Hyman: Money Printing “Good for Gold”

Release Date: 
Friday, May 23, 2014

Gold and Silver Prices

Gold prices ended the week nearly flat after an earlier gain of more than $10. Prices were mostly affected by a strengthening U.S. dollar and an unchanged Federal Reserve policy. (“Gold Declines as Dollar Strengthens Before Housing Data,” Bloomberg, 5/23/14.)

Gold finished the week at $1,293.90, up $0.20. Silver prices rose $0.13, finishing the week at $19.58.

Hyman: Money Printing “Good for Gold”

Financial writer Sean Hyman discussed billionaire John Paulson’s continuing belief in the value of gold in a diversified portfolio.

“Paulson knows that nothing has changed. He knows that our national debt continues to climb and that there's no real plan in place to turn that around...Those rising debts are good for gold and bad for the dollar. In addition to this, the Federal Reserve is still printing money and supporting the economy…Well, more money printing is good for gold, because gold can't be printed or diluted.”

“On top of this, there's turmoil in Turkey. Each day that passes we don't have any more resolution on Ukraine/Russia than the day before. China is crashing into Vietnamese ships and reclaiming territory that isn't rightfully theirs. They're beginning to drill for oil in territory that is not rightfully theirs…Moreover, food inflation is on the rise again. And that can cause more unrest in emerging market economies where they are the most sensitive to these rises in food prices…These are all pro-gold events. Now, here's the thing you have to realize about gold. Gold doesn't respond every day, every week or even every month to these things. But during the course of quarters and years gold responds very well to these events. So the gold investor must be patient and not easily rattled when gold doesn't respond near term like they feel it should.” (“Soros and Paulson Are Buying and Holding Massive Gold Positions,” Money News, 5/19/14.)

Rickards: Next Crisis Will Be “Ugly”

James Rickards, senior managing director at Tangent Capital Partners, issued a dire warning regarding the next potential financial crisis.

“‘The meltdown in 2008 was not a meltdown. It was sort of a half-meltdown.  Think of it as a bunch of dominoes falling. All the dominoes are going to fall, but if I drop a steel curtain between two dominoes, that's going to stop. That's what the Fed did.’”

“But the Fed's tactics didn't change the dynamics, Rickards maintained, as bad debt and leverage haven't gone away. ‘That's all still there. Except now, it's worse, because in 2008, what did we hear about? 'Too big to fail,' right? Well guess what, the five biggest banks in America today are bigger than they were in 2008…So everything about '08 that was too big to fail is bigger today. Those dominoes are still waiting.’”

“‘We're in a depression — not a recession — a depression.’…He warned that the deflationary forces from the depression and the inflationary forces from policy are pressing against each other. ‘They're fighting each other to a standstill, but that's going to snap, that's exactly like two tectonic plates crashing into each other…It's going to be ugly for investors, it's just a matter of time.’” (“James Rickards to Newsmax TV: 'Ugly' Financial Crisis to Jolt US Within 5 Years,” Money News, 5/22/14.)

The World Is Running Out of Gold: Gizmodo

Design and technology blog Gizmodo noted the growing depletion of the world’s gold supply which is fueled in part by the technology revolution.

“How much gold would you have if you stole every bit that's ever been mined? Not much—you'd be able to make a cube of solid gold with 60-foot sides. There just isn't that much gold in the world, and it's getting harder and harder to find it. In fact, our love of gadgets may be part of the problem.

“[W]'re only two decades away from exhausting the world's gold supply if mining continues apace. How could we be running out of gold? It's simple. As gold boomed in the 90s and 00s, the easy-to-access deposits were sapped of their supplies. Now, the gold being discovered is way deeper into the Earth, which means that discovering it takes a lot more work before it can be extracted.”

“As the BBC points out, all of the gold mined since the beginning of time has, in essence, been recycled: A piece of gold mined by the Romans may have been melted down into a gold bar in the 1800s, say, and may have eventually made its way into a consumer product like a gold watch.

“But all those gadgets and computers and electronics that require minute amounts of gold to function? They're changing that gold reuse pattern for the first time in history. Because so little gold is used in this tech, it doesn't make sense to recycle it. So while gold, like air, has remained a static resource on Earth, that's no longer true. Our gold resources will continue to deplete, one iPhone at a time.” (“The World Is Running Out of Gold,” Gizmodo, 5/22/14.)

India Set to Ease Restrictions

India’s newly elected leadership is set to begin easing restrictions on gold imports.

“The Reserve Bank of India and finance ministry officials will recommend that the new government relax strict gold import rules to head off a surge in illegal buying, officials with direct knowledge of the plan said. Last year, India imposed restrictions on gold imports, the second biggest import after oil, following a steep rise in the country's current account deficit…The incoming prime minister, Narendra Modi, who led the Bharatiya Janata Party (BJP) to a decisive victory in a just-concluded election, has indicated his willingness to remove the gold curbs.” (“Government officials ready plan to ease gold import curbs - sources,” Reuters, 5/21/14.)

Goldline’s Express IRA℠ Program

Many Goldline clients choose to include precious metals as part of their retirement planning especially during times of economic crisis and uncertainty.* Goldline’s Express IRA℠ allows clients to acquire precious metals on their schedule; they no longer have to wait for your self-directed IRA to be funded before getting started.

Goldline's Express IRA℠ not only provides clients with the ability to diversify their IRA on an expedited basis, clients can also qualify for Goldline's ground-breaking Two-Way Price Guarantee Program℠ when they acquire $10,000 or more of our exclusive bullion coins. When an Express IRA purchase qualifies for Goldline's Two-Way Price Guarantee Program℠ clients are protected on short-term upside and downside market movement: they can either call to reprice their coins if the selling price falls (up to a maximum of 28 days depending on the size of the purchase) or, if the selling price of the coins increase during the qualifying period, clients can call Goldline to acquire additional coins at the original selling price.

Goldline provides a wrap-up of the week's precious metals news along with important commentary on the American Advisor Week in Review audio program. Listen to the show below:

*Federal IRA tax laws are complex and may change from year to year. Goldline believes it is appropriate to have 5%-20% of retirement portfolio allocated to precious metals. Other individuals and institutions may recommend different percentages. As with any investment, you should consult your tax advisor before making a decision regarding precious metals IRA investments.

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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