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Is Gold Signaling Something Else On The Way?

Is Gold's Rally Signaling Something Else On The Horizon?


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Gold's Rally May Be Telling Us Something

 

Since February 29, gold began an unprecedented rally that would see the yellow metal rise to a new weekly closing high on the following day, March 1. Gold continued to rally into the following trading week that just ended and would go on to break intraday highs or daily closing highs or both, every day of this trading week. To put icing on the cake, gold closed at a new record weekly closing high last night for the second week in a row.

Since Friday of last week, gold has smashed through a total of 11 records. Let that sink in. Gold has broken its own records 11 times in 6 trading days. here's a brief rundown...

Friday March 1: Gold closed at $2,082 for a record high weekly close.

Monday March 4: Gold managed to close above $2,100 for the first time for a record daily close of $2,116.

Tuesday March 5: Gold breached its previous intra-day high of about $2,144 set on December 1, 2023 with the spot price hitting $2,150.50 to set a new intra-day record all time high. The yellow metal would go on to close at $2,126.30, beating the previous day's record close. (Two records broken on same day)

Wednesday March 6: Gold once again hit a new intraday all time high of $2,152.67 as well as a new record closing high of $2,148.62. (Two records broken on same day)

Thursday March 7: Gold once again breached its all time high with an intraday high of $2,164.40 and closing the trading day, once again with a new record closing high of about $2,159. (Two records broken on same day)

Friday March 8: Gold sets new record intraday high of $2,195.20 and sets a new daily record closing high of $2,179.10 which is also a new record weekly closing high, climbing almost $100 in just one week. (Three records broken on same day)

All in All, this historical gold rally has smashed through 11 records in just 6 trading days. This is absolutely phenomenal! Kitco's one-month gold chart shown below sums it all up...

Kitco 1 Month Gold Chart - March 8, 2024 - New Record Closing High $2.179K

This gold rally is believed by some to be fueled by the massive central bank gold buying spree. 2022 was a record haul for central bankers, well over 1,000 tons while 2023's haul was only about 40 tons shy of breaking the previous year's record. Adding fuel to the fire, total demand for all forms gold hit a record high 4,899 tons in 2023.

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At the same time, a liquidity crisis is brewing as the REPO market winds down. The chart below comes from the Federal Reserve and shows that we're likely just a couple of months or even weeks away from some kind of financial liquidity crisis. In the years 2020 / 2021, the FED went on a massive multi-trillion dollar money printing spree. Financial institutions found themselves awash in liquidity (Good times). Instead of holding their cash, they parked it at the FED (REPO) to earn (low) interest at (very) low risk. At one point, the amount of cash parked in REPO surpassed $2.5 trillion in early 2023. By late Spring, the drawdown began in earnest. Now, the REPO market sits just above $400 billion. As you can see, more than $2 trillion has been drawn out of the REPO market just in the last 10 months or so. The good times aren't so good anymore. This should be called 'Stealth Q.E.' because that's what it appears to be.

St. Louis FED REPO Chart March 9, 2024

A year ago, we witness a handful of banks crash right around the same time the REPO market began to wind down. Remember Silicon Valley Bank? Actually, there were 5 banks in total that went into the dust bin of history, including a systemically important European bank, Credit Suisse which was then taken over by UBS.

Now, New York Community Bank (28th largest American bank) announced on March 1 that they lost $2.8 billion in the final quarter of 2023. Just in the last few days, the bank was able to raise $1 billion in capitol with help from an unlikely source, former Treasury Secretary Steven Mnuchin's firm. We'll see how long that $1 billion lasts!

I also keep hearing about the woes being felt across the commercial real estate landscape. Just a couple days ago, FED Chair Jerome Powell warned the CRE problems will lead to more bank failures. He also stated, 'this is a problem we'll be working on for years'. Powell is openly warning that more bank failures are on the way so is it really a good idea to park your cash in any bank now after a statement like that?

Smart investors understand that to protect one's wealth, that wealth must be diversified. Is this why we're seeing gold go to new all time highs 6 trading days in a row? Is this also why we're seeing Bitcoin go to new all time highs in the very same week? Bitcoin broke through its November, 2021 high twice this week. The chart below shows Bitcoin briefly clipping the $70K mark yesterday. Do we have a new bottom near $68K, at least for a little while?

As a side note, the Bitcoin halving is now only about a month or less away. I'm looking forward to seeing how Bitcoin behaves in coming days.

Kitco Bitcoin 5 Day Chart - New Record High $72.22K March 8 / 9, 2024

In the last couple of weeks, major central banks around the world have continued their pause on raising interest rates, including the Bank of Canada, European Central Bank and the Federal Reserve. They know that raising rates any further would be a death blow to the economy. So, instead of raising rates, they are simply holding them steady and will likely do so for some time. Oddly, one holdout, the Bank of Japan, the last to still be at negative interest rate territory, is seeing its currency surge all of a sudden, sparking rumors of an imminent rate hike.

