With all the commotion around the world, it is very interesting to finally see gold breaking out of a 6-year base. The $1,360 level has been very well documented over the last several years, as many believe that a weekly close above that level would usher in a new bull market. GC finally closed at $1,364 two months ago and has run up to $1,546 on August 13th, 2019 to gold holders’ enjoyment.
Central Bank Gold Agreement
There are many factors as to why this has happened. Geopolitical tensions around the world are at a fever pitch. Rumors have it that China will invade Hong Kong shortly, and bullion dealers are reporting gold shortages everywhere. Central banks have been accumulating more gold in the last few years than at any point in the last 50. Maybe central banks know something we don’t? Maybe Draghi will do whatever it takes? The European Central Bank announced a few weeks ago that 22 member banks would not renew the Central Bank Gold Agreement. This agreement was negotiated to coordinate gold sales amongst the signatories. Coordination of the signatories helps create a balanced market between future expectations. Central bank coordination amongst many markets is nothing new. Anyone who follows the gold market knows how the banks have a stranglehold over the price via the futures market.
Gold Still A Safe-Haven
Isn’t it interesting how after 20 years, the banks have decided not to renew the agreement? The gold price has increased by five times since 1999, and the signatories have become net buyers of gold while the signatories see no large sales of the precious metal in the foreseeable future. According to the ECB, the signatories confirm that gold remains an important element of global monetary reserves because it continues to provide asset diversification benefits, and none of them currently have plans to sell significant amounts of gold. A press release from the ECB confirms that a non-renewable agreement is due to a market that has developed, matured, and has an increased investor base. Is this deal being torn up because the agreement only allowed them to sell? Is a coordinated sale the same as a coordinated COMEX futures smash?
Powell Gags The Fed
Now that the coordinated contract has been torn up, does that mean they’re coordinating buys? It would make sense since central banks have been net buyers the last several years, with the Basel III, $15+ trillion in negative-yielding bonds, and negative interest rates. Not only are all these factors leading to more interest in the gold space, but even the Fed is becoming risk-averse. For the first time ever, a sitting Fed chair has banned communications between Fed officials and the public. Powell has banned any public appearances by Fed board officials, including scheduled interviews and any on- or off-the-record comments. You can clearly see that tensions are rising in the fiat slavery compendium. The Fed would usually march some Fed clowns out when the market was heading down. Is the Fed jawboning over gold, and is it here to stay? Got gold?
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