4. GOLD, THE DOLLAR, THESE FOREVER WARS AND GOLD'S FLASH CRASH

23 October 2025

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GOLD, THE DOLLAR, AND THESE FOREVER WARS

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1. The Dollar Trap

It might seem utterly foolish for Russian companies such as oil giants Rosneft and Lukoil to leave assets in US dollar accounts, given the near-certainty of eventual confiscation.
But what choice did they have? The dollar remains the central clearing currency for global trade, especially in oil, shipping, insurance, and large-scale long-dated commodity contracts. To pull out would assure legal actions, fines...

Even when nations want to diversify, the reality is that the dollar’s network effect is overwhelming. It underpins the international payments system (SWIFT), and most trade finance is still denominated in USD. Cutting oneself off from the dollar is near impossible. 

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2. Gold's Flash Crash

Gold fell sharply last Thursday and again on Tuesday (today is Thursday 23 Oct 2025).
Analysts cited “easing trade tensions” between the US and as the US moved to compromise over the export of refined rare Earths from China) and speculation that the Federal Reserve might have to delay further rate cuts - both factors said to have strengthened the dollar, its relative strength.

But when we look at the data, the DXY (Dixie, the Dollar Index) barely moved - roughly from 98.8 to 99.0. This is hardly a “strong dollar rally.”
It raises a fair question: are markets being "over-interpreted" to fit policy-friendly narratives? Ie, are we getting propaganda even in our macroeconomic data? Is the significance of these forever wars being obscured?

The timing of these moves over the last week suggests something else.
Gold’s decline coincided with rumours of progress towards peace in Ukraine: fewer geopolitical shocks tend to depress safe-haven assets.
Then, when Washington sanctioned Rosneft and Lukoil, gold rebounded.
That makes sense: sanctions restrict oil supply, drive up prices, slow global trade, and threaten growth, which create exactly the conditions under which investors hedge with gold.

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3. Central Banks Keep Buying

Step back and look at the long-term trend.
Central banks, especially in Asia, the Middle East, and emerging markets, have been accumulating gold steadily for two decades.
They buy as part of a de-dollarisation strategy, exchanging printed local currency for physical metal that can’t be frozen or sanctioned. And now selling out of U.S treasuries or at least not investing in in order to obtain dollars and with these by gold.

According to the World Gold Council (2024), central banks added over 1,000 tonnes to their reserves in just two years — the largest accumulation since records began.
China, India, Turkey, and Poland have been the leading buyers. Remember that since 1971 the US dollar as not been backed by anything other than a promise from the US treasury. 

The logic is simple: monetisation of debt by printing expands the money supply while the supply of physical assets remains constant, causing inflation ie reducing the purchasing power of a fiat currency.

• Inflation erodes fiat money.
• Gold protects purchasing power.
• Plus, in an era of dollar weaponisation, gold is one of the few assets that is truly sovereign.

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4. The Investment Gap

Ray Dalio (Bridgewater Associates) and strategists at J.P. Morgan recommend holding 15–25 % of total assets in gold as “wealth insurance.”
Yet institutional portfolios such as pension funds today hold less than 1 % of their assets in gold. Retail investors hold even less.

If institutions were to rebalance towards that 15 % level, it would represent a massive structural demand shock ...a tide of capital that could propel gold prices way beyond their current levels.

Gold is not only a store of value but also a reserve asset for trade ie a settlement medium between central banks.
In other words, it operates as a form of real money, even in a fiat world. "Gold is money, all the rest is credit", said J P Morgan himself back in 1912!

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5. The Real Risks

For private investors, the question is not whether gold’s price will fluctuate - it surely will. It’s about sovereign risk (the risk of a state breaking its promise to repay by defaulting on its debt, freezing assets, imposing capital controls, or otherwise preventing investors from getting their money back):

• Will governments impose capital gains or sales taxes on gold transactions?
• Could they impose capital controls on moving bullion across borders?
• Could “anti-hoarding” or “windfall” taxes appear under the pretext of financial stability?

