The gold market needs another catalyst to drive ETF inflows for stainable higher prices

While October was a historic month for the gold market as the precious metal saw a record-high closing price for the month, more is needed to create a sustainable bid in the marketplace, according to analysts at the World Gold Council.

In October, gold prices rallied nearly 7%, closing out the month at $1,997 an ounce. Since then, the precious metal has struggled to hold its ground at around $2,000 an ounce. December gold futures last traded at $1,974 an ounce, down 0.73% on the day.

In their latest monthly commentary, analysts at the World Gold Council noted that while geopolitical uncertainty due to the conflict between Israel and Hamas drove speculative safe-haven demand higher, long-term investors are still reluctant to jump into the market according to weak price action in gold-backed exchange-traded products (ETFs).

“A sustained rally in gold will, in our view, require either continued or worsening political risk, a peak in bond yields and the US dollar, or an equity bear market combined with revived recession risks,” the analysts said.

Although the gold market needs another catalyst for a sustainable rally above $2,000 an ounce, October’s price action does show how much potential the gold market has as sentiment continues to shift.

“COMEX net shorts reversals are a historically reliable positive signal for gold prices and have tended to lead ETF flows,” the analysts said. “It is possible that with a full house of investment behind it, including ETFs and futures, gold could break out of the broad range in which it has traded since the middle of 2020.”

The weakest pillar in the gold market remains investment demand in gold-backed ETFs; however, the WGC said that October flows could signal a bottom in the market.

Although the gold market saw its fifth consecutive month of outflows, the pace was a lot slower compared to September. The WGC said 37 tonnes of gold, valued at $2 billion, flowed out of global gold-backed ETFs last month.

However, the WGC noted that assets under management increased by 6% due to gold’s rally last month.

Year to date, holdings in gold-backed ETFs have dropped by 225 tonnes, valued at $13 billion.

According to analysts at the WGC, the Federal Reserve’s restrictive monetary policy remains a critical factor for gold as outflows in North American markets led the broader trend.

According to the WGC, North American-listed funds saw outflows of 27.5 tonnes, valued at $1.5 billion.

“Surging Treasury yields, the opportunity cost of holding gold, early October overshadowed safe-haven demand from geopolitical risk and equity volatility later in the month. With the economy performing surprisingly well and inflation remaining sticky, the 10-year US Treasury yield touched 5% during the month –the first time since July 2007,” the analysts said.

Across the Atlantic, the WGC said that European-listed funds saw outflows of 11 tonnes, valued at $622 million.

“We believe stabilizing yields, as the European Central Bank (ECB) paused its ten-month rate hiking spree and the region’s inflationary pressure continued to slide, geopolitical risks and the rising gold price helped limit losses,” the analysts said.

Asian markets, which have been a pillar of strength in global ETFs, saw inflows of 1 tonne, valued at $81 million.

“Between January and October, Asia funds attracted US$1bn (+15t), the only region experiencing positive flows, mainly driven by China and Japan,” the analysts said.

Finally, other markets, led by Turkey, also saw inflows of 1 tonne.

As to what turns the tide for gold, the WGC said that investors might need to see lower equity markets to spur renewed interest in the precious metal.

“Earnings projections remain quite rosy, but prices, particularly the Nasdaq, are rolling over. The index is down more than 10% already from its mid-year peak during what is supposedly the seasonally strongest period. A greater than 20% drop from the peak – a ‘bear market’ – could spur additional interest in gold from investors, concerned perhaps that equity dips are no longer worth buying,” the analysts said.

  China continues to dominate the gold market with a 12-month buying spree, adding 23 tonnes in October

By

Neils Christensen

For Kitco News

Time to Buy Gold and Silver

David

Better risk appetite limits buying interest in gold, silver

Gold and silver prices are weaker in midday U.S. trading Monday. The safe-haven metals are seeing some downside price pressure as trader and investor risk appetite has up-ticked modestly recently, as seen by last week's solid rally in the U.S. stock indexes. December gold was last down $8.10 at $1,991.10. December silver was last down $0.06 at $23.225.

Hey, if you have not done so, I strongly encourage you to try out my “Markets Front Burner” email report. It's my best writing and analysis, I think, because I get to look ahead at the marketplace and do some market price forecasting. And it's free! It's a weekly email report that comes right to year email box. Sign up to my new, free weekly Markets Front Burner newsletter.

