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Gold miners ‘laughing’ amid best rally in decade as metal surges

December’s cheer is carrying into 2019 for gold-mining companies.

A gauge of mining shares is extending gains after its best December since the financial crisis as investors flee to haven assets amid a slump in the broader equities market and a U.S government shutdown. The BI Global Senior Gold Valuation Peers jumped as much as 2% Thursday to the highest since May, with bullion set for a sixth straight advance.

‘‘The yellow metal is in demand due to the fact that almost everyone is looking for safe-haven assets,’’ Naeem Aslam, chief market analyst at Think Markets UK, said by email. “Gold miners are laughing all the way because the entire landscape has become more attractive.”

Volatility in equities, concern about a broadening US-China trade conflict and a softening dollar have underpinned a rally in bullion. The trade showdown is starting to have an impact on economic activity, after Apple Inc. issued a warning on its outlook and factory data weakened.

Bullion for immediate delivery rose 0.5% to $1,291.29 an ounce at 1:42 p.m. in New York, after touching the highest since mid-June. On the Comex, gold for February delivery settled up 0.8%. In December, the BI miners index jumped 12%, the most for that month since 2008. Harmony Gold Mining and AngloGold Ashanti paced gains on Thursday.

Investors seeking havens have also been buying silver. The white metal touched the highest since July on Thursday.

“Looks like silver has gained momentum because of gold,” Aslam said.

© 2019 Bloomberg L.P

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Now we’re talking…all we need is to bring back the Gold Standard now!

Not enough Gold to introduce the Gold standard. New Gold standard = Dollar.

When the Gold price shoots up, a stock market Crash is on the horizon.
(Gold Price was $1850/ounce in 2008/2009)

This is a topic I spend a lot of time on. A gold standard in itself does not guarantee sound money. There were many periods of inflation and devaluation under the gold standard in the past. It is true that a gold standard does restrict the devaluation of the currency or the “printing of money”. A gold standard is still a million times better that the fiat system we have at the moment.

The complete solution would be a gold standard with the concurrent elimination of the fractional reserve banking system. The gold standard alone will not be of much use because banks will still have a license from the state to create their assets out of thin air. In effect, banks are allowed to write cheques on funds they do not own. Banks typically write cheques for about ten times the amount the have in the “vault” This is the cause of every the financial crises and the subsequent run on the banks.

If you have a fractional reserve banking system, you also need a Reserve Bank to act as lender of last resort when (not if) the unavoidable financial crisis hits. Reserve Banks have only one purpose – to save the banking system from collapse. They have only one tool available to do this. They have to devalue the currency in order to save the banking system. They cannot save the banking system from collapse if there is a restriction on the amount of money they can print. This is why a gold standard never lasted long. The moment there is a run on the banks, it is the end of any gold standard and the beginning of an unbacked paper currency or fiat currency.

So, the complete solution to the devaluation of currencies will be the implementation of a system of “legal” currency or sound money. This will be a gold standard, without Reserve Banks, without a fractional reserve banking system. Only when all 3 elements are present simultaneously, will we have a legal and stable currency system. The current system obviously is a fraudulent socialist re-distributive scheme.

I realize that I won’t be able to change the current system. I have made peace with that idea. I will enjoy it while it lasts. It is my aim to use this fraudulent re-distributive system to my advantage, and the advantages can be enormous – this I promise you. In order to benefit from the system, you have to align your interests with those of the Central Banks. Then you basically join the ranks of the Rockefellers. “If you can’t beat them, then join them”. But that is another topic altogether.

Sensei, your comments are always both insightful and accurate. How is the strategy of aligning yourself practically implemented?

imho in this investment game there are many different opinions. The balance on the trading account is the score board, it tells you whether your opinion is correct or not. If we want to build wealth in real terms we are forced to borrow to invest. But it is not that simple. We have to borrow in terms of a currency where interest rates are below the rate of inflation, to buy assets that beat inflation. This is basically what international banks do. Gearing brings increased risk. So this is not an option for the general investor.

Property investors basically follow this option. They use gearing. Another step higher up in the hierarchy would be to borrow in dollars to buy listed property in the USA. A step higher again would be to borrow in dollars to buy the Nasdaq 100 ETF. Even better would be to borrow in dollars to buy the ETF’s that outperform the Nasdaq. While you take the risk of borrowing money, you might as well employ that risk in the most profitable manner.

This is only my humble opinion – and this is what I do. But I say again – it is not for everybody. It took me more that a decade of preparation to identify, quantify and manage the risk. The vast majority of people who trade on gearing lose their capital in the first 12 months.

Gold miners do not laugh frequently, let them have their day.

Gold was about 950 ten years ago and it is say 1300 now, with zero yield inbetween. That sucks as an investment!

Even after correcting the last three months, equities such as simple S&P500 etf murders gold over any longer term.

Johan the facts support your statement for the time period between 2008 to 2018. The SP500 recovered after the Great Financial Crisis in real terms( in terms of gold).

We can go back further in time. In the year 2000 the SP500 traded at 1500 points and gold at $270. It would take 5.56 ounces of gold to buy the index in the year 2000.

The SP500 trades around 2500 now, while gold is at $1280. If you own gold, and you want to buy the SP500 now, it will cost you 1.95 ounces of gold. In terms of gold, the SP500 is 65% cheaper today than what it was during the year 2000.

We can go back even further. The SP500 is 22% below the 1970 level in terms of gold.

I am not saying that gold is the perfect investment. That is not the point that I am trying to make. Gold is merely another form of cash. A superior form of cash in mho.

Where I am going with this line of reasoning, is that we are paying real taxes on nominal profits. We are paying real money on taxes on phantom profits. The SP500 gained 66% since the year 2000 in nominal terms but in real terms, in terms of a stable currency, in terms of gold, the SP500 is negative by 65%. The investor who held the SP500 since the year 2000 would have paid Capital Gains Tax, some would have paid income tax, some paid estate duties on nominal profits, while they incurred losses in real terms.

This is the beauty of a fiat currency system. This illustrates the fantasy world of real taxes on illusionary profits. Under a fiat currency system a government can raise real taxes on honest people who did not make any real profits and nobody minds. We pay taxes, management fees and performance fees on losses in real terms. No wonder that honest, hardworking people are struggling to retire.

And then they say that people are no saving enough. Nobody can ever save enough to beat the taxes on real losses.

Sensei: you would need to factor in the S&P with dividends reinvested to compare returns over time. Also, I have noticed with gold bulls they pick their dates very selectively… why not compare gold 40years from 1980 to now :/

Or on your currency angle, imagine you were a Japanese investor and bought gold with Yen in 1970. Gold was very cheap say $50 but the Yen was 350 to the dollar versus about 100 now.

To each his own, but for me gold is not an investment as it has no yield, which is the essential definition of an investment. Looking at broad equities they always have a yield, something like 13X ten year earnings over long term.

Rarity? Imagine an asteroid storm hits earth and showers us with thousands of tonnes of pure gold. What would happen to currencies tied to gold? The bitcoin crowd also thought rarity had value! Look at it another way : being seduced by three gorgeous Swedish girls on an airplane is very very very rare – it does not make it very valuable.

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