logo
News & Views
Forecasts, Commentary & Analysis on the Economy and Precious Metals
Celebrating our 42nd year in the gold business

October, 2014
_________________________________________________________________________________________________________________________________________________________________
USAGOLD's NEWS & VIEWS newsletter
mk Michael J. Kosares
Editor

"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million can diagnose." - John Maynard Keynes


USAGOLD Website

Gold coins & bullion since 1973

pileofgold

ORDER DESK
1-800-869-5115
Extension # 100

Great prices. Quick delivery. All the time.
Contemporary gold and silver bullion coins
Bullion-related historic gold coins
U.S. $20 gold pieces

Prefer e-mail to get started?
orderdesk@usagold.com


* * * * * * * * * * * * * * * * * * * * * *
bbb
USAGOLD rates A+ with zero complaints

* * * * * * * * * * * * * * * * * * * * * *


This year put an
Angel under the tree

Owning the famous French Angel gold coin has always been considered good luck.

Legend has it that an earlier version accompanied Napoleon in his quest to conquer Europe. He carried it in the long march to Russia and back until he finally misplaced it -- the day before the Battle of Waterloo.

When the coin's designer, Augustine Dupre, was sentenced to death, he held a gold Angel as he prayed for his life; it caught the eye of his guard, allowing him to 'negotiate' his escape from the guillotine.

A truly unique and memorable holiday gift option, this old world French Angel coin pendant comes with an 18-inch 14-karat rope chain.

_____________________________

Only 50 pendants available – $560.00 / each

Marie Mitchell
1-800-869-5115
Extension #106


OPEN ACCESS FILE
WHY GOLD, WHY NOW

dragon
The China Syndrome
The groundbreaking series on China's pivotal role in the gold market

swans
BlackSwans YellowGold
The standard reference on how gold performs during periods of deflation, chronic disinflation, runaway stagflation and hyperinflation

compass
Gold Chartography 101
The case for gold ownership in ten charts you will never see on CNBC

zero
Gold at the zero bound
Something happened on the way to negative interest rates. Something unexpected. Gold and silver demand went through the roof.

gold bull
Big banks, hedge funds key factors
in 2016 gold surge

A tale of two gold markets – the one ending December, 2015 and the one beginning January, 2016

decisions

How would you invest money you didn't need for ten years?
"Perhaps we spend too much energy trying to foretell the future, and too little trying to be resilient whatever happens."

keynes young
Keynes on the menace
of printing money

How the celebrated economist might have structured his investment portfolio today.

______________________________

mkMichael J. Kosares, the author of these articles, has more than 40 years experience in the gold business. He is the founder and executive director of USAGOLD (both the website and gold brokerage service), the author of three books on the gold market, and the editor of "News & Views, Forecasts, Commentary & Analysis on the Economy and Precious Metals," the firm's client letter. He has written numerous magazine and internet essays and is well-known for his ongoing commentary on the gold market and its economic, political and financial underpinnings.

abcs

"I keep six honest serving men
(They taught me all I knew);
Their names are What and Why and When
And How and Where and Who."

– Rudyard Kipling –

Book Order Form (US)


* * * * * * * * * * * * * * * * * * * * * *

USAGOLD's News & Views newsletter has provided cutting-edge coverage of the gold and silver markets for over 25 years. Its content is widely quoted, re-circulated and sourced at websites all over the world.

Its principal objectives have always been the same – to keep our clients informed on important developments in the gold market, condense the available gold-based news and opinion into a brief, readable digest, and, most importantly, to counter the traditional anti-gold bias in the mainstream media. That formula has won it a loyal five-figure subscription base.

If you would like to become a subscriber, we invite you to sign-up at our registration page. There is no charge for the service and your participation is welcome.

Special Report

Why China thinks gold is the buy of the century
(. . . In one easy lesson*)

dr

by Michael J. Kosares

Let's start with some big, but digestible numbers:

$3,950,000,000,000 = China’s total foreign exchange reserves

$1,250,000,000,000 = Value of the world’s 31,866 metric tonnes gold reserve at $1220/troy ounce

_____________________________________________________________________________________

 $1,280,000,000,000.  = China’s holdings of U.S. Treasuries in its foreign exchange reserves

 $   319,000,000,000. = Value of U.S. 8133 metric tonnes gold reserve at $1220/troy ounce

______________________________________________________________________________________

Now let's delve into what those numbers might mean to the average gold owner:

On the occasion of the launch of the Shanghai International Gold Exchange on September 19, 2014, Zhou Xiaochuan, the governor of the Peoples’ Bank of China (PBOC), reflected on his country’s view of gold.  “[The] gold market,” he said, “is an important and integral part of China’s financial market. We are now the largest gold producer, as well as the biggest gold importer and consumer in the world. . . The People’s Bank of China will continue to support the sustainable growth and sound development of China’s gold market.”

“Can you imagine,” asks Koos Jansen, the Holland-based expert on China’s gold market, “Mario Draghi or Janet Yellen attending the opening ceremony of a gold exchange in Frankfurt or New York, let alone speaking about the importance of gold?”

When it comes to the gold market, China is the dragon in the room. With its nearly $4 trillion in foreign exchange reserves and potential purchasing power, that presence is formidable. 