U.S. stock indexes are slightly up at midday after posting solid gains last week—the best weekly gains of the year. There have been no major, unexpected developments, markets-wise, on the Israel-Hamas war front for some time—namely other countries getting seriously involved in the conflict. That has lifted marketplace spirits a bit and has allowed traders and investors to focus on and react to more normal market fundamentals. That's also pulling safe-haven bidding away from the gold and silver markets—at least right now.

In overnight news, Bank of Japan governor Ueda said the BOJ will continue its monetary policy easing and yield-curve control policy. He also said he did not think the Japanese government 10-year note yield would stay significantly above 1.0%. That compares to the U.S. Treasury 10-year note yield of around 4.5%. Ueda's comments were music to the ears of the foreign exchange and financial markets traders who are and have been executing the U.S.-Japan interest rate differential or “carry” trades.

  Hedge funds losing interest in gold as the market searches for a new catalyst

The key outside markets today see the U.S. dollar index slightly higher. Nymex crude oil prices are higher and trading around $82.00 a barrel. The yield on the benchmark U.S. Treasury 10-year note is presently fetching 4.643%.

Technically, December gold futures bulls have the overall near-term technical advantage. Prices are in a four-week-old uptrend on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at $2,050.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,950.00. First resistance is seen at $2,000.00 and then at $2,010.00. First support is seen at last week's low of $1,978.20 and then at $1,964.60. Wyckoff's Market Rating: 6.0.

December silver futures bulls have the slight overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $24.05. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at $23.50 and then at the October high of $23.88. Next support is seen at $23.00 and then at last week's low of $22.565. Wyckoff's Market Rating: 5.5.

December N.Y. copper closed up 37 points at 371.85 cents today. Prices closed near the session high and hit a four-week-high. The copper bears still have the overall near-term technical advantage. However, fledgling price uptrend is in place on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 385.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the October low of 351.95 cents. First resistance is seen at today's high of 372.55 cents and then at 375.00 cents. First support is seen at today's low of 366.65 cents and then at last week's low of 363.15 cents. Wyckoff's Market Rating: 3.5.

By

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold lacks the juice to break through $2,000 this week, but analysts don't recommend shorting it

Gold’s inability to convincingly break above $2,000 an ounce is creating some cautious sentiment in the marketplace, with some analysts saying that prices might need to consolidate in the near term before the precious metal takes a run at its all-time highs.

While analysts are not looking to short gold in the environment, some have said its price action is disappointing as gold has not benefited from a sharp drop in yields and weakness in the U.S. dollar.

 

Currently, at $1,999, gold has ended a three-week winning streak as it looks to close the week roughly unchanged from last Friday. However, prices are down nearly 1% from its opening gap at the start of the week.

Commodity analysts have said that gold continues to be driven by global geopolitical factors as waning fear in the marketplace takes its toll on the precious metal’s safe-haven allure. Although Israel’s war with Hamas continues to rage, the conflict remains within Gaza, keeping the ongoing chaos in the Middle East in check.

"The geopolitical crisis that has fueled gold’s rally is becoming exhausted,” said Christopher Vecchio.

Vecchio said that while a geopolitical event can provide the gold market with tradeable momentum, it does nothing to attract long-term investors. He noted that a gold rally based on a specific geopolitical event needs to see constant escalation to maintain its safe-haven bid.

Vecchio said he exited his gold position last week and will remain on the sidelines in the near-term as he expects prices to consolidate.

"The bulk of gold’s big move is done. But I would not want to short gold as the fundamental backdrop of a weaker dollar and lower bond yields are positive for gold,” he said. "I think gold can continue to grind higher, but it will be a frustrating grind for potential traders.”

David Morrison, senior market analyst at Trade Nation, described gold as a market that is in search of a new catalyst.

Ole Hansen, head of commodity strategy at Saxo Bank, said that he is neutral on gold; he also noted that a consolidation around current levels would be healthy. The neutral outlook comes after gold saw a nearly 7% rally in October, its best monthly performance since March.

"Gold has paused after rallying almost 200 dollars last month after profit-taking emerged once again above $2,000 per ounce. Having rallied so hard in a short space of time, the market needs consolidating, but so far, the correction has been relatively shallow, with support appearing at $1,953, ahead of $1,933, the 200-day moving average and 38.2% retracement of the mentioned rally,” said Hansen.

