first majestic silver

If Gold’s A “Barbarous Relic,” Why Do Governments Want It So Much?

February 22, 2017

It’s Tuesday morning, and the Euro was crushed overnight – to within less than a percent of the 14-year low of 1.047/dollar set earlier this year; in turn, causing the cost of living for hundreds of millions of Europeans – and millions of other people whose fiat toilet paper is pegged to the Euro, to instantaneously surge.  Not to mention, billions of people the world round, whose currencies also plunged – which quite obviously, caused a positive “net change” in physical gold and silver demand.

And no, it wasn’t due to “positive” U.S. news – which for the most part, has permanently left the building.  To the contrary, the odds of FrExit, NetherlExit, ItaLeave, and CatalonExit have never been higher – even if, LOL, GrExit odds declined for a day, based on OPEC-like propaganda that “bailout talks are continuing.”

The political, economic, social, and monetary premises of my “if a nuclear bomb destroyed Europe” articles are playing out in real-time.  And the funniest part of all, is that as I edit, the Eurozone PMI Index – i.e., the same “soft data” that has completely decoupled with reality in the United States of Rigged Economic Data – was reported to have surged to its highest level in LOL, six years; “coincidentally,” right ahead of the Dutch, French, and Italian elections that threaten to tear the Eurozone apart.    Not to mention, as simultaneously, the U.S. PMI’s declined – causing the 10-year Treasury yield to again fall back, after again attempting, and miserably failing, to breach the 2.50% “economic line in the sand” I drew six weeks ago.

What better time to bring up the ultimate “pot calling the kettle black” statement, from a commentator (LOL, a college professor, from the violently blue state of Oregon) worried that Donald Trump will rig economic data to promote his agenda; which of course, he well (as you can see here, regarding the ridiculous GDP growth his “plan” anticipates) – as if any politician doesn’t do that.

The worst thing (Trump) could do…would be to politicize the agencies that produce government economic data, to put people in place that will skew numbers in his favor.”

Which, I might add, couldn’t have been put in perspective better than this quote by someone named Catherine Rampell, of what the results of said “plan” will likely be.  Which frankly, has ZERO chance of actually working, given that horrific state of America’s economy and finances, and the equally horrific “fixes” Trump suggests.

Remember my rule of thumb: The more growth a politician promises, the worse his economic plan probably is.”

The odds that even a single ounce of actual, physical gold was sold on the right side of the pond – other than by those in dire financial need – are extremely low.  And in fact, essentially no one did in the Eastern Hemisphere, as gold and silver prices were steady all night, despite the dollar’s aforementioned “strength.”  That is, until the second the London paper “pre-market” trading session opened at “2:15 AM EST”; when, launched by a prototypical “Cartel Herald” algorithm, PM’s were “capped and attacked” for the 792nd time in the past 909 trading sessions.  Which I assure you, by any statistical metric represents a “sixth sigma” event; which, by definition, is impossible in freely-traded markets.

Throw in the fact that silver’s 2:15 attack “coincidentally” occurred at exactly its 200 DMA of $17.95 (i.e, the “line in the sand” the Cartel has been vigorously defending all week); and as well, at exactly the 8:20 COMEX open six hours later; and it couldn’t be more obvious what’s going on.  Which, by the way, I discuss in great detail in this must listen, two-hour podcast with Tone Vays, just uploaded last night – of how, why, and when financial markets (particularly gold and silver) are serially manipulated.  FYI, Tone is in my view the second most visible Bitcoin commentator in the English-speaking world – so the benefits of listening to this podcast, in my view, will be many-fold.


And then there’s that pesky thing called fundamentals, which for the time being have been ignored due to the historic, unprecedented level of financial market manipulation.  To that end, I cannot emphasize enough that both gold and silver production peaked in 2015, whilst global demand for both hit record levels in 2016.  This, whilst above ground, available-for-sale inventories are at historic lows, with the production outlook anticipated to – care of the catastrophic impact on the mining industry caused by two decades of price suppression – plunge for years to come.


Contrast this to the “oil PPT” rigged crude market; featuring steadily rising prices despite all-time high inventories, record production, “stunningly” weak demand, and little reason to believe the OPEC “production cut” – assuming it isn’t massively cheated on – will work; and you can see why over the long-term (and potentially, the short-term as well), the path of least resistance, for both the Precious Metal and crude oil markets, will be decidedly against the prevailing “trend.”  To that end, I could easily write an entire article on this damning article from last night, of how Bank of America anticipates exploding production from U.S. and other non-OPEC producers at prices above $50/bbl; which is already occurring, and will continue to do so until inexorable supply growth inevitably swamps waning demand, causing prices to plunge.  Just as, in converse fashion, inexorable demand growth will swamp plunging supply – and thus, the gold Cartel – in the equally rigged; and equally systemically dangerous; Precious Metal markets.

Of course, I don’t have all day to write about oil – particularly when such an important topic, regarding gold, has come to the fore.  Which is, those darned fundamentals again, starting with the fact that on balance, Central banks have been buying gold every year since the financial crisis – particularly in, but not limited to, those in the Eastern Hemisphere.  This, whilst gold is continually bombarded with propaganda about its uselessness; my favorite of which, that it doesn’t have a yield – compared to the $10+ billion of sovereign bonds sporting negative yields.

Not that such “smoking gun” evidence of the attractiveness of gold as a storage of value is lacking, mind you – like this chart of how a lack of the monetary discipline gold engenders destroys “the 99%,” at the hands of the 1% making the rules.

However, when the man who is arguably the “father” of the past three decades of global “bubble finance” – and subsequently, the political, economic, and monetary collapse the world is enduring today – makes unequivocal statements about the failure of fiat money; and the value of gold; they cannot be ignored, such as the two he made earlier this week, listed below.  And yes, I’m well aware that “Maestro” Greenspan was once – and still is – a diehard gold bug, who sold his soul for power.  To wit…

I view gold as the primary global currency. It, and silver, are the only currencies that do not require a counterparty signature.  They are the only currencies that have intrinsic value, and it has always been that way.  No one questions their value, and they have always been valuable commodities, since first being coined in Asia Minor in 600 BC.”


There is a widespread view that the 19th Century gold standard didn’t work. I think that’s like wearing the wrong size shoes and saying the shoes are uncomfortable!  It wasn’t the gold standard that failed; it was politics.”

Putting an exclamation point on this topic – of how governments may say gold is a “barbarous relic,” but act differently, consider this comment yesterday, from former German Finance Minister Markus Soeder – regarding the contentious “Troika” negotiations with Greece, regarding the (fourth) “bailout” it requires to avoid immediate, catastrophic default.

“(Further Greek) aid should only be given against a pledge in the form of cash, gold or real estate.”

I’ll simply conclude that if Central banks are buying it – particularly, those of China and Russia;  whilst the most important monetary officials in the Western world are lauding it; that’s good enough for me.  And hopefully you, too – especially if you happen to be American; and thus, have access to supply at the most artificially suppressed prices in modern times.

Andrew ("Andy") Hoffman, CFA joined Miles Franklin, one of America's oldest, largest bullion dealers, as Media Director in October 2011. For a decade, he was a US-based buy-side and sell-side analyst, most notably as an II-ranked oil service analyst at Salomon Smith Barney from 1999 through 2005. Since 2002, his focus has been entirely on precious metals, and since 2006 has written free missives regarding gold, silver and macroeconomics. Prior to joining the company he spent five years working as an investor relations officer or consultant to numerous junior mining companies.

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