I've been long on gold since Trump started going crazy with tariffs. You can't tax imports without having its effects percolate throughout the economy eventually. I'm also reacting to what I think is a growing AI asset bubble that will pop at some point (it's not a question of if but when).
Most of my savings was in SPX (S&P 500 ETF), but over the course of the year I've been progressively exchanging more of it for GLD (ETF).
Four things are happening (and one of them is gold) that make a terrifying situation.
Facts:
- Gold has reached all time highs
- US debt (ie T-bills) selling at all time lows
- US equities are at all time highs
- USD falling day over day, month over month, year over year
All 4 of those facts cannot remain true indefinitely. The all time high equity prices are because it requires more USD(which is decreasing in value) to purchase them. Gold is at all time highs because USD is decreasing in value, and the flight to safety leads people to gold. US debt is falling in value because no one wants to buy it. At some point, equities will give up and crash, or gold will have to crash....and I don't think it's going to be gold crashing.
In a sense, it is not surprising. The surprising part is the apparent overall yawn from.. well, everyone. One could easily argue that the current situation is, to put it mildly, problematic. And I am not just talking fiscal, or financial, or geopolitical. It is somehow all of these and yet, due to some interesting level of crisis fatiue, most are shrugging it off. 4k seems high, but it merely reflects current perpcetions and still does not crazy. My pet theory is that.. there is no safe haven this time so money is all over the place.
edit: I am mostly in bonds with some gambles here and there, but that was my position since the begining of this year.
I always wonder why gold going this high is seen as bearish to the dollar as the US currently holds 8,133.46 metric tons of gold, more than the next three top holders combined (Germany, France and Italy) and almost twice as much as China and Russia combined (although no one really knows how much China holds).
So I would be far more concerned on the impact of gold price going high on other currencies that are not backed by as much gold before worrying about the US.
Background: I’m a full-time rare coin dealer (and software engineer, which is why I’m here haha).
One of the fascinating things happening in this market is that there’s a massive disconnect between the spot price of gold ($4000), which is driven and set by massive trades and hedges on international commodities exchanges, and the supply and demand for actual physical gold - the kind that’s sold at Costco in bars or by the US mint in 1oz coins.
Since so much activity is driven by futures contracts online (without physical settlement), this disconnect means that the average consumer more or less is either holding physical gold they already have or selling physical gold they already have to cash out at these historic levels. There just aren’t a lot of regular people out there who are saying “yeah I want lots of gold at $4000/oz”.
So brick and mortar dealers are being flooded with gold in their shops these days, and the supply chain looks pretty wild - tons of that physical gold is going to refineries who are melting it down and shipping it off as physical collateral for the futures contracts - but the big buyers out there don’t actually want or need all this expensive physical gold. The price spike isn’t because all of a sudden there’s increased demand for physical gold - it’s just a financial instrument at this point that happens to have a physical counterpart.
None of this is to say there’s a problem with this - it’s just fascinating that net result of this huge spike is lots of jewelry and old coins being melted into bricks of gold that will sit quietly in secure warehouses and vaults around the world.
Whenever the ruling class is threatened, the first thing they do is force their own people to give up their gold.
- In 217 BC, to survive the Second Punic War after Cannae, Rome passed the Lex Oppia requiring citizens to surrender gold and jewelry to the state treasury.
- In 1307, to survive debts from the Flemish War, Philip IV of France arrested the Knights Templar and seized their treasury, disrupting credit networks used by merchants and pilgrims.
- In 1536, to survive the Great Matter (his divorce) and break with Rome, Henry VIII dissolved the monasteries in order to melt down their gold and silver chalices, crosses, and shrines.
- In 1666, to survive the Second Anglo-Dutch War costs, Charles II "borrowed" gold deposits from London goldsmiths through the Stop of the Exchequer and never returned them.
- In 1797, to survive the French Revolutionary Wars, Pitt the Younger demanded "voluntary" Loyalty Loan gold contributions from British citizens, backed by threat of forced requisition.
- In 1917, to survive WWI and the October Revolution, Lenin's Decree on Gold confiscated all gold coins, bullion, and objects from "non-working classes."
- In 1933, to survive the Great Depression banking crisis, FDR signed Executive Order 6102 requiring all Americans to give up their gold.
- In 1934, to survive monetary reform, the Gold Reserve Act let the US Treasury profit $2.8 billion by revaluing confiscated gold from $20.67 to $35/oz (basically stealing 41% of the value)
- In 1959, to survive the US trade embargo, Castro's Revolutionary Government Law 851 seized all private gold holdings in Cuba, including jewelry and coins.
- In 1966, to survive foreign exchange crisis, India's Gold Control Act under Indira Gandhi banned private gold ownership above tiny amounts, forcing surrender to the state.
It's a wonder of our modern age that this classic form of expropriation is now happening through voluntary means: high paper prices drawing physical gold from millions of small holders into the vaults of institutions, without any guns, goons, or executive orders required.