On the downside, Hansen said that gold prices would have to fall back to $1,900 an ounce to put this new uptrend at risk.

With little economic data on the docket next week, analysts have said investors will continue to digest the Federal Reserve’s monetary policy decision.

  The Fed's monetary policy is irrelevant and won't stop gold's push above $2,000 – abrdn's Robert Minter

Although the U.S. central bank left interest rates unchanged for the second consecutive time in this tightening cycle, Federal Reserve Chair Jerome Powell maintained his tightening bias.

"Is monetary policy restrictive enough to bring inflation down to 2%? That is what we are asking ourselves," said Powell in his press conference following the monetary policy decision.

"The Fed has left the door open to another rate hike. Even though we are confident that interest rates have already peaked, market participants are nonetheless likely to remain cautious in this respect. Assuming there is no further escalation in the Middle East, the upside potential for the gold price will probably be severely limited,” said Barbara Lambrecht, commodity analyst at Commerzbank.

Markets will get a chance to hear more from Powell as he participates in a panel discussion on "Monetary Challenges in a Global Economy" at a conference in Washington.

The only major economic report to be released next week will be the University of Michigan’s preliminary consumer sentiment survey.

Last month’s revision to the survey surprised markets as one-year consumer inflation expectations rose 4.2%. Powell, during his press conference, dismissed the reading, saying it was an outlier and most consumer surveys show inflation expectations remain "well anchored.”

Next week’s data

Monday: Reserve Bank of Australia monetary policy decision

Thursday: Weekly U.S. unemployment claims; Powell participates in a panel discussion

Friday: University of Michigan preliminary consumer sentiment

By

Neils Christensen

For Kitco News

Time to Buy Gold and Silver

David

Both the SEC and the defense request a summary judgment in lawsuit against Terraform Labs and Do Kwon

With justice served for one of the “crypto villains” of 2022 – Sam Bankman-Fried – the Securities and Exchange Commission (SEC) is looking to speed up the process for the other major villain of 2022, Terraform Labs founder Do Kwon.

In May 2022, the $45 billion Terra ecosystem collapsed after its TerraUSD (UST) algorithmic stablecoin lost its U.S. dollar peg. In February, the SEC filed a lawsuit against Terraform Labs and Do Kwon, charging them with securities fraud.

According to a document filed with the courts on Oct. 27, the SEC has asked the judge presiding over the case to make a summary judgment on the claims without a full trial.

“Terraform and Kwon orchestrated a fraudulent scheme that ultimately led to $45 billion in market loss, including devastating losses for U.S. investors,” the filing said. “Defendants fabricated Terra blockchain activity to create the appearance of real-world transactions on the blockchain that did not exist. And they lied to investors about the stability of Terraform’s so-called stablecoin, while concealing the secret deal Defendants had entered into with a third party to save the asset from collapse. When this scheme unraveled, investors in Terraform’s crypto asset securities lost nearly everything.”

“In addition to defrauding investors, Defendants engaged in unregistered public offerings of certain of their crypto-asset securities,” the SEC added. “Defendants distributed LUNA and MIR to intermediaries that were expected to, and did, resell those securities into public trading markets accessible to investors in the U.S.”

“As set forth below and in the SEC’s Statement of Undisputed Material Facts Pursuant to Local Civil Rule 56.1, the evidence that establishes Defendants’ violations is clear, undisputed, and overwhelming,” they said. “The Court should grant summary judgment in the SEC’s favor.”

The filing included more than 45 pages outlining the evidence and arguments against Terraform Labs and Kwon as the SEC made its case for summary judgment.

“Summary judgment is appropriate when the record shows that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law,” the SEC said, citing Case v. City of New York. “If the moving party meets its initial burden, the burden then shifts to the opposing party to establish a genuine dispute of material fact.”

The SEC presented evidence showing that “Terraform repeatedly violated the Exchange Act” by making “numerous material misrepresentations in statements to investors and potential investors” regarding the depeg of the stablecoin TerraUSD, “and engaged in other deceptive conduct, including causing ‘fake transactions’ to be put on the Terra blockchain.”

