Big ideas are like supertankers filled with oil; both take forever to get moving. The move from one state to another is a boring form of entertainment. However, each is impossible to stop once the momentum has built. Substantial progress can be seen over a period of time and one can notice and understand the real measure of the changes that have occurred.
Physical metal ownership of silver and gold as an investment idea is like a supertanker filled with oil. The momentum in gold and silver builds year over year while the action is boring and nothing much happens each day. Only if you look over a long enough horizon will you see change did happen, the idea managed to cover a far distance.
Gold is possibly gaining momentum and the gold price is once again oscillating around the US$1900 level, which is the same sticking point that the gold price found itself when it reached its high in August 2011 – this was also a sticking point as gold declined from its recent new high last fall.
The Domino Effect
The world geopolitical, economic and financial environment in 2011 was in upheaval and has several comparisons to the state of the world in 2020-21.
2011 was a volatile year. The headline crises at the time were the Eurozone debt problems – Greece, Ireland, and Portugal had all received large support packages from the EU and Eurozone.
Government leaders were scrambling to put new mechanisms in place to support these countries. That would prevent the feared domino effect from spreading the skyrocketing interest rates into larger countries such as Italy.
The European Union met in Brussels for an emergency session to handle the emerging sovereign debt crisis beyond the problems of just Portugal. Moreover, bankers agreed upon a write-down of Greek bonds, recapitalizing of Europe’s banks, and total bailout facilities to reach one trillion Euro.
However, for the second time status quo was chosen over the destruction of failed entities.
The fiscal support was backed by the European Central Bank and therefore, one of the milestone moments on the road to central bank balance sheet inflation seen today. Central bankers adapted the motto of ‘whatever it takes’ to support the economies that has lasted over the last decade.
The World in Turmoil
Social media was at the beginning of its rise as a way for ‘grass roots’ movements to organize – Occupy Wallstreet in the Western countries was in full swing.
Geopolitically Osama Bin Laden was found and the US military killed in May of 2011 in the height of what was known as the war on terror. England experienced 6 days of rioting which led to more than 3000 arrests, 186 injured police officers and 5 dead. And starting in Tunisia the Arab Spring uprising was able to spread across five other countries including Egypt, Libya, Yemen, Syria and Bahrain.
The first bitcoin conference took place at the World Expo in New York City, and Wikileaks began to accept donations via bitcoin while the bitcoin creator, Satoshi Nakamoto, was washing his hands from being involved with bitcoin.
Financial markets were still recovering from the Great Financial Crisis of 2008-09, the S&P 500 was still below the levels of 2008.
Fast forward to August 2020 when gold reached the US$1900 level once again. The world was again in a state of turmoil as Covid-induced lockdowns had swept around the world.
The United Kingdom was dealing with Brexit. Thus, riots over police violence plagued many cities throughout the US (and other Western Countries). The US was amid turmoil in its presidential election process. Moreover, Trump and his followers maintained that the US election was rigged and that Trump was the rightful winner of the election.
Social media campaigns again made headlines. Also, this time the activism was turned toward financial markets as Reddit’s WallStreetBets forum called for a herd of investors to start buying companies that hedge funds had large short positions in.
Also, the difference between the 2011 and 2020-21 time periods is that newly created money now flows into households who place it into financial markets.
So, the equity markets are at new highs, money printing, central bank balance sheets, and government debt levels have all exploded.
These all give gold lots of reason and room to run higher and gain momentum. Moreover, remember it takes a long time for the momentum in a tanker filled with oil to grow. And this could also be the momentum building in the gold and silver markets! So this year gold and silver would be gaining momentum in the market. Two examples of this are the difference in the gold price to S&P 500 ratio and the gold price to US money supply charted below.
From the Trading Desk
We are still seeing consistent volume on orders. Also, with premiums remaining elevated on Silver, we have seen some clients allocate more to gold recently. Stock-wise, we have good availability on all gold bars. However, the delays remain at the Royal Mint for Gold Britannia coins and are on allocation.
Unless you specifically are looking for Gold Britannia’s, you should consider other 1oz gold coins we offer.
The lowest premiums currently are on the South African Krugerrand 1oz coin at Spot plus 5.5%.
Silver Bars availability is good on 100oz & 1000oz VAT-free bars bonded in Zurich. Silver coins in Zurich are available too and silver coins for delivery are available but premiums remain elevated.
Also, please call our trading desk to confirm current availability for deliverable Silver coins as availability depends on your location.
Gold closed the week and the month above $1900. Gold has had a strong move up from the lows at $1675 at the end of March. In the short term, the price is a little overbought and we may see a pullback and some consolidation here.
On Friday we have a speech from Fed Chairman Powell. All eyes too will be on the Non-Farm Payrolls and what this means for inflation expectations.
Keep an eye on bond yields too as there is a strong correlation here to what happens to the gold price.
Silver remains in a tight trading range still eyeing that strong resistance level at $30.
GOLD PRICES (USD, GBP & EUR – AM/ PM LBMA Fix)
02-06-2021 1895.90 1902.75 1341.16 1343.15 1555.97 1559.49
01-06-2021 1907.70 1899.35 1344.74 1339.23 1558.97 1551.77
28-05-2021 1892.45 1899.95 1333.80 1342.12 1552.38 1561.76
27-05-2021 1895.05 1891.45 1341.70 1334.80 1554.13 1551.18
26-05-2021 1904.30 1899.75 1344.82 1344.83 1555.43 1553.81
25-05-2021 1882.80 1887.00 1327.56 1335.24 1536.18 1541.11
24-05-2021 1876.85 1880.15 1328.43 1327.20 1538.27 1537.96
21-05-2021 1877.65 1875.90 1321.30 1324.01 1535.54 1539.74
20-05-2021 1869.35 1878.30 1325.18 1327.39 1534.18 1537.76
19-05-2021 1860.00 1888.45 1312.79 1332.30 1523.53 1544.37
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