How formidable?  Consider this:

- China could purchase the total United States gold reserve (8133 metric tonnes) with 8% of its foreign exchange reserves. 

- It could purchase the total global gold reserve (31,866 metric tonnes) with 32% of its foreign exchange reserves.

- It could purchase all the gold stored by Exchange Traded Funds (+/- 1750 metric tonnes) with less than 2% of its foreign exchange reserves.

- At $4900 per troy ounce, the value of U.S. gold reserves would match China’s U.S. Treasury holdings of roughly $1.28 trillion. 

- At $4700 per troy ounce, the value of the world’s gold reserves would match China’s total foreign exchange reserves of roughly $4 trillion.

- To put it another way, China could pay double the current price for the world’s total gold reserve and still have nearly $1.5 trillion in foreign exchange reserves.

- China sits atop the list of the world’s foreign exchange holdings. The United States ranks thirteenth at $133 billion.  For the United States to ascend to the top of the rankings, it would need to revalue its $319 billion gold reserve to almost $4 trillion – or raise the value to just under $15,300 per troy ounce.

These numbers are daunting. And for those unfamiliar with the massive scope of the monetary mess confronting the world's central banks, they might appear unbelievable. At the core, though, the yawning chasm between official sector gold and China's foreign exchange reserves suggests a serious undervaluation of gold at current prices. This imbalance is not likely to be addressed through mine production anytime soon, nor is it likely to be addressed by some realignment of international gold reserves, as some have suggested. Instead, the most likely outcome will be a significant adjustment in gold’s market price. It could come gradually or in fits and starts, or even all at once. Somehow though, sometime down the road, the market will address the imbalance. It always does. In fact, as some have suggested, China–through its staunch advocacy of gold–might already be in the process of forcing the issue.

koos

For more information, please see "Chinese Gold Demand Explosive"/Koos Jansen/9-29-2014

In the meantime, the current monetary regime with the dollar as its centerpiece will continue bumbling along until something–probably another black swan event–intervenes.  Though some might see that bumbling along as a positive sign, others see it as fraught with danger. Over the past few months, for example, several emerging countries experienced sharp corrections in their currencies as a result of institutions unwinding their vast dollar carry trades–a process that is on-going.  The damage done serves as a reminder of the problems presented by an over-reliance on the dollar.  None of this is lost on either China or the other countries affected. Managing a nation's reserves is not a whole lot different from managing one's personal investment portfolio. Diversification makes a great deal of sense. As a result, the trend among central banks to add gold reserves is likely to gather pace.

China, as suggested by PBOC governor Zhou's statement above, has taken the lead in that regard. It has been steadily adding to its official reserves and encouraging its citizenry to import the precious metal. (See chart)  In 2009, it announced a national reserve of 1059 tonnes. The current level of reserves is a state secret, but some gold market analysts have suggested a doubling since the 2009 announcement with one analyst predicting an increase to 5000 tonnes.  If the gold market is looking for a bombshell to shake it out of its current lethargy, the announcement of a major increase in China’s gold holdings would do the trick.

In my view China would swap its foreign exchange reserves for the world's gold supply in a heartbeat. It is a willing buyer perhaps without equal. Jeff Clark, senior precious metals analyst at Casey Research, puts it this way: “[T]he Chinese think differently about gold. They view gold in the context of its role throughout history and dismiss the Western economist who arrogantly declares it an outdated relic. They buy in preparation for a new monetary order–not as a trade they hope earns them a profit.” Private investors might take note.

_________________

 * With apologies to Henry Hazlitt, author of "Economics in One Lesson" (1946) -- "The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."

nvIf you appreciate the kind of bedrock analysis you just read, you would probably enjoy and gain from our e-mail newsletter service which alerts you whenever a new issue is published. It comes free of charge and you can opt out of the service at anytime. Last, we will not deluge you with emails.

–– To register, go here. ––

A little USAGOLD history. . . . Pictured are News & Views hard copies from 1999 just before gold began its secular bull market. News & Views first made its appearance at a time when gold-based publications were few and far between. The "Big Breakout" headlined in the November, 1999 issue refers to a price jump from $260 to $330 per ounce. Your editor sees a good many similarities between that period and now.

___________________________________________________________________________

Michael J. Kosares is the founder of USAGOLD and the author of "The ABCs of Gold Investing - How To Protect and Build Your Wealth With Gold." He has over forty years experience in the physical gold business. He is also the editor of News & Views, the firm's newsletter which is offered free of charge and specializes in issues and opinion of importance to owners of gold coins and bullion. If you would like to register for an e-mail alert when the next issue is published, please visit this link.

Disclaimer - Opinions expressed on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. USAGOLD, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD does not warrant or guarantee the the accuracy, timeliness or completeness of the information found here.


Coins & bullion since 1973


Order Desk
1-800-869-5115
Extension # 100

Prefer email to get started?
orderdesk@usagold.com


- Hours -
6:00am - 6:00pm
U.S. Mountain Time
Monday - Friday

bbb
Better Business Bureau Rating A+
Zero Complaints

- Mailing Address -
USAGOLD
P.O. Box 460009
Denver, Colorado 80246-0009


Saturday December 10
website support: sitemaster@usagold.com
Site Map - Risk Disclosure - Privacy Policy - Shipping Policy - Terms of Use
© 1997-2015 USAGOLD All Rights Reserved