“Second, the undisputed record shows that Kwon – as the founder, CEO, and majority shareholder of 92% of Terraform – had the ‘power to direct or cause the direction of the management and policies of’ Terraform,” they said. “Kwon admitted that he had ultimate authority for decisions at Terraform.”

“Third, Kwon was a culpable participant in Terraform’s deceptive conduct and misrepresentations,” they alleged. “In fact, he was the genesis of that conduct and he repeatedly used Terraform to advance his schemes. Kwon conceived and directed the plan to ‘fake transactions’ on Terraform’s blockchain and then falsely represented them as real.”

“Kwon personally negotiated the deal with [redacted] in May 2021 to restore the peg, and then misrepresented to the public that the algorithm had ‘automatically self-heal[ed]’ the peg,” they said. “At the same time, Kwon directed Terraform employees to omit that information from public statements.”

“No rational jury could conclude that Kwon was not liable for Terraform’s violations of Exchange Act Section 10(b) and Rule 10b-5 thereunder pursuant to Exchange Act Section 20(a),” the SEC argued. “For the foregoing reasons, summary judgment is warranted against Defendants Terraform and Kwon on all of the SEC’s claims.”

  The Kwon Identity: Fugitive Terraform Labs founder Do Kwon arrested using fake papers in Montenegro

In an opposing filing from Kwon’s defense team, his lawyers also asked for a summary judgment on the case, arguing that the judge should reject the SEC’s lawsuit, claiming it has failed to prove he or his firm did anything wrong.

“After two years of investigation, the completion of a discovery period that resulted in the taking of more than 20 depositions, and the exchange of over two million pages of documents and data, the SEC is evidentiarily no closer to proving that the Defendants did anything wrong,” the lawyers wrote.

“Indeed, with the close of fact and expert discovery, the deficiencies in the SEC’s case have gotten worse, as it is now apparent that admissible evidence does not exist to support many of the SEC’s claims and that the SEC knew some of its allegations were false when it filed the Amended Complaint,” they said. “It is evident that the SEC’s preferred witnesses have trafficked in rumor and innuendo about the Defendants, but few, if any, have any firsthand knowledge about anything relevant to this case.”

Kwon’s lawyers provided 35 pages of arguments backing their motion for a summary judgment, and concluded that, “For all the foregoing reasons, the Court should grant summary judgment in its entirety with prejudice.”

Both motions for summary judgment are now in the hands of the presiding judge and will be ruled on in the near future. Kwon is currently detained in Montenegro and has previously asked the court to reject the SEC’s motion to extradite and interview him in the United States.

By

Jordan Finneseth

For Kitco News

Time to Buy Gold and Silver

David

Gold Price News: Gold Falls for Third Day Ahead of Fed Rate Decision

Gold is down for its third consecutive day with the precious metal now trading comfortably below $2,000 an ounce.

While safe haven demand continues to be strong amid Israel’s ongoing attacks on Gaza, today also brings the latest Federal Reserve interest rate announcement that will provide a reminder of the “higher for longer” stance of central banks.

gold kau price on kinesis exchange

Gold ($/g) price – 3-month view – from Kinesis Exchange

As a result, even though gold has dipped slightly from the highs achieved at the end of October, the price remains at a very high level historically with the recent movement more reflective of a slight correction rather than a broader downward trend.

Today’s Fed rate decision is widely expected to see the US central bank keep its rate unchanged at 5.5% but while rates may not rise further, the prospect of any cut in the coming months looks remote. As such, gold will have to face this permanent headwind of high-interest rates, making the non-yield-bearing asset less attractive.

While the peak of gold above $2,000 an ounce may have passed for now, the precious metal is unlikely to slide much further before fresh support rushes in.

Time to Buy Gold and Silver

David

Bitcoin price whipsaws on Fed rate decision, reclaims support above $34,600

The broader crypto market experienced a slight uptrend in trading on Wednesday after the Federal Reserve announced that it would be holding interest rates steady in a range of 5.25%-5.5%, the highest level in 22 years.

While rates remain unchanged for the time being, the central bank left the door open for future increases as they work to bring inflation back to their 2% target. Fed Chair Jerome Powell said the committee “is proceeding carefully” and will continue to make decisions “meeting by meeting.”

