Today one of the top money managers in the world told King World News gold is the only real money that is prized for its beauty. He also discussed what he expects to see happen in the gold market.
June 17 (KWN) – Dr. Stephen Leeb: “Gold is very special. It has two qualities that no other metal possesses. It is money. And if you look at the Bible you will see the expression, ‘The love of money is the root of all evil.’ What gold doesn’t have in common with paper money: It is both money, which is something you can touch and feel, but at that same time it is also sacred. It has some very special sacred qualities. There are religious statues that are made out of gold. And you can find religious philosophers that didn’t believe in money at all like Simone Weil who said gold was very special because of its beauty. It’s prized for its beauty. The combination of these two qualities is what Thomas Jefferson was talking about in the Declaration of Independence that made gold so special.
By Cornelius Christian Michelle Makori – Wednesday May 3, 2023
JP Morgan Chase bought the beleaguered First Republic Bank over the weekend, making First Republic’s failure the second-largest bank collapse in U.S. history.
According to Andrew Axelrod, global macro expert, the banking crisis is just getting started. He highlighted that many banks are exposed to commercial real estate, a sector which is expected to collapse due to remote work and companies downsizing their assets.
“With the simple fact that remote work is such a big deal, that means there are a lot of open office spaces,” he told Michelle Makori, Lead Anchor and Editor-in-Chief at K-News. “When it comes time to rolling those mortgages over, they’re not going to do that… Within the banks, their collateral layer is starting to come apart.”
Axelrod’s comments echo those of Tesla CEO Elon Musk and Berkshire Hathaway’s Vice Chairman Charlie Munger, who have both warned of the risk from commercial property loans. Musk, in an April interview with now former Fox News host Tucker Carlson, forecast that commercial property is the “next anvil” to drop in the ongoing banking crisis.
As people withdraw money from banks to place them in T-bills, which carry a higher yield, and as mortgages mature, Axelrod said a “massive problem” could manifest.
Gold Rally
As gold continues to hold above $2k, Axelrod suggested that the rising economic uncertainty could send it to $3k within the next 12 months.
“I don’t think $3k is crazy,” he said.
Axelrod’s prediction comes in the midst of a gold-buying frenzy, which saw 2022 as the best year for central bank gold purchases.
Fed ‘money printing’
As banks fail and the economy slows down, the Federal Reserve will turn on its “money spigots” and use quantitative easing to bail out the economy, said Axelrod.
“We’re already in a perfect storm for the Fed’s balance sheet to keep ballooning,” he claimed. “We’re already seeing it with these bailouts. At some point these toxic assets are going to be absorbed by the Fed… those can be astronomical figures.”
As the Federal Reserve continues to engage in loose monetary policy, Axelrod forecast that 100% inflation is a distinct possibility by 2026. He also pointed to de-dollarization trends within the BRICS (Brazil, Russia, India, China, and South Africa), which would cause these nations to dump the greenback, sending U.S. dollars back home where they would cause prices to rise.
“You have all these nations that want to save in dollar-denominated debt, but if that starts to reduce or go away, then the Fed is going to have to jump in and make up the difference,” said Axelrod.
American money around the globe with the United States highlighted.
Inflation in the U.S. is expected to continue to moderate. However, pension funds are still not taking any chances as they increase their exposure to gold, according to the latest report from one global risk management firm.
In a report published Thursday, analysts at Ortec Finance said that a study of U.S. public sector plan professionals, who collectively manage more than $1.3 trillion, said they were 90% confident that inflation is declining.
Globally, more than half of public pension fund managers, with total assets under management of more than $3 trillion, said they expect inflation to be 3.3% or lower within a year, which is down sharply from last year’s survey, where inflation was expected to be around 6.4%. The survey showed that only 10% of global money managers expect inflation to be over 6%.
The survey results come a week after the U.S. Labor Department said its Consumer Price Index rose less than expected in the last 12 months to 5%. While fund managers are optimistic that inflation will continue to trend lower from last-years 40-year highs, analysts at Ortec said that they still aren’t taking any chances as they increase their exposure to gold and other commodities.
“There is genuine optimism that lower inflation will become well-established with very few managers expecting it to be as high as it currently is within a year or two,” said Marnix Engels, managing director of Pension Strategy at Ortec, in the report.
“Many US public sector pension plans have acted to manage their balance sheet effectively in order to achieve long-term objectives while dealing with the short-term risk from inflation. Strategic asset allocation decisions are however, becoming increasingly complex as a result of the ever-growing number of asset classes and investment strategies, and the unique risks associated with them,” he added.
According to the research, about 70% of fund managers surveyed said they planned to increase their exposure to broad commodities; 40% specifically said they would increase their allocation to gold; in other alternative assets, 52% of managers said they would increase their allocations to infrastructure. Meanwhile, 42% said they increase increased their exposure to inflation-protected bonds.
Commodity analysts have said that hedge fund interest in gold as a strategic asset should continue to support the precious metal above $2,000 and potentially push prices to all-time highs. Analysts note that their bullish positioning in gold is still relatively low compared to last year when it made its first attempt at all-time highs.
The latest data from the Commodity Future Trading Commission shows that money managers are net long gold by 104,000 contracts, about 27% from the 2022 peak, the last time when prices were above $2,000 an ounce.
Analysts note that holding in gold-backed exchange-traded products also shows that investors are generally underinvested in gold compared to its previous run. In March, global gold-backed ETFs saw their first net inflows in 10 months.
