3 Minute Gold News – Jim Rickards – July 11, 2016

3 Minute Gold News

A Quick Read for Busy People

A synopsis of an interview with Jim Rickards, New York Times bestselling author of The Death of Money, Currency Wars, and the newly released bestseller The New Case for Gold by Egon von Greyer at Gold Switzerland.

Jim is the editor of Strategic Intelligence, Chief Global Strategist for West Shore Funds, former general counsel for Long Term Capital Management, and a consultant to the U.S. Intelligence community and U.S. Department of Defense.

by: Elaine Diane Taylor

Gold Master Class Interview

Topics:

Gold Supply & Demand
Loss of Confidence in Central Banks
Gold & Silver Markings
Inflation
Getting Rid of Debt

 

Jim Rickards

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Interview Link

 

 

GOLD SUPPLY & DEMAND

The majority of gold bars in the world are produced in Switzerland.

The drivers for the price of gold are:

1. Supply and Demand

Gold has been moving from the west to the east. It’s been leaving vaults in New York and London and going to vaults in Shanghai and elsewhere in the world, mostly in China.

What people don’t understand is that the gold stops in Switzerland along the way.

The older bars that were of a lesser purity, along with “scrap” gold which is jewelry, and “dore” from the mines, all comes to Switzerland to get refined into the new standard — 99.99% pure and usually in 1 kilo bars.

The old standard was a 400 oz. bar and the new stardard is a 1 kilo bar.

Refiners are saying they’re seeing shortages of gold.

They have a demand and a waiting list of people who want to buy it  but they’re having trouble sourcing the gold.

One of the major refiners in Switzerland told Jim that they can’t get dore, which comes from the miners and is about 80% pure. The refiner is still operational because they’re processing scrap gold, but they can’t get dore.

The vaults in England work on a LIFO basis, which is Last In First Out. So newer bars with dates in 2013 or 2014 are put into the vaults last and then come out to be sold first before the older bars.

Refiners are telling Jim that they’re seeing bars with dates from the 1980s. This means the vaults are sending older bars to the refiners because the newer bars have already been sold.

That gives you an idea of the shortages.

Just on supply and demand fundamentals the price of gold should be going up substantially.

2. Declining Confidence in Central Bank Money

Gold is a form of money. Sometimes it acts as a commodity or an investment, but it’s money and competes with other forms of money.

The dollar is money. The euro is money. The yuan is money. Gold is also money.

People are losing confidence in the other forms of money.

When the dollar price of gold goes up it means the value of the dollar is going down. A higher price for gold means that it takes more of the other kinds of money, dollars or yen for example, to get a quantity of gold.

A doctor uses a thermometer to test a patient’s health. The U.S. dollar price of gold is like a thermometer taking the central bank’s temperature and testing its health — it measures confidence in the central bank.

Right now that confidence is being lost.

The central banks can’t get out of the problems they’re in. They’ve proven monetary policy will not fix the problems.

It’s only going to get worse which means the dollar price of gold is going to go much higher.

 

GOLD & SILVER MARKINGS

Dollar bills have markings and so do gold and silver ingots.

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The standard delivery bar for silver is 1,000 oz. (30kg), but they’re never exactly 1,000 ounces. They are each weighed individually.

Ingots are marked with the name of the refinery, the purity (99.99% is the highest purity you can buy), a stamp of the assayer certifying the purity, the year it was refined and the serial number of the bar.

By using the serial number and the refiner’s stamp you can always trace the bars.

Newly refined silver is very shiny while bars that are a few years old will get very dirty and black.

Gold bars always look the same no matter how long ago they were refined.

Screen Shot 2016-07-10 at 10.13.03 AMWhen you own gold or silver in a vault you can get the serial number that’s stamped on your bar and know it’s yours.

When you buy gold and silver you always need to buy it through the LBMA (London Bullion Market Association) chain of integrity.

Never buy it from a street vendor or someone you don’t know.

If you deal within the LBMA chain of integrity you will never get a fake bar.

The new standard for a gold good delivery bar is 1 kilo, and it is exactly 1 kilo (32.15 oz).

Sometimes a gold bar will also be stamped with the name of the company that had it made, such as the UBS bank.

 

$10,000 GOLD?

The price prediction of $10,000 for an ounce of gold is based on the implied non-deflationary price.

That means you take the money supply for the world (called the Global M1) and back it with 40% gold.

Historically that’s a pretty high number to back the money supply with. In the 1800s England backed theirs with 20% gold. In the 1900s the U.S. had about 40% backing with gold.

If you take the official gold in the world, about 35,000 tonnes, and then take the Global M1 and divide it by the total gold, you come out with $10,000 per ounce for the gold.

That’s the price that gold would have to be to restore confidence in the monetary system without causing deflation.

You could price it at $1,000 per ounce but that would deflate the value of the money supply and you’d have a repeat of the Great Depression.

Nobody wants that and monetary experts understand it.

The $10,000 per ounce figure would be in today’s dollars not in hyperinflated dollars.

It’s not necessarily going to happen tomorrow. It could be a year from now or two years from now.

But the conditions are present now.

It’s like an avalanche where you see the snow building up. Just one snowflake can come along and disturb a few others, and that creates an avalanche.

It could happen yesterday, today or tomorrow — you don’t know when. But you can see the conditions.

The conditions for a collapse of confidence in paper money are all already there and the avalanche could happen tomorrow.

