Today one of the greats in the business told King World News that investors should ignore volatility in precious metals because China is guaranteeing epic bull markets in gold and silver.
Dr. Stephen Leeb: “The last few weeks have certainly had their share of headlines that inspire thoughts of doom, from North Korea’s nuclear threats to massively destructive hurricanes. Hurricane Harvey already has proved to be the greatest disaster ever to hit Texas, while Irma, as I write this, has ravaged Florida. The combined damage from the two storms could be in the hundreds of billions of dollars…
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Meanwhile, gold is has been strong as of late, despite today’s pullback. But if you’re assuming that’s because of gold’s traditional appeal as a provider of shelter in a storm, a safe haven when things get rough, think again. You only need such a shelter if financial assets are breaking down, and that hasn’t been happening – throughout all the disasters, the stock market has hung tough.
Instead, gold’s strength reflects prospects that, courtesy of China, the metal will be resuming its role as a currency. I continue to see gold as in the early moments of what will be an epic bull market catalyzed by China’s adoption of a gold-linked yuan, perhaps as part of a broader basket of currencies, for trading in what will be the world’s newest and most important oil benchmark.
And it’s no accident that China has chosen oil, which is often referred to as black gold, as the critical building block, the initial item denominated in that currency, which will be used in the East and potentially throughout much of the world, at the expense of the dollar. The plan goes hand in hand with China’s intention to dominate virtually all major sources of energy, which the country correctly sees as essential to its future.
It’s impossible to understate energy’s importance. Vaclav Smil, a chaired professor at the University of Manitoba who is a leading scholar of all things energy-related (and someone Bill Gates has cited as his favorite author), recently produced his 40th book. It begins: “Energy is the only universal currency: one of its many forms must be transformed to get anything done.” Another very pertinent line – in which Smil is quoting Howard Odum – notes that “the availability of power sources determines the amount of work activity that can exist, and control of these power flows determines the power in man’s affairs and in his relative influence on nature.” In other words, the truism that cannot be emphasized enough is that without a access to ample energy, societies and civilizations fall apart.
The point, which China thoroughly gets, is that the country with the greatest control over energy is the country that most easily controls its own fate. And for now and a long time to come, oil is still the critical form of energy.
Today, amidst all the Irma-related stories dominating the news, it was somewhat surprising to see that a recent leading Bloomberg headline was: China to Ban Sale of Fossil Fuel Cars in Electric Vehicle Push.
But if you’ve invested in oil stocks, or in auto-related companies, don’t take this headline as reason to panic about oil’s demise. For one thing, no time limit was given to suggest such a move is imminent. The headline, based on comments by Xin Guobin, vice minister of industry and information technology, should be seem as much more a comment that China sees the future supply of oil as limited rather than an expression that China’s demand for oil was ready to taper off. China already had announced plans to have 7 million electric vehicles on the road by the early 2020s. That is a pretty ambitious goal, though given all that China has shown it can accomplish we wouldn’t doubt China can meet it. Still, realize that’s 7 million out of more than 200 million a car population that is growing far faster than 7 million cars a year. Gas-powered vehicles in China are going to be around a lot longer than the Bloomberg headline might imply.
I see China’s all-out push for electric vehicles as symptomatic of its long-term thinking and planning. Its goal is not only to control oil – as it will with its coming benchmark, but use this currency as a vehicle for hegemony over trade at first in the East and then perhaps the world.The coming scarcity of oil and other hydrocarbons is a brutal reminder once again why gold must be at the center of this new monetary system. Only a currency centered around gold will have the heft to in effect barter for scarce commodities including sources of energy. And only a gold centered monetary system under China’s control will give the Middle Kingdom control of both today’s and future sources of energy.
An important distinction is that instead of suggesting that oil demand will peak – which is what many now are arguing will happen – the Bloomberg headline suggests that China sees that it’s oil supply that eventually will fall short, even as demand for oil remains strong. It is clear China views oil as a commodity with a limited lifespan, one that will have to be replaced eventually by other energy sources if world civilizations are going to progress. The powerful implication is that most current energy sources – in which oil is central – have also begun a major bull move.
In this regard, I’ll point out once again that China either is a leader in or completely controls the elements likely to be most critical as energy evolves, including rare earths, cobalt, graphite, solar panels, nuclear energies, and others needed to segue from our fossil-fuel driven world to one driven by renewable sources. Among these many minerals and commodities that stand out as necessary for new energies, silver is clearly one very close to center stage because of its role in solar energies and so many things related to the technologies that will lead to more efficient uses of energy. Silver will not be too far behind gold in what we see as a near “fantastic” run in prices.
For investors, the message remains that the new currency in town will be gold, not just because China likes it but because as current energy resources become scarcer, there will have to be a means of rationing them. Gold is really the only choice, as a precious, nearly supply-fixed, metal with a type of Platonic beauty that coincides with a “brand” that goes back many millennial. That gold doesn’t have an industrial role to play in the development of the renewable energies, assures its supply will not diminish that eventually, which is also vital for a durable currency. If there were a second choice it would be silver – also a precious metal with a many millennial history as a currency. Don’t be surprised if there are times in which the white metal moves on stage for a central rather than supporting role in what promises to be epic bull markets.”
***KWN has now released the remarkable audio interview with whistleblower and London metals trader Andrew Maguire discussing a major short squeeze developing in the gold market, why the Goldman Sachs admission is such a big deal and much more, and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: Greyerz – The Biggest Crisis The World Has Ever Faced And The Silver Breakout CLICK HERE.
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