Stocks climbed higher following the announcement as traders saw the pause as evidence that the risk-on environment has returned. At the close of markets, the S&P, Dow, and Nasdaq finished in the green, up 1.05%, 0.65%, and 1.43%, respectively. Treasury yields sank lower, with the 10-year yield trading around 4.755%

Data provided by TradingView shows that Bitcoin’s (BTC) price whipsawed near midday, spiking to a high of $35,200 before dipping to $34,080. The top crypto has since climbed back above support at $34,600.

BTC/USD Chart by TradingView

Senior Kitco technical analyst Jim Wyckoff noted that “November Bitcoin futures prices [were] a bit weaker in early U.S. trading Wednesday,” and said, “Recent price action has formed a bullish pennant pattern on the daily bar chart.”

Bitcoin futures 1-day chart. Source: Kitco

“However, prices need to see a bullish upside breakout this week, or the bullish pennant will be negated,” Wyckoff warned. “The BTC bulls still have the solid near-term technical advantage as a price uptrend is in place on the daily bar chart.”

MN Trading analyst Gunter Lackmann said the daily chart for Bitcoin shows its price is “in a bullish consolidation resembling an ascending triangle chart pattern as the 8EMA, a reliable source to look for relative strength, is catching up with price.”

BTC/USD 1-day chart. Source: MN Trading

“Currently, the most obvious invalidation of this pattern would be daily candle closes under $34k, but we should also be ready for an intraday retest of the 8EMA, which last got tagged on October 23,” he said. “Upside resistance is at around $34.8k.”

Zooming in on the 1-hour chart, Lackmann said there is a “clear consolidation pattern, especially focused between $34,240 – 34,760.”

BTC/USD 1-hour chart. Source: MN Trading

He said the “most preferable entry into long exposure here probably would be a raid of the range low ($32.2k) followed by a reclaim of the range.”

“Most conservative traders wait until after the move to the upside (often divided into two – three legs up) completes” to reenter the market, he said. “My targets for those potential legs up from here are the areas of $36 – 38k and $40 – 42k. From there, it will become more likely that we get a retest of the previous HTF range high of around $31.5k, just when the market gets excited for more upside.”

For traders waiting for a significant pullback before opening a position in Bitcoin, market analyst Rekt Captial warned that there are only 100 days left when such an opportunity could present itself.

Altcoins in an uptrend

A majority of tokens in the top 200 recorded gains on Wednesday, while only nine coins saw losses greater than 3%.

Daily cryptocurrency market performance. Source: Coin360

SushiSwap (SUSHI) was the top performer, with an increase of 46.4%, followed by a gain of 26.8% for Just (JUST), and 16.3% for Uniswap (UNI). Polymesh (POLYX) led the losers with a decline of 11.64%, while MobileCoin (MOB) lost 10.5%, and Centrifuge (CFG) fell by 9%.

The overall cryptocurrency market cap now stands at $1.29 trillion, and Bitcoin’s dominance rate is 52.4%.

By

Jordan Finneseth

For Kitco News

Time to Buy Gold and Silver

David

UK to implement first set of crypto regulations in 2024, Spain to implement MiCA in 2025

The government of the U.K. has completed its review of comments received from the public regarding its proposed regulatory regime for crypto assets and has decided to move forward with implementing the first set of rules to regulate the crypto sector, including a requirement that all market participants be authorized before they can offer services to customers.

HM Treasury released the government’s responses to the comments received from the public on Monday, saying, “The government’s ambition to make the UK a global hub for cryptoasset technologies remains steadfast.”

“To realize this ambition, we must make the UK a place where cryptoasset firms have the clarity needed to invest and innovate, and where customers have the protections necessary for confidently using these technologies,” said Andrew Griffith, economic secretary to the Treasury.

“The learnings gathered from our engagement have been invaluable for further informing our approach,” he added. “While most aspects of our proposals were well received by the large majority of respondents, we have modified certain features of our future framework to take onboard the evidence presented.”

The Treasury said it would move ahead as proposed in a February public consultation, requiring firms undertaking cryptoasset activities to be authorized by the Financial Conduct Authority (FCA), although it gave no start date.

“By and large, the government intends to implement the territorial scope of the future regulatory regime as proposed in the Consultation,” they said. “This means a person (whether legal or natural) will generally be required to be authorized by the FCA under Part 4A of FSMA if they are undertaking one of the regulated activities or are providing a service in or to the UK.”

