about the Republican National Convention discussing a platform calling for a “gold commission” to study the feasibility of relinking the US dollar to gold.
Similar congressional commission was convened in the early 1980s, and to nobody’s great surprise endorsed the (non gold standard) status quo. Given the restraints that a genuine gold-dollar link would impose on federal spending, it is in fact almost inconceivable to imagine Washington voluntarily agreeing to return to a gold standard. However, the talk about gold gives impetus to more investors to become holders of bullion and the gold mining shares . The rise of the commodity price and constant news about the sector becomes a self fufilling prophesy for driving the price higher.
Lather, rinse, repeat” as the old saying goes. The problem (one of many), as we’ve discussed on this site before, is the law of diminishing returns associated with money printing: the more you do it, the bigger and bigger the stimulus doses have to get in order just to achieve the same “high” as last time. The more central banks resort to this, the more painful the inevitable economic correction, which makes going “cold turkey” on the money printing even more difficult.
Bloomberg Reports :Speculators Buying
Speculators increased bets on rising gold prices to the highest since March as mounting speculation that the Federal Reserve will expand its record stimulus drove the metal to its second-biggest monthly gain this year.
Money managers raised their net-long positions by 19 percent to 131,687 futures and options contracts in the week to Aug. 28, U.S. Commodity Futures Trading Commission data show. Combined bets across 18 U.S. commodities fell 1.9 percent to 1.3 million contracts, still near the highest in 15 months. The Standard & Poor’s GSCI Spot Index of 24 raw materials gained for the fifth straight week, the longest rally since June 2011.
Gold Wagers Jump to 5-Month High as Fed Spurs Rally
Sergio Dionisio/Bloomberg
Gold climbed 4.5 percent last month, exceeded this year only by January’s 11 percent jump.
Gold climbed 4.5 percent last month, exceeded this year only by January’s 11 percent jump. Photographer: Sergio Dionisio/Bloomberg
Investors accumulated record holdings last week in exchange-traded products backed by gold, exceeded only by the U.S. and Germany when compared with national reserves. Fed Chairman Ben S. Bernanke pledged in an Aug. 31 speech to promote growth with “additional policy accommodation as needed.” The price of the metal rose 70 percent as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008 through June 2011.
Anytime they’re putting more money into the economy, it’s good news for gold,” said Dan Denbow, a fund manager at the $1.8 billion USAA Precious Metals & Minerals Fund in San Antonio. The outlook for monetary stimulus “allows the risk-on trade to come back in to the market.”
“As long as there is a worldwide monetary bias toward liquidity, easier money, quantitative easing and other measures, the underlying environment for an increase in commodity prices is favorable,” said Michael Cuggino, who manages about $17 billion at San Francisco-based Pacific Heights Asset Management. While Bernanke “didn’t really say anything new, he kept the door very, very open to further action down the road,” he said.
Gold Standard Ventures – Nevada Leases
Posted: August 31, 2012 Filed under: Exploration Companies, Gold, Speculative | Tags: Elko County Nevada, Geology, Gold Standard, National Instrument 43-101, Nevada, Newmont Mining Corporation, The Ventures, TSX Venture Exchange Leave a commentCampaign poster showing William McKinley holding U.S. flag and standing on gold coin “sound money”, held up by group of men, in front of ships “commerce” and factories “civilization”. (Photo credit: Wikipedia)
Gold Standard Ventures* (GSV : TSX-V : $1.64)
Gold Standard Ventures bucked the trend, rallying after releasing additional information on leases it entered into (originally announced on March 28, 2012) with various land holders encompassing approximately 4,128 net mineral acres of land adjacent to the company’s flagship Railroad gold project in Elko County, Nevada.
The leases grant Gold Standard the exclusive right to explore, mine and develop varying percentage holdings in portions of what the company calls the “South Railroad Project,” which includes the Pinon district. Specifically, these leases give them control of approximately 32% of strategic sections in the Pinon district, which includes the historic South Bullion and Trout Creek deposit (together known as the Pinon deposit).
Gold Standard highlights that the geologic and exploration data exist for them in recognized peer-reviewed publications. For the Trout Creek Deposit, a paper entitled “Geology of the Trout Creek Disseminated Gold Deposit, Elko Co. Nevada” authored by Phillip Jackson and Joseph Ruetz states that “preliminary geologic reserves are estimated at 150,000 contained ounces of gold and mineralization is open-ended. Gold and silver ratio is about 1:8.”
Another paper entitled “Geology and Mineralization at the South Bullion Deposit, Pinion Range, Elko Co., Nevada: Implications for Western United States Cenozoic Tectonics” authored by Borden Putnam and Edmund Henriques states that “Newmont Exploration Ltd (NEM) has identified a drill inferred geologic resource exceeding 20 million tons at an average grade of 0.026 oz/st Au, based on 0.01oz/st cutoff, 20 foot minimum bench, and a density of 13 cubic feet per short ton, for a total of 520,000 contained ounces.”
Gold Standard cautions that these historic resource and reserve estimates were derived from data assembled prior to the introduction of National Instrument 43-101. Note, the remaining interests in these lands are held by others including Manhattan Mining Company on behalf of Royal Standard Minerals.
Gold Standard President and CEO Jonathan Awde stated, “As matters now stand, development of Pinon will have to be undertaken jointly by its owners. We look forward to achieving a mutually beneficial arrangement for all parties to advance the Pinon deposit.”
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