The War on Gold Has Begun
Are you looking to position your gold stock portfolio right now?
Then you will want to know about The Swap Lines. This is a major overlooked risk in the gold market that mainstream financial media isn’t talking about.
Why Invest in Gold?
For 5000 years gold has existed as money, it simply retains wealth.
Gold and silver as a financial instrument have been integral to the development and the rise and fall of human civilization, on this planet.
Gold’s rarity is literally out of this world. The right conditions to create gold can only be found in the heart of suns, much larger than our own.
Its appearance on earth could have only occurred through meteorite impacts and when the earth was formed from dust some 4.500 billion years ago.
It is extremely rare, and increasingly difficult to find. Refer to the attached annual exploration budgets versus discoveries chart below.
Without delving into technical analysis, it’s clear that gold and silver and particular gold are deeply cyclical markets right through history.
Yet until recently, gold was able to be exchanged as currency anywhere on the planet.
Imagine for a moment, traveling to the great Songhai Empire in the heart of west Africa in the 15th and 16th century from Europe. At its peak, it was one of the largest states in African history. The exchange rate of gold was almost exactly the same as in Europe and yet one could have discovered and bought with gold spices and commodities never seen in the west.
Earlier in the dark ages, the fear of the plague slowed the velocity of gold transactions. People preferred to bury their gold and to wait for happier days. This only exacerbated the hardships and destruction of societies as the plague swept from China through to Europe with surprising speed.
Of course, all this changed with the end of the Betton Woods agreement in 1971 with Richard Nixon.
Why Invest in Gold Now?
There have been approximately 775 fiat currencies yet there is no historical precedence for a fiat currency that has succeeded in holding its value.
This fact is currently highlighted with the expansion of money supply worldwide, by every nation. However, money velocity has ground to almost a halt. It is clearly seen in the graph below.
This where we once again welcome gold to the stage.
It could be argued, that’s gold does not fluctuate in price but reflects the real value of the currency.
Gold has successfully audited fiat currencies for the last 5000 years. In essence it’s a “reality check” of real value in the world.
The fact is, there are many indicators that points to gold and silver’s continuing its bull run to great heights.
One reason not often discussed, are the lower valuation of commodities, refer to the chart below.
Understanding the Dollar SWAP Lines and how it impacts your Gold Investments
Another reason may be less obvious. The full effects of the coronavirus are yet to be determined but looking from this point in time where markets are high and the economy is closed. There are signs that the future recovery and stability of the world is in question.
This will have an impact particularly when it comes to gold production.
Not only is the cost of mining gold exponentially increasing but also the stability of countries not part of US swap lines could hang in the balance. These countries are mostly the third world and represent the largest proportion of newly developing gold and silver mines.
This is important, because as gold and silver prices rise and the economic recovery is slow and, in some countries, may even declines over the coming years. Non-US swap countries, basically countries that are not supported by the US, may come to question why the assets of their country are being sent overseas by foreign corporations.
This is of particular concern for investors, who could see themselves locked out of mines with no legal recourse.
This is one of the many factors playing into gold and silver’s bull run. Of course, this is not a day trading perspective (if there are any left).
The positive SWAP Lines Nations
For myself, I am content to take a long position in the most stable gold and silver mine companies within US swap line countries and try and forget about it for the next few months.
Below is a list of positive SWAP lines Nations.
The coming corrections will be overwhelming for investors who are not psychologically prepared to see major pull back in gold and silver and the world economy as a whole.
Marin Katusa (April 28, 2020)
Retrieved from. The War on Gold – Legendary Investor Issues Emergency Briefing on Gold [Video File]. https://m.youtube.com/watch?feature=youtu.be&v=qeY8O0Cqa8Y
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This article does not take into account the investment objectives, financial situation or needs of a particular person or entity. Before acting on any investment strategy or advice you should first consult with your current ASIC accredited investment professional or seek out a compliant investment professional for such.