Looking at the World’s biggest gold ETF SPDR Gold Shares (NYSE: GLD), it currently holds 926.57 tonnes of gold, down compared to the nearly 1,100 tonnes held in March 2022.
Ortec Finance is a leading global provider of risk and returns management solutions for pension funds and other institutions, as it creates risk models to help them achieve their investment goals.
A shift in risk sentiment, coupled with a weak U.S. dollar and growing expectations that the Federal Reserve will cut interest rates in the second half of the year, is propelling silver prices higher, and the precious metal is outshining gold.
With March coming to a close, silver has seen significant gains this month, rallying more than $3, its best monthly performance since December 2020. May silver futures settled Friday at $24.235 an ounce, up 1% on the day and nearly 4% for the week.
Silver’s rally is even outperforming gold as the gold-silver ratio has fallen to a two-month low, currently trading around 82 points.
In a note Friday, Fawad Razaqzada, market analyst at Forex.com, said that the ratio’s drop last week below 86 points was a significant move, breaking support of a bearish trend line.
“If the bullish trend remains intact for both metals, silver should shine more brightly, is what this chart is telling us,” he said.
Looking at silver’s technical outlook, Razaqzada said that with the market notching higher highs and higher lows on the chart, it could be only a matter of time before the precious metal pushes above $24.50 an ounce, breaking its two-year downtrend.
Ole Hansen, head of commodity strategy at Saxo Bank, said silver has room to rally to $25 or even $27 an ounce if the precious metal sees a close above $23.90.
“The metal remains under-owned,” he said in a comment on Twitter.
Looking at the precious metal’s fundamentals, analysts said silver is simultaneously benefiting as a safe-haven and risk-on asset.
Analysts note that easing fears over the global banking crisis is generating some optimism for the global economy, supporting silver’s industrial component. At the same time, concerns that this is only the eye of the storm are providing some safe-haven support to the precious metal.
Even if the banking crisis is resolved, Jonathan Butler, precious metals analyst at Mitsubishi, said that one more sleeper issue could continue to support precious metal safe-haven demand: the quickly approaching debt ceiling.
“The nonpartisan Congressional Budget Office has estimated the government will exhaust its emergency tools sometime this summer, which raises the prospect of a default unless lawmakers can raise or suspend the ceiling. Coming at a time of uncertainty and increased financial commitments from the government as it may be forced to backstop more bank depositors, silver (and gold) may continue to be in demand as a safe haven,” Butler said in a report published Thursday.
Similar to gold, silver is also benefiting as a monetary metal as cooler-than-expected inflation data is adding to expectations that the Federal Reserve has finished raising interest rates.
Friday, the U.S. Department of Commerce said its core Personal Consumption Expenditures price index increased 0.2% last month, compared to January’s increase of 0.5%. The data was slightly weaker than expected, as economists forecasted a 0.4% rise. In the last 12 months, core PCE inflation rose 4.6%.
According to the CME FedWatch Tool, markets see a 50% chance that the Federal Reserve holds rates steady after its May monetary policy meeting. At the same time, markets continue to expect a rate cut in the second half of the year.
While there is still significant bullish support for silver, analysts at TD Securities said that the market could see some profit-taking in the near term. However, the bank added that the precious metal continues to benefit from solid physical demand, particularly from China.
“The white metal continues to hold a strong risk-reward profile given recent signs that Shanghai traders are accumulating silver once more, which points to resilient demand for silver even as commodity internals point to sluggish demand for raw materials,” the analysts said. “That being said, the white metal will be more likely to reach escape velocity should prices break above $25.20/oz, which would favor a resumption in long acquisitions from trend followers.”
The start of the year was a historic moment for Croatia as the nation became part of the eurozone and adopted the euro as its national currency. The move also shows how gold remains an essential asset for central banks.
Last month Krishan Gopaul, European, Middle East and Asian market analyst at the World Gold Council, reported that Croatia bought nearly 2 tonnes of gold in December. This was the central bank’s first gold purchase since 2001.
According to Croatia’s public news agency Hrvatska radiotelevizija – HRT, the gold purchases were related to the nation’s entry into the eurozone. Croatia had to transfer some of its foreign reserves to the European Central Bank, which it is now a member of.
In the interview with HRT, Croatian National Bank (CNB) governor Boris Vujcic, via Google translate, said that they transferred 639.9 million euros to the ECB at the start of January.
The gold purchased, roughly 56,256 ounces and worth more than $101 million, represented 15% of the payment to the ECB, HRT said. The other 85% of the payment was in U.S. dollars, valued at $580.1 million. The central bank said it bought the gold in the open market for slightly more than $1,800 an ounce.
According to HRT, Croatia’s gold reserves have been the subject of heated debate over the years. In 2015 it was revealed that the nation’s gold was sold in 2001 for around $272 an ounce. Croatia had 13.2 tonnes of gold after it broke away from Yugoslavia in the early 1990s.
Croatia joined the European Union in 2013 and it took nearly ten years to become a member of the eurozone. Nations must meet specific economic criteria to become members of the eurozone, including sound public finances, sustainable price stability and a stable currency.
While Croatia bought gold for the first time in more than 20 years, it certainly wasn’t alone. Last month the World Gold Council noted that central banks bought 417 tonnes of gold in the fourth quarter of last year.
Central banks bought 1,136 tonnes of gold last year, the most since 1967 and the second-highest amount since 1955.