The euphoric stock markets too have made recent headlines with new all time highs including the Dow Jones Index that saw it go beyong $39K and the S&P 500 surpass $5K. Speaking of records... Would you believe the S&P broke 15 records so far in 2024!

Kitco Dow Jones Index Chart - March 9, 2024

 

Interesting to see the stock markets hitting fresh new highs just before gold and Bitcoin took off to reach new highs of their own. On the sidelines, something else has been going over at the COMEX. According to Alasdair McLeod, gold's Open Interest on the Comex has risen by more than 100,000 contracts since February 20th. Each contract is worth 5,000 ounces. Great timing, eh?

All the while, the U.S. debt will hit $34.5 trillion sometime late today (or early tomorrow). It's growing by about $1 trillion every 100 days or so they say but it's growing exponentially. Soon, it'll be every 90 days, then every 70 days, then every month, then every week, every day, every hour, every minute. All you need to do is give yourself a quick history lesson on what happened to the German people in 1923. Mike Maloney of GoldSilver.com explains how to avoid the pitfalls of hyperinflation with gold.

US Debt Clock - March 9, 2024 - $34.496K

As if the last few years weren't difficult enough, we've already begun facing some kind of financial 'situation' that's likely beyond our imagination. You see, the entire world is awash with currency we call money and it's backed by absolutely nothing. Actually, it's supposed to be backed by the full faith and confidence in government. Popular revolts around the world suggest that confidence is waning.

The debt clock image above is a testament that the more currency they print, the more worthless it becomes. We are headed into uncharted territory. The world has never experienced anything like this before.

The U.S. dollar, which had climbed some two points since January, is now seeing a decline. Starting around the middle of February, the dollar has lost most of those gains. In fact, it's at a 7 week low. A weak employment report out yesterday didn't help matters.

And the number one nemesis for currency is gold. Whenever we see gold rise in such fashion as we've seen in the last week or so, all currencies depreciate in value. Gold went up about 10% in the last 10 days. Gold now costs 10% more for Americans. For other currencies, it's a lot higher. SilverGoldBull.ca now sells a random year 1oz Gold Maple Coin 'for as little as' $3,057 to its Canadian customers (A record high!). Fortunately, their Silver Maples are going for 'as little as' $40.99 in Canadian dollars.

Those in the know, know and understand what's going on. Either that or they're completely nuts! They are dumping dollars or whatever currency they have as fast as they can for anything real. Leonardo DaVinci's painting, 'Salvador Mundi' sold for over $450 million in 2017. Here's a Mercedes that sold for $142 million in 2022. This Paradise Cove, Malibu home sold for $190 million last year. Let's not leave out postage stamps that sold for more than $10 million. Even dogs are making it onto the crazy shit high price list as this Tibetan Mastiff sold for $1.6 million.

The sheer absurdity of it all! 

Silly prediction: Watch closely as these same 'investors' suddenly rush into silver...

Banks are piling into gold because of 'Basil III', a standard put in motion after the Great Financial Crisis among central banks and headed by the Bank For International Settlements or BIS, the 'central banker of central bankers'. The Basel III standard, only fairly recently fully implemented, makes gold a tier one asset. This means that banks must hold a certain percentage of their assets in the form of gold. An article published by Seeking Alpha in May, 2021 states, 'Basel III: A gift for physical gold investors'. They were right!

This is one of the reasons the price of gold is rising. It is being revalued as a tier one asset, as it should be but there's no telling from this point how high the price of gold will go against any currency as they will surely go in the opposite direction. Are some currencies about to experience massive devaluations? Just look over at Egypt. Here's a story from www. abc.go.com titled, 'Cash strapped Egypt allows currency to fall sharply against dollar, hikes rates'. Devalued against the dollar, did they? I don't want to know how much Egyptians are now paying for an ounce of gold this morning. All I know is, it's a lot higher than 10%.

As for silver, this 'sleeping giant' is just getting out of bed. Here's Kitco's one month chart for silver. 

Kitco Silver 1 Month Chart - March 8, 2024

The silver to gold ratio closed last night just below 90:1. The historical ratio is usually around 15:1. Silver's dual purpose as a monetary metal and industrial metal primes itself as an excellent choice for long term investment. Could it be the next 'best hedge' against inflation?

GoldPrice.Org Silver to Gold Ratio Chart March 8, 2024

The times they are-a-changing. Crypto is now its own ecosystem and it's flourishing. In fact, this week silver and Bitcoin's total market caps duked it out a couple of times. Bitcoin overtook silver's market cap for the first time on Tuesday and became the 9th largest asset in the world while 'poor' silver dropped one position to 10th place.

I suppose we should be keeping an eye on Bitcoin and silver going forward because it's not too outrageous to think that both commodities will rise a notch or two in coming months and years.

Make sure to buy lots of popcorn. It's going to be a big show.

 

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SweptOverNiagara
SweptOverNiagara

Name's Joe and I live in Ontario, Canada. I like writing on a wide variety of topics. I enjoy keeping track of markets, investing and commodities and the crypto sector. Also do some coding for web browsers.


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