The rules that the Treasury intends to enforce focus on crypto assets like Bitcoin (BTC), the underlying blockchain technology that underpins the sector, and providers that are looking to offer crypto asset services to the U.K. public.

Regulated activities include offering a cryptoasset, operating a trading platform, swapping cryptoassets for currencies such as sterling, arranging investments and lending in cryptoassets, and safekeeping or custody.

“The government’s position is that firms dealing directly with UK retail consumers should be required to be authorized irrespective of where they are located,” they said.

The ministry said the new rules will be brought under established market law rather than exist as a standalone regime.

"It’s unlikely that crypto regulation will be easily shoe-horned into the existing regulatory framework," said Jonathan Cavill, a lawyer at Pinsent Masons. "The reality is that as the market develops at pace, the UK runs the risk of being left behind if it fails to attract crypto businesses."

The ministry said it plans to accelerate the implementation of these rules to provide the sector with greater clarity and will present secondary legislation to parliament in 2024. They also released a separate document outlining their approach to regulating stablecoins and will propose legislation in 2024 to give the FCA powers to oversee them.

The decision to move forward with establishing regulations around digital assets comes on the heels of the June passage of the Markets in Crypto Assets (MiCA) legislation in the European Union, which is the world’s first set of comprehensive rules specifically for cryptoasset markets.

  Singapore, Japan, Switzerland, and the U.K. partner on digital asset pilot programs

Spain to implement MiCA ahead of schedule

The Spanish Ministry of Economy and Digital Transformation has announced that it will begin implementing MiCA at the national level in December 2025, six months before the July 2026 general deadline for implementing the crypto framework for all 27 member states of the E.U.

The Ministry made the announcement via a press release on Thursday, and the first vice president of Spain, Nadia Calviño, has since met with the president of the European Securities and Market Authority, Verena Ross, to discuss the government’s intention to advance the implementation of MiCA.

While MiCA was approved in June, E.U. countries have been given a 36-month transition period from the time the bill was published in the Official Journal of the European Union. Spain previously stated they wanted to shorten that transition period to 18 months.

"The government will shorten the transitional period of application … with the aim of creating a predictable and stable regulatory and supervisory framework," the release from the Ministry said. “[This] will provide legal certainty and greater protection for Spanish investors in this type of assets.”

But they are not waiting until 2025 to start their preparations, as multiple large international crypto exchanges in Spain have been granted local licenses. In June, Crypto.com announced that they had been granted a Virtual Asset Service Provider (VASP) registration from the Banco de España that allows the exchange to operate in the country.

In September, Coinbase secured an anti-money laundering compliance registration from Spain’s central bank, and Kraken attained a VASP registration similar to Crypto.com.

Earlier this month, Banco de España issued a note to Spanish citizens preparing them for the potential introduction of a digital euro and explaining the basics of how the European Union’s central bank digital currency (CBDC) would operate.

“These preparations are multiple and complex in nature, not only for the Eurosystem but also for legislators,” they said. “The objective is clear: to be able to complement the range of payment solutions available to citizens, including cash. The digital euro would be an additional option that would ensure access to public money with all its guarantees, also in an increasingly digital environment.”

“The infrastructure that allows us to make electronic payments (machines, connections, protocols …) is a key part of our financial system and the Eurosystem ensures its soundness and availability,” the central bank said. “The digital euro would be based on a public and European infrastructure that would strengthen the European financial system and make it more independent of foreign alternatives.”

By

Jordan Finneseth

For Kitco News

Time to Buy Gold and Silver

David

China's gold output, consumption rise in 2023, gold ETFs add 9.53 tonnes in Q3

China’s gold production and consumption both increased over the first nine months of 2023, while the country’s gold ETFs also saw significant inflows in the third quarter, according to a report from Xinhua.

“China produced 271.248 tonnes of gold in the first nine months of 2023, up 1.261 tonnes or 0.47 percent compared with the same period last year,” the report said, citing data released by the China Gold Association (CGA). “In the January-September period, gold consumption in China totaled 835.07 tonnes, up 7.32 percent year on year.”