The danger isn’t in gold’s volatility — it’s in the system’s desperation for revenue.
When the debt burden grows too large to service, governments look for assets to confiscate or revalue.

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6. The Takeaway

Gold remains the last refuge for those seeking no counterparty risk (the risk a bank, broker, or borrower will fail to meet their obligation) ie seeking a physical asset whose supply is limited and whose value cannot be "conjured" by printing presses.
Gold is in effect an anchor of trust in a world of promises.

As debt-to-GDP ratios soar, and money supply expands at “eye-watering” speed, currently:

U.S. GDP: ≈ $30 trillion

U.S. National Debt: ≈ $38 trillion

Debt-to-GDP ratio: ≈ 124 %.

The logic of holding gold grows clearer - there's no way that dirt is ever going to be repaid in full unless inflation can burn it away ie inflation about interest rates over many years indeed decades... but who would continue to invest in U.S treasuries?) or the system will fracture under its own weight. A structure - political, economic, or social - becomes so large, complex, and unsustainable that it collapses from internal pressure, not from outside attack, ie costs, contradictions or inefficiencies grow faster than the system's ability to manage them - debt, inequality, bureaucracy, or corruption grow faster than productivity and trust, so the system eventually implodes from within.

It breaks down naturally, like an overloaded bridge snapping.

Fiscal Dominance and Overstretch

The state’s debt burden grows faster than the tax base.

Interest payments consume a rising share of govt revenue.

Governments start to monetise the debt (print or issue short-term paper to fund themselves).

Investors lose confidence → rising bond yields → even higher borrowing costs → ... a vicious spiral.

In either case, those holding tangible, finite assets will sleep better!

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References:

• World Gold Council (2024) – Central Bank Gold Reserves Data
• Ray Dalio, Principles for Dealing with the Changing World Order (2021)
• J.P. Morgan Private Bank, 2025 Outlook: Real Assets for a Real World
• YouTube: The Gold Story – Explaining the Numbers

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Why Central Banks Keep Buying Gold

(This graphic shows the flows, incentives, and price linkages.)

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3. PORTFOLIO STRATEGY THREE GOLD ETFs FOR THE DOLLAR ENDGAME

Portfolio Strategy: Three Gold ETFs for the Dollar Endgame

1. Two-Phase Dollar Cycle

2. Relative Performance (Phase 1) - clean line chart comparing SGLN, AUCP, GDXJ under a “Dollar Crunch” (DXY↑, liquidity↓).

3. Gold Sensitivities (Phase 2) - bar chart showing approximate leverage to gold (SGLN 1×, AUCP 1.5×, GDXJ 2.5–3×).

4. ATR-Based Trailing Stop - simple visual of price vs trailing stop band.

5. Portfolio Allocation - pie or stacked bar showing 40 / 40 / 20 split and respective roles.

Framework and Rationale

This section examines how a gold-weighted portfolio might behave across two distinct phases of the dollar cycle.

Phase 1 represents a dollar liquidity squeeze; Phase 2 represents a loss of confidence in fiat money.

The focus is on three London-listed ETFs: SGLN (iShares Physical Gold), AUCP (L&G Gold Mining), and GDXJ (VanEck Junior Gold Miners UCITS).

Each vehicle captures a different layer of exposure — physical metal, senior producers, and high-beta junior miners.

(Insert – “Two-Phase Dollar Cycle: Dollar Crunch → Dollar Break”)

Phase 1 – Dollar Strength and Liquidity Tightening

In this phase, real yields rise and the dollar index (DXY) strengthens.

Liquidity leaves emerging markets and speculative equities, creating risk aversion.

The key mechanism is forced de-leveraging: investors sell what they can, not necessarily what they should, in order to pay their debts.

SGLN tends to remain resilient.  Gold is sold for cash but simultaneously benefits from safe-haven flows and, in sterling terms, from a weaker pound.  The ETF’s low tracking error and physical backing make it an effective capital-preservation tool.

