This is the real reason for China’s major move to stockpile commodities.
KWN has now released a powerful audio interview with billionaire Ross Beaty, Chairman of Pan American Silver, about the crisis the world is facing today and what to expect from major markets, including gold and silver.
Gold, Silver, Commodities Surge
September 11 (King World News) – Alasdair Macleod, reporting from London: “Eric, you will recall the importance of 23 March, when the Fed switched to unlimited monetary inflation only days after cutting its funds rate 1% to zero. Gold rose from $1,460 to a high of $2,075 on 7 August. At the same time, base metals began to rise, and a wide range of other raw materials from lumber (+250%) to lean hogs (+73%) also rose.
The chart below puts the relationship between gold and commodities in context: it could be the most important chart of this year.
ONE OF THE MOST IMPORTANT CHARTS OF 2020:
S&P Commodities (Blue) vs Gold (Orange)
The pecked line divides 2020 into two. First was the intensifying deflationary sentiment ahead of the Fed’s rate cut to zero on 16 March, and its promise of unlimited inflation in the FOMC statement of 23 March. And secondly, the inflationary period that follows. It was at that point that the S&P500 reversed its fall of 33% and started its dramatic move into new high ground, and the dollar’s trade weighted index peaked, losing about 10% since.
Gold took the hint and rose 40%, while commodities turned higher as well, gaining a more moderate 20%. The gold/silver ratio collapsed from 125 to 72 currently, as the monetary qualities of silver resumed its importance.
The S&P GCSI commodity index was initially suppressed by the WTI contract delivery debacle in April, but its bullish move has resumed. Both gold and commodities are clearly adjusting to a world of accelerating monetary inflation, where bad news on the economic front will accelerate it even more.
And here it is worth noting that a contracting global economy is perversely positive for commodities measured in fiat, because their prices reflect increasing supplies of fiat money losing purchasing power at a time when both supply and demand are being equally diminished. More money ends up chasing fewer goods.
Furthermore, in the long-term commodity prices are far more stable measured in gold than in fiat money, which tells us that theoretically commodity prices will keep pace roughly with gold. And when all commodities are rising, particularly when the global economy is contracting, that tells us fiat dollars are losing purchasing power.
Now comes the really important bit: China is already acting on this trend. They are selling dollars to buy and stockpile global commodities in enormous quantities, even selling down their holdings in US Treasuries to do so. A look at the exchange rate tells us they are not selling their own currency to buy commodities, only dollars. Bear in mind they can buy commodities at any time, so there has to be a reason for their stockpiling.
China’s Chess Move Is To Preserve Wealth
So far, commentators have not got this message: it is less about commodities, which are always available, but China is extracting value from her fiat dollars while she can. Clearly, she has taken the view that the dollar will lose value.
Commodities, as well as gold and silver, are the only safe haven for China in these inflationary times. And if China is dumping fiat dollars for tangible raw materials, she is sending a signal to other nations that they should do the same.
When the bubble in financial assets bursts, what is saved from the wreckage can basically choose between fiat cash and commodities, which includes precious metals. And with cash losing purchasing power that leaves commodities.
China is clearly ahead of the game.”
MUST LISTEN: Billionaire Ross Beaty
To listen to the incredibly powerful audio interview with billionaire Ross Beaty discussing skyrocketing gold and silver and why this gold bull market will be the biggest he has ever seen in his lifetime, plus Beaty also recommends one stock that investors should consider buying now click here or on the image below.
BOOZE BINGE! Record Run In Gold, Shades Of 2009…
***ALSO JUST RELEASED: BOOZE BINGE! Record Run In Gold, Shades Of 2009, Lowest Level Ever, Plus Another Record CLICK HERE.
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