The CGA data also revealed a rise in the consumption of gold jewelry and gold bars and coins in the Chinese market. “Consumption of gold jewelry in the Chinese market rose 5.72 percent year on year to 552.04 tonnes, while that of gold bars and coins surged 15.98 percent from the same period in 2022 to 222.37 tonnes,” they said.

However, not all sectors saw an increase in gold consumption. “During the period, consumption of gold for industrial and other use fell 5.53 percent from a year earlier to 60.66 tonnes,” the report said.

The third quarter also witnessed significant inflows to the holdings of Chinese gold-backed exchange-traded funds. “In the third quarter alone, holdings of gold-backed exchange-traded funds (ETFs) in China added 9.53 tonnes,” the CGA said.

This addition brought the total holdings of gold ETFs in the Chinese market to about 59.69 tonnes by the end of September.

According to a recent report from Vladimir Zernov, Market Analyst at FX Empire, China is selling off massive quantities of its U.S. assets, and has little choice but to reallocate the funds to gold.

Zernov said he believes gold is one of the few viable alternatives to U.S. Treasuries. “In this scenario, China could increase its gold purchases in the upcoming months,” he wrote.

According to recent data from the U.S. Treasury, Chinese investors sold $21.2 billion worth of U.S. assets in the month of August. “While Fed policy outlook was the biggest driver behind the sell-off in Treasuries, it looks that China’s activity contributed to the move that pushed the yield of 30-year Treasuries towards 5.00%,” he wrote.

Zernov said he believes that, contrary to the prevailing market view, high Treasury yields may actually serve as an additional bullish catalyst for gold. “Traders are searching for safe-haven assets due to geopolitical tensions,” he wrote. “Treasuries are considered to be among the safest assets in the world, but their price is falling for months, and some investors may choose to buy gold.”

Chinese investors may be among the first ones to redeploy their funds to gold markets, he said.

Recent gold purchase data supports the theory that China is moving heavily into gold as they move to liquidate U.S. debt, with the People’s Bank of China (PBoC) buying gold at a torrid pace.

According to updated foreign reserve data, China’s central bank bought 29 tonnes of gold in August, lifting year-to-date purchases to 155 tonnes. It was also the central bank's biggest purchase since December.

And it’s not just the Chinese state that’s shown a voracious appetite for the yellow metal. Recent months have seen China’s domestic gold prices spike well above international spot prices as the country’s wealthy and middle class have clamored to secure the value of their own savings.

The population’s desire for gold was so great that the PBoC intervened in the market by banning banks from importing gold, which pushed the spread between the spot price of gold in Shanghai and in London to a record $121 per ounce in mid-September.

By

Ernest Hoffman

For Kitco News

Time to Buy Gold and Silver

David

This is why the fiat system 'ruins everything' and 'must be destroyed' – Jimmy Song

The fiat system is responsible for not only bad financial practices and mountains of debt but also distorted incentives on personal and professional levels, according to Jimmy Song, Bitcoin Developer, Author, Educator and Entrepreneur.

In his new book, 'Fiat Ruins Everything: How Our Financial System Is Rigged and How Bitcoin Fixes It,' Song dives into the fiat system and its pitfalls.

Song makes the case that the debasement of our money is the root of many of our problems and that the system of central banking has, in a way, “enslaved” us.

Song writes, “Like a zombie master, central banks have turned every organization into its slave, and much of civilization now lives a zombie-like existence. This is the debasement you’ve been feeling your whole life, the reason why everything seems to be slowly deteriorating.”

Song maintains that fiat has ruined everything from the economy to policies to relationships to family to art.

"Fiat money and the system of central banking is allowed to put new money into existence," Song told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News, on the sidelines of the Pacific Bitcoin Festival. "And the existence of somebody that can do that changes the incentives all over the place. In our personal lives, we don't have savings vehicles anymore, so that changes our behavior."

Song broke down his argument, starting with governments being in charge of printing money to prolong their stay in power.

"Governments can print money to buy votes to essentially prolong their power. That leads to a lot of distorted incentives. And at the global level, the U.S. has the ability to print the world's reserve currency. And that means it is dominant in foreign affairs," he said.

Song makes a compelling argument on how the fiat system impacts and distorts our daily lives. Watch the video above for details.

Money debasement

Inflation and currency debasement create a population that is focused on consumerism versus sound money spending, Song pointed out.

