The Global Rush To Own Gold Has Only Just Begun


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Submitted by QTR's Fringe Finance

Judging by the action in gold over the last two days, one might assume that rate hikes have been implemented (and worked) and that Russia and Ukraine have declared a cease-fire.

Neither of those things have happened and so (it?ll come as zero surprise to my readers) that I found the nearly $70 peak-to-trough sell off in gold over the last two days to be misguided.


I added exposure to gold with some GLD calls yesterday (yes, I know it is paper gold and a claim to physical that may not exist, I just wanted speculative options exposure) with the equity trading at about $177.75.

The slams lower in gold are as predictable as they are irrational.

Following a melt up/short squeeze in the equity markets over the last two days, ostensibly due to positive sounding cease-fire talks that I am still skeptical of and wrote about this week and last (here and here), gold sold off by about $70 within the course of less than two trading sessions.

The combination of the Fed finally embracing rate hikes and the Russia/Ukraine conflict potentially slowing down has the market thinking that safe havens may not be necessary going forward.

This perception that gold is trading on is far from the reality of the situation. As we just learned this morning, Russia has said ?nothing very promising? has taken place in peace talks so far, and the Fed hasn?t even begun to approach the problem of inflation yet.

Regardless of whether or not there is eventually a cease-fire or Russia decides to back off the gas in Ukraine, it doesn?t mean that the economic sanctions that have been put in place against the country are going to be withdrawn. These sanctions have forced Russia and China to cross the Rubicon, in my opinion, where it appears to me that Russia and China may challenge the U.S. dollar and that Russia is trying to back the ruble with gold.


This isn?t going to change anytime soon, regardless of whether or not the physical conflict in Ukraine continues.

And there was a lot of bluster yesterday from Philadelphia Fed President Patrick Harker, who said that he was ?open to the idea of more aggressive rate hikes? and that the ?U.S. can avoid a recession?. It was the usual line of bullshit from someone at the Fed: lots of confident-sounding lip on how to quell inflation, but little action.

The truth is we have only seen one 25 bps hike (which should have been a 50 bps hike). Real rates are still drifting between -6% and -8%. This is about as bullish of a scenario for gold as you can possibly get, and it isn?t going away anytime soon. Real rates are going to remain negative for the foreseeable future. If they don?t, it means that the Fed has raised rates so high that we?re going to have a massive debt crisis, which will then eventually become systemic, forcing people back into gold as a sovereign debt crisis safe haven, after they first sell it in a rush to deleverage.

The truth is that I think the gold rush has only just begun.

Watching one major selloff like we saw on Monday was fine with me ? I chalked it up to regular market gyrations. But once gold made a $70 dive in the course of less than two trading sessions, I had to pull the trigger on some speculation.

I?m not sure what the gold market is perceiving when it comes to the world of macro, but whatever it is, it certainly stands at odds with my analysis that both key outstanding risks - Russia and inflation - lead back to gold moving higher.

In the case of Russia, I expect permanent changes to the way the country conducts business globally (i.e. sells oil and natural gas) that will be bullish for gold.

With regard to inflation, I think the Fed will hike until the market crashes at some point this year. It?ll then be forced to retake a dovish stance on monetary policy, while hoping that CPI starts to turn slightly lower so that they can claim victory in the face of perversely negative real rates. A situation like this, in my opinion, isn?t just the likeliest outcome for how the inflation problem will be dealt with, it is also the most bullish scenario for gold.

No matter what, it feels to me like a new, bifurcated global economy waits in the wings and that it is only a matter of time before gold once again gets the starting nod to do what it does best: preserve wealth, store value and help act as sound money.

If you enjoyed today?s piece and have the means to support Fringe Finance, I?d be honored to have you as a subscriber: https://quoththeraven.substack.com/subscribe?utm_medium=web&utm_source=subscribe-widget&utm_content=51238594
please sanction Silver as well, so it can go up LOL

Swiss refiners can still legally buy gold from Russia, according to authorities, though most of them have said that they won?t.

?All bars produced by Russian refineries after March 7, 2022, may no longer be traded in Switzerland,? the customs statement said.?Bars produced by Russian refineries before March 7, 2022, can continue to be traded.?


According to media reports, the precious metal has been flagged as a possible new target for EU sanctions on Moscow.

Countries set to ban Russian gold revealed
London says a ban on new Russian gold imports will be announced at the G7 summit
From RT

Despite booming profits for Moscow, the US secretary of state insisted that Western sanctions will hurt the Kremlin soon

US Secretary of State Antony Blinken told CNN on Sunday that an embargo on Russian gold exports will strip Moscow of around $19 billion in annual revenue. Pressed over the West?s failure to hurt the Russian economy with sanctions thus far, Blinken predicted that the effects will be seen next year.

The US, UK, Canada, and Japan will announce a ban on the import of Russian gold during the G7 Leaders? Summit in Germany on Sunday, according to a statement from the British government.

Gold is ?the second most lucrative export that Russia has, after energy,? Blinken told CNN?s Jake Tapper. ?It?s about $19 billion per year, and most of that is within the G7 countries. Cutting that off, denying access to about $19 billion of revenue a year, that?s significant.?

Blinken's statement was factually incorrect. In reality, Russia's second most valuable export is food. Foreign sales of agriculture products were worth over $37 billion in 2021, according to Moscow.

It is unclear whether the rest of the G7 nations will sign on to the ban, with European Council President Charles Michel saying on Sunday that the EU would first need to determine whether it would be ?possible to target gold in a manner that would target the Russian economy and not in a manner that would target ourselves.?

G7 will reveal plan to ban Russian gold ? UK
Read more
G7 will reveal plan to ban Russian gold ? UK
US President Joe Biden has said that a gold ban would impose ?unprecedented costs on [Russian President Vladimir] Putin,? and UK Prime Minister Boris Johnson has claimed that it will ?strike at the heart of Putin?s war machine.?

However, both leaders said the same about the multiple rounds of sanctions imposed on Russia by their countries and their EU allies. Yet, while Biden promised in March to ?crater? the Russian economy, Moscow is reporting record profits from oil and gas sales, and the Russian ruble currently stands at a seven-year high against both the dollar and the euro.

Meanwhile, inflation is at its highest level in 40 years in the EU and the US, and customers on both sides of the Atlantic are paying record high fuel prices. Despite agreeing on a Russian oil embargo last month, the EU is reportedly importing more Russian crude now than at any point over the last two months.

Russia will also still have the option to sell its gold to refiners, or to look for new buyers in China, India, or the Middle East, as it has done with its fossil fuels.

?The US said that Western sanctions against Russia would devastate its economy but that doesn?t seem to be happening. When are these sanctions going to start having the effect that the West and President Biden has promised?? Tapper asked Blinken.

READ MORE: EU steps back into coal age ? media
?Everything that we?ve done from the start in imposing these unprecedented sanctions and export controls, it is having a profound impact on Russia,? Blinken replied, claiming that Russia now ?can?t acquire what it needs to modernize its defense sector, modernize its technology, to modernize its energy exploration.?

?Already we?re seeing predictions that the Russian economy will shrink by 8-15% next year,? he stated, seemingly quoting the same figures Biden did earlier this month, which he attributed to unnamed ?experts.?

Russian economy slows a bit due to extreme strength of the Ruble, becoming less competitive hence the discount on their oil price, soon to be on their gold price too lol