 

INFLATION

You need two things to create inflation:

1. Money Printing

2. Velocity (the speed of the spending of the money)

When people lose confidence in their dollars they’ll spend them fast, trying to buy things before the price of those things goes up higher and higher.

That’s when prices soar. Velocity is a psychological thing.

We’ve had the money printing and we’re going to see more of it.

And we’ll have the loss of confidence where people dump the money and we get the velocity of the movement of the money.

You can have hyperinflation almost overnight.

It may be three years or four years from now but it might not take that long. It may happen tomorrow. The point is that when it happens it’s going to happen very quickly, and it will be too late to be able to get any gold because of the supply and demand fundamentals.

Speaking to a major refiner in Switzerland, Jim was recently told that if he had been a new customer, and wasn’t already known and a good customer, he wouldn’t have his phone calls returned.

The refiners don’t want new business. They have more business than they can handle and they don’t have enough gold.

Shortages of physical gold are already popping up. When there’s a buying panic and hyperinflation it will take off very quickly.

When people who have paper gold contracts ask for their physical gold they’ll have a problem. There’s only 1 tonne of gold for every 100 claims on that tonne.

So 99% of the people with paper gold contracts are going to find out they don’t own gold. They’ll get paid out and won’t be part of the spike in prices.

 

GETTING RID OF DEBT

There are three ways to get rid of debt:

1. Growth

We’re unfortunately not getting growth, and printing money does not get you growth. So you can take that off the table.

2. Default

Just not paying the debt.

3. Inflation

The dollars are worth less. So you pay the $1 trillion you owe, and then say, “Good luck buying a loaf of bread because I just printed the $1 trillion.”

That’s what the U.S. is going to do to China.

This is one of the reasons that China is stockpiling thousands of tonnes of gold. They know the U.S. is going to inflate their way out of their debt.

China can’t dump the Treasury Notes they own because the market is not that deep.

So if you can’t sell them and you know the U.S. is going to inflate their way out of it then what can you do?

You can buy gold as a hedge.

You can hope for a stable dollar, in which case the gold won’t do very much. But if you know the U.S. is going to destroy the value of the dollar then the gold will go up.

You’ll lose on the paper side but you’ll make it up on the gold side.

Gold is money and it’s insurance. It’s like an insurance policy but you don’t have to make yearly payments.

An actual insurance policy is only as good as the company that writes it. AIG went bankrupt. With gold there is no insurance company — keep it in safe storage (not a bank) and you’re holding the gold.

 

The New Case for Gold is available at Amazon.

 

Jim Rickards can be found on Twitter and at James Rickards Project.

 

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Gold is $1,254.50 U.S. per ounce

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Death Valley, California U.S.A.

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Temperatures were about 116 F. It’s vast, harsh and diverse. So much fun to hike. Definitely had extra water and was aware of the conditions. ;)

 

Dante’s View, Death Valley

 

 

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The gold arrastra below was used in Nevada in the 1880s.

Large stones were dragged around the basin by water power and the ore was pulverized. The original basin was made of masonry with screened ports in the side through which the gold was recovered.

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Elaine Diane~

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Not Much of a Holiday
words and music Elaine Diane Taylor
© 2015 Intelligentsia Media, Inc. All rights reserved.
SOCAN/ASCAP
Single available on iTunes

The Greek bank holiday and long lines to get a few euros for the day. Debt deals behind closed doors. The media telling us what opinions to have. China building islands in the South China Sea and claiming all the international waves. More dealing to come. More standing in line for those who owe. Who owes? There’s a long line of nations in debt and this is far from done.

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AlbumCover.PreparingfortheFall

Preparing for the Fall live boutique album available on iTunes — featuring Wag the Dog, Black Swan Dive,  American Pie and Gods of the Copybook Headings.

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Coins and Crowns
words and music Elaine Diane Taylor
© Intelligentsia Media Inc. All rights reserved.
SOCAN/ASCAP
from the album Coins and Crowns available on iTunes

Single featured in Episode 1 of Mike Maloney’s documentary series Hidden Secrets of Money.

When a nation leaves the gold standard and sound money, and borrows to go to war, then hunger goes up, hope goes down, anger goes up, then it all goes down.


The Gods of the Copybook Headings
words by Rudyard Kipling and music by Elaine Diane Taylor
©2014 Intelligentsia Media Inc.
SOCAN/ASCAP
from the album Preparing for the Fall available on iTunes

The copybooks of the early 1900s gave us all the wisdom we need. The sayings that were copied are the truths, the gods, of our world. All the empires who followed the gods of the marketplace instead have fallen, and there’s terror and slaughter when the gods of the copybook headings return. The lyrics are by Rudyard Kipling. One of my gurus.

Another Week on Wall Street
words and music Elaine Diane Taylor
© 2013 Intelligentsia Media Inc. All rights reserved.
SOCAN/ASCAP
from the album Coins and Crowns available on iTunes

See the bankers wave their Wall Street wands and conjure piles of paper green. Naked short selling is like betting that your neighbour’s house will burn down. But in this scenario it happens to burn down. If the bankers win then we lose the whole world as we know it. I wrote this in 2009, with a lyric “A little grease (Greece) is floating out to sea, and little pigs (Portugal, Italy, Greece and Spain) are bobbing up and down, they’ll send a storm and we’ll see, when the tide goes out who’s naked on the beach“, and it’s coming on now. The world is changing as we know it.

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Nothing on this site is intended as individual investment advice. We’re all watching which way the wind is blowing.

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