Gold bars are in short supply as gold trades at a $30 premium in New York.
Gold Bars Also In Short Supply
March 19 (King World News) – John Ing: Tariffs will be paid by the American consumer, a tax increase at a time when they are scrambling to pay bills. Food? Retaliation will drive up costs since it is likely that China and others would impose tariffs on American crops. Soybean producers in America are still recovering from the previous round of tariffs. Interest rates remain high and mortgage rates remain near 7 percent. At the same time government spending increased 9% while personal consumption jumped by 15%. Hot, hot, hot. And gold bars? They are also in short supply.
There are some who are disturbed by the lack of guardrails. However, we are still early in Trump’s presidency with the need to cut taxes and get spending under control, without increasing the $2 trillion annual deficit because current policies will add at least $2.8 trillion to the deficits by 2034.
The point is that there are multiple guardrails. The ultimate guardrail however is inflation which helped sink President Joe Biden’s attempt at a second term. If the US is ever to reduce its large deficit, it must first deal with structural issues that caused the shortfall which includes large budget deficits, low savings and overconsumption. … Inflation is one guardrail the Fed will be watching as the inflation numbers and rates are expected to remain high.
The stock market has erased the gains made since last November and consumer spending, a bulwark of record US growth is down. The chickens have come to roost. And in this new world of trade wars, real wars and economic wars, investors’ and governments’ enthusiasm for the dollar is waning which is the main driver behind central banks’ stocking up on gold instead of treasuries.
China is the world’s largest creditor with $3.227 trillion foreign exchange reserves while the US is the world’s largest debtor. Recent data shows that Japan and China, the two largest holders of Treasuries have reduced their holdings, amid trade frictions making funding America’s debt more difficult to finance. The Fed remains the largest owner of US government debt despite quantitative tightening. If foreign owners of US debt keep reducing their holdings, what or who will fill the gap, particularly since the Fed too has reduced its holdings.
The US holds the world’s largest gold reserve at 8,133 tonnes valued on the Fed’s balance sheet at $42.22/oz. Given its financial woes there is talk of revaluing the reserves upward which would be worth some $800 billion instead of the $11 billion to bail-out America’s beleaguered financial system. In the first comprehensive audit of gold since 1974, Mr. Trump will go to Fort Knox with Mr. Musk to confirm the existence of 4,600 tonnes of gold purportedly kept in 15 vaults.
Gold Trading At A $30 Premium In New York
In 1981, Ronald Reagan’s Gold Commission was tasked with investigating the possibility of establishing a gold standard for the currency, backed by the gold in Fort Knox supported by Lewis Lehman and Ron Paul. Rather than using the gold standard, the commission developed a gold coin. Today there is a shortage of physical gold because the world’s major central banks, led by China have been soaking up over 20% of the world’s supply over the past three years. Due to a tightening in the physical market, more than 400 tons of gold were moved from LBMA London vaults to Comex’s New York vaults. As a result, New York gold is currently trading at a premium of $30/oz, which may be the result of an offside derivatives position in New York.
The world is changing, get used to it. One can detect the decline of confidence and trust in every part of the world. Meantime the US dollar has fallen to 57 percent of central bank reserves. Since the end of the Second World War, the US dollar has been the world’s reserve currency, with its “exorbitant privilege” allowing the US to finance its chronic deficits with cheap debt. When Congress passes a trillion-dollar spending bill, the Federal Reserve simply creates the dollars and credits the US Treasury. No borrowing is required.
Today the tariff-weakened dollar is backed by the good faith and credit of the United States. What happens if the United States’ good faith and credit is found wanting? Today faith in its economic and financial institutions is being tested, particularly after American exceptionalism eviscerates government and the rule of law. We believe America’s growing isolation and unreliability has sapped confidence in America and eroded the dollar’s hegemony. Without confidence in the dollar, the world has no valid reserve currency. The ultimate scorekeeper then is gold. Gold is an alternative to the dollar, an asset and scarce. Mr. Trump won the election pledging a new “golden age.” He was right. Gold is up 12% this year, surging to a record $3,000/oz adding to the 27% gain of 2024. We continue to believe gold will top $3,300/oz.
The best Trump trade is gold.
JUST RELEASED: $3,000 Gold!
To listen to Alasdair Macleod discuss the gold price breaking above $3,000 and much more CLICK HERE OR ON THE IMAGE BELOW.
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