Gold price in 1973 was around $60, so if your thesis is that "something must happen", it might be worth asking why the same thing didn't happen when it crossed $200, $500, $1000, $2000, or $3000.
Gold's price is only half the story here. The other half of the story is the value of US debt and US currency(USD). When they move in opposite directions - historically - /one/ of those instruments crashes. Choosing a side and putting your money behind it is dangerous, but also lucrative.
I know little about monetary policy, so this is a genuine question. What’s the non-kooky explanation for why there was a big economic divergence between income and productivity in the U.S. that appears to have started at the same time as the U.S. ended the convertibility of dollars to gold. https://wtfhappenedin1971.com/
Reminder for anyone outside of the country or not paying attention: there is a non-zero chance that the leader is following a project 25 plan which necessarily involves intentional economic failure to create the necessary conditions for an authoritarian state. Some of the theorization around this desired state of affairs involves possible structural changes to USD or national debt.
19 comments
[ 21.2 ms ] story [ 853 ms ] threadMost of my savings was in SPX (S&P 500 ETF), but over the course of the year I've been progressively exchanging more of it for GLD (ETF).
It's been a good strategy for me so far.
Facts:
- Gold has reached all time highs
- US debt (ie T-bills) selling at all time lows
- US equities are at all time highs
- USD falling day over day, month over month, year over year
All 4 of those facts cannot remain true indefinitely. The all time high equity prices are because it requires more USD(which is decreasing in value) to purchase them. Gold is at all time highs because USD is decreasing in value, and the flight to safety leads people to gold. US debt is falling in value because no one wants to buy it. At some point, equities will give up and crash, or gold will have to crash....and I don't think it's going to be gold crashing.
edit: formatting
edit: I am mostly in bonds with some gambles here and there, but that was my position since the begining of this year.
So I would be far more concerned on the impact of gold price going high on other currencies that are not backed by as much gold before worrying about the US.
One of the fascinating things happening in this market is that there’s a massive disconnect between the spot price of gold ($4000), which is driven and set by massive trades and hedges on international commodities exchanges, and the supply and demand for actual physical gold - the kind that’s sold at Costco in bars or by the US mint in 1oz coins.
Since so much activity is driven by futures contracts online (without physical settlement), this disconnect means that the average consumer more or less is either holding physical gold they already have or selling physical gold they already have to cash out at these historic levels. There just aren’t a lot of regular people out there who are saying “yeah I want lots of gold at $4000/oz”.
So brick and mortar dealers are being flooded with gold in their shops these days, and the supply chain looks pretty wild - tons of that physical gold is going to refineries who are melting it down and shipping it off as physical collateral for the futures contracts - but the big buyers out there don’t actually want or need all this expensive physical gold. The price spike isn’t because all of a sudden there’s increased demand for physical gold - it’s just a financial instrument at this point that happens to have a physical counterpart.
None of this is to say there’s a problem with this - it’s just fascinating that net result of this huge spike is lots of jewelry and old coins being melted into bricks of gold that will sit quietly in secure warehouses and vaults around the world.
- In 217 BC, to survive the Second Punic War after Cannae, Rome passed the Lex Oppia requiring citizens to surrender gold and jewelry to the state treasury.
- In 1307, to survive debts from the Flemish War, Philip IV of France arrested the Knights Templar and seized their treasury, disrupting credit networks used by merchants and pilgrims.
- In 1536, to survive the Great Matter (his divorce) and break with Rome, Henry VIII dissolved the monasteries in order to melt down their gold and silver chalices, crosses, and shrines.
- In 1666, to survive the Second Anglo-Dutch War costs, Charles II "borrowed" gold deposits from London goldsmiths through the Stop of the Exchequer and never returned them.
- In 1797, to survive the French Revolutionary Wars, Pitt the Younger demanded "voluntary" Loyalty Loan gold contributions from British citizens, backed by threat of forced requisition.
- In 1917, to survive WWI and the October Revolution, Lenin's Decree on Gold confiscated all gold coins, bullion, and objects from "non-working classes."
- In 1933, to survive the Great Depression banking crisis, FDR signed Executive Order 6102 requiring all Americans to give up their gold.
- In 1934, to survive monetary reform, the Gold Reserve Act let the US Treasury profit $2.8 billion by revaluing confiscated gold from $20.67 to $35/oz (basically stealing 41% of the value)
- In 1959, to survive the US trade embargo, Castro's Revolutionary Government Law 851 seized all private gold holdings in Cuba, including jewelry and coins.
- In 1966, to survive foreign exchange crisis, India's Gold Control Act under Indira Gandhi banned private gold ownership above tiny amounts, forcing surrender to the state.
It's a wonder of our modern age that this classic form of expropriation is now happening through voluntary means: high paper prices drawing physical gold from millions of small holders into the vaults of institutions, without any guns, goons, or executive orders required.
Gold hits all time high (goldprice.org)
https://news.ycombinator.com/item?id=45417805
(7 days ago, 88 points, 134 comments)