"The debasement of money causes you to want to spend it rather than save it because saving it is a lot of work. In order to keep the value that you have, you have to put a lot of time and energy into investments, savings vehicles, and maintaining those investments," he explained. "That's a lot of time, effort, and energy taken away from pursuing something more fruitful, like providing value to other people through the market process of providing goods and services."

This is how society ends up preferring short-term consumption versus long-term goals. The consequences of this could be dire, especially when it comes to civilizational progress. Watch the video above to get the full take.

Prior to the modern-day fiat currency, there was a gold standard, which served people better. However, one of its downfalls was centralization, Song added. For more details on what worked and what didn't under the gold standard, watch the video above.

Song argues for the sound money standard, noting that if Bitcoin is adopted on a large scale, it could fix the global issues the fiat system created.

"What fiat money lets you do is suspend reality. You can certainly see that with some of the zombie companies that exist today. The more money you inject, the longer they can live, even though they really should be dead," Song said. "Fiat must be destroyed to preserve civilization."

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Time to Buy Gold and Silver

David

Gold continues to shine as rising debt could cause bond yields to become unanchored – Sprott's McIntyre

There is no question that geopolitical uncertainty caused by chaos in the Middle East was the spark that ignited safe-have demand for gold and drove prices up from their seven-month lows; however, there is another factor at play in the marketplace that is helping to support prices at $2,000 an ounce, according to one portfolio manager.

In an interview with Kitco News, Ryan McIntyre, managing partner at Sprott Inc., said that the potential for a credit risk event is also providing solid safe-haven demand for gold and could help propel prices well above $2,000 an ounce.

McIntyre's bullish outlook on gold comes as the precious metal has held its ground, holding initial support this week above $1,950 an ounce even as bond yields remain in striking distance to 5%, their highest level in 16 years.

McIntyre said that one of the reasons why gold's negative correlation to bond yields is breaking down is because more and more investors are becoming worried about the U.S. government's fiscal outlook and the growing debt, which has surpassed $33 trillion.

However, McIntyre added that this is more than just the size of U.S. government debt.

"The most frightening thing for me is the deficit. I am more focused on the trajectory of where things are going," he said. "The rising deficit means the U.S. is not getting its finances in check."

McIntyre also noted that elevated gold prices reflect the growing risk that the U.S. economy faces a potential debt spiral as higher interest rates reflect higher borrowing costs, which precipitates the need for more capital.

He said that he thinks the U.S. is experiencing a slower version of what happened last October when the U.K. bond market was roiled after then-Prime Minster Elizabeth Truss proposed substantial tax cuts to be paid for with higher deficits. The turmoil in British financial markets cost Trust her job as Prime Minister.

One reason why markets are now focusing on the U.S.' growing debt is because of the sharp rise in interest rates. With the Fed Funds rates between 5.25% and 5.50%, the U.S. government is now spending more money servicing its $33 trillion debt than it spends on national defense.

At the same time, McIntyre also noted that along with the Fed's aggressive rate hikes, it has reduced its balance sheet, significantly reducing M2 money supply, the amount of money held by the public.

  Traders wait to see if gold can break $2,000 after the Fed holds rates steady

"Because the supply of money is decreasing, asset values are inherently decreasing. You now need more assets to support your credit requirements at higher levels. This is the last thing you absolutely want because it can quickly spiral out of control," he said. "I think this is why investors are turning to gold because they see a stable asset. There is only one safe-haven asset out there if you don't just want U.S. government bonds: that is gold."

While the Federal Reserve remains primarily focused on inflation, McIntyre said they need to be aware of the potential risk that bond yields could become unanchored to monetary policy.

While it may be a little early, the scenario that McIntyre is looking for is where the Federal Reserve maintains its hawkish stance but starts buying bonds, to keep yields in line. He added that the same time, increasing M2 money supply would also help ease market tensions.

However, McIntyre added that the Fed is in a difficult position. Because of rising deficits, the Fed can be seen increasing its balance sheet too much.

"Maybe in the short term, it will have the desired effect. But I think it will make people more nervous. And that's the problem when you lose control," he said. "With all this uncertainty, I think gold will continue to do well and remain in an uptrend until the government can get its spending under control, which isn't likely to happen anytime soon."

By

Neils Christensen

For Kitco News

Time to Buy Gold and Silver

David