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GOLD AND SILVER SHINE AS STRATEGIC SAFE HAVEN INVESTMENT ALTERNATIVES
LBMA – The London Bullion Market Association Precious Metals Conference wrapped up this year in Shenzhen, China with delegates looking forward to increasingly higher Gold prices.
Last year’s conference poll reported the forecast by attendees was for gold to rise to $1532 per ounce at a time when gold was endeavoring to find support at $1200 per ounce. Gold did that and more with it’s profound rally of 20% for the year as it hit a six-year high above $1550 per ounce.
This year an unofficial poll of LBMA attendees reported many delegates see gold continuing its strong upward rising trend toward $1658 per ounce, 11% up from current prices.
Delegates expressed an even stronger outlook for Silver rising to $23 per ounce, a three-fold rally at 32%.
Other strategic reasons to look to the precious metals for safe haven assets are the concerns over a looser monetary policy along with increasing fears of recession, and soaring national and global debt. These along with many other geopolitical issues continue to weigh heavily on investor’s minds, and gold and silver stand stalwart as as wise investment alternatives.
The consistent and increasing erosion of the U.S. dollar’s status as the world’s reserve currency is a present and impending threat, and runs tandem with the strong and growing intent from the East and other nations for what the Chinese Xinhua news agency called a ‘de-Americanized world’.
We have no further to look, than to the quiet yet continuous massive stockpiling of physical gold by China, as well as China’s acquisition of some of the largest gold vaults in the world and China’s gradual unrelenting internationalization of their currency, the Yuan.
According to Britain’s Daily Telegraph, “China wants its currency to replace the dollar in global commodities trading and a growing number of people are seeing China’s gold moves as a means to promote the Yuan as the world’s reserve currency, and large reserves of physical gold backing the Yuan would certainly bolster market confidence.”
China regularly imports gold from Hong Kong, and even Russia, which is also expanding its gold reserves at a remarkable pace, is also supplying Beijing with many tons of gold bullion yearly. Yuri Soloviev, First Deputy President and Chairman of the VTB, one of the leading universal banks of Russia stated that VTB would contribute as much as possible to developing and facilitating trade relations between the two countries as they believe that the Chinese market opens up long-term opportunities for Russian business.
In an interesting twist China imports gold from Switzerland, which has acquired massive amounts of bullion form bankrupt Venezuela and according to a report by Latinvest’s Russ Dallen, “The Swiss Federal Customs Administration reported that Venezuela had shipped many tons of gold to Switzerland.”
China’s love for gold spans many generations. The Chinese people love gold, and US Global Investor Inc., CEO, Frank Holmes even calls this the “Love Trade”.
China is the world’s largest market for gold, and the world’s largest consumer of gold, mainly through jewelry purchases, and demand is rising. During the Chinese New Year hundreds of millions of Chinese travel to visit family and enjoy vacations, and gold is one of the most popular gifts, and demand at this time is so immense that it even influences the global price of gold.
China’s profound quest for ever-greater quantities of gold does not stop there. China Has been acquiring gold and silver mines around the world, and according to the Nikkei Asian Review, China sees overseas mines as part of the country’s long term strategic goals of expanding its economic influence and building up its manufacturing might.
In regards to rare earth metals, Chris Berry, president of House Mountain Partners recently reported that since China effectively owns the entire supply chain of rare earth battery metals, China could easily weaponize the rare earths to retaliate against the United States. This along with their tremendous growing acquisition of physical gold bullion is growing China’s power.
Even Canada’s Barrick Gold, the world’s largest bullion producer, said it would expand cooperation with China’s Shandong Gold Group in developing gold mines, and the two companies are building on a deal struck in April 2017 under which Shandong Gold acquired 50% of Barrick’s Veladero mine in Argentina.
But there is yet an even more important reason China is stockpiling gold, according to Takahiro Morita, chief of Morita & Associates, a gold and platinum market research company, “As the world’s leading gold consumer, China wants to gain the power to set gold prices in the future.”
The Nikkei Asian Review said, “China’s Belt and Road Initiative to develop a network of international trade routes, targets wide areas of Eurasia, including major gold consuming countries as India and Kazakhstan.”
China has also been acquiring some of the world largest gold vaults. According to Bloomberg, the ICBC Standard Bank Plc expanded its push into London’s precious metals market by agreeing to buy one of Europe’s largest vaults from Barclays Plc.
ICBC Standard, formed after ICBC – Industrial and Commercial Bank of China Ltd., China’s biggest bank, bought a controlling stake in Standard Bank Plc’s global markets business.
According to Tyler Durden in Zero Hedge, Fosun International, China’s largest private-owned conglomerate which invests in commodities, properties, and pharmaceuticals purchased JPM’s iconic former headquarters, a tower build by David Rockefeller at 1 Chase Manhattan Plaza, which is also the building that houses the firm’s commercial gold vault, which is the largest in the world.
Eric Sprott, a Canadian billionaire businessman, said, “ In 2008, behind the scenes, everybody knew what was going on before Lehman failed. You could smell it coming. You can now smell another banking crisis happening.” and ”even the BIS (Bank for International Settlements) stated in one of their annual reports that ‘The process of central banks printing money would clearly end in failure.’ This is the central bank of central banks saying it.” And, “There is a shortage of physical gold.“
Peter Schiff, founder of Euro Pacific Capital, Inc., said, “When the dollar became the world reserve currency [in 1944], the U.S. was a fundamentally different country than it is today. At that time, the dollar was backed by gold. Everyone holding dollars could exchange it for gold at a present rate. Gold was available on demand, so the dollar was as good as gold. In that period of time, the US was the world’s biggest creditor nation. It had a huge trade surplus which it invested in the rest of the world.” “We are now the world’s biggest debtor, and the dollar is backed by nothing. We have a mountain of debt.”
This compounding current of discontent with the status quo is all the more reason why investors would be wise to diversify by adding some precious metals to their portfolio for safety and peace of mind.
Michael Pento, President and Founder of Pento Portfolio Strategies and Author of the book, “The Coming Bond Market Collapse”, reported “ The gradual erosion of the U.S. dollar’s status as the world’s reserve currency has been greatly hastened of late.” And “Our addiction to debt and cheap money have finally caused our major international creditors to call for an end to dollar hegemony and to push for a ‘de-Amerianized’ world.”
Pento further said, “It is of supreme importance that investors now take steps to protect their portfolios from the de-crowning of the U.S. dollar as the world’s reserve currency.” And, “The masses will turn to gold in a way that has never been seen before in history, and this will create an upside explosion in gold that will shock the world.”
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