AUCP declines moderately.  Large producers suffer from falling sentiment and, to a lesser degree, lower short-term bullion prices, but their positive cash flow and dividend yield absorb part of the shock.

GDXJ reacts sharply.  Juniors are sensitive to financing conditions; they often fall two or three times more than gold itself.  A 15–25 per cent correction is typical during risk-off episodes.

Relative performance of SGLN, AUCP and GDXJ during dollar-strength periods

Practical note: investors should treat such drawdowns as accumulation opportunities rather than reasons to exit.

Position sizes can be scaled gradually when RSI falls below 40 and volume contracts, indicating capitulation rather than fundamental weakness.

Phase 2 – Dollar Weakness and Monetary Repricing

This phase begins when markets conclude that the Federal Reserve has lost control of real yields.

Fiscal deficits widen, policy credibility erodes, and inflation expectations re-anchor higher.

The narrative shifts from “tight money” to “unpayable debt.”

SGLN becomes the portfolio’s anchor.  As central-bank demand rises, the ETF’s price tends to advance broadly in line with bullion.  Gains of 50–100 per cent are historically consistent with similar monetary resets.

AUCP benefits from margin expansion: producers’ revenues follow bullion while their costs (energy, labour, reagents) adjust more slowly.  Leverage to the gold price is roughly 1.5×, with dividends maintaining investor confidence.

GDXJ becomes the high-beta sleeve.  Smaller miners experience operational leverage; historical analogues suggest potential 3–5× moves once gold establishes a new base above previous highs.

(Insert – “Estimated sensitivities of SGLN, AUCP and GDXJ to bullion price changes”)

Trade Management and Exit Discipline

The challenge in this environment is not identifying the trend but managing exposure as volatility expands.

ATR (Average True Range) provides a practical way to frame trailing exits without being prematurely stopped out.

1. During consolidation: use the 14-day ATR to estimate expected daily range.  For example, if ATR = 2.5 USD, a normal fluctuation is ±2.5 USD around recent closes.

2. During the breakout: allow a wider tolerance — roughly one ATR below the weekly closing high.  This converts ATR from a defensive stop into a trailing exit that locks in profits while respecting trend volatility.

3. When volatility contracts after a spike: reduce position size or rebalance into SGLN to maintain portfolio stability.

(Insert placeholder: small technical diagram – “ATR-based trailing stop illustrated on GDXJ weekly chart”)

Position Weighting

A practical distribution reflecting both protection and asymmetry could be:

ETF Exposure Type Typical Beta to Gold Suggested Weight Role

SGLN Physical bullion 1.0 40 % Core hedge and liquidity reserve

AUCP Senior producers 1.5 40 % Income and steady participation

GDXJ Junior miners 2.5–3.0 20 % High-beta growth sleeve

(Insert placeholder: infographic – “Sample portfolio allocation across gold tiers”)

Assumptions

Liquidity cycles drive performance differences more than simple bullion moves.

ATR and moving averages are practical, objective tools for risk control.

The long-term value of miners derives from cash flow sensitivity to gold, not short-term sentiment.

Diversifying across the gold-exposure ladder (metal → majors → juniors) allows participation through both deflationary and inflationary phases of the dollar cycle.

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1. GOLD, EQUITIES AND THE ENDGAME OF A TRASHED CURRENCY

13 October 2025

Gold, Equities and the Endgame of a Trashed Currency

When money weakens, asset prices soar - at first at least. But the illusion of wealth soon gives way to the reality of devaluation. This is the story of how currencies collapse, why gold endures, and how you, dear readers as investors, might navigate the transition.

Money Printing

It is well explained here, offset 15'

1. The Dollar’s Fragile Supremacy

When a currency weakens, the first thing investors notice is that everything priced in it seems to rise. “Appears to”. Gold, oil, and shares all appear to surge in value. But this is largely an illusion. Their nominal price climbs because the measuring stick - the currency itself - is shrinking. You have to understand that the money in your pocket doesn’t go as far as it used to because there is more of it in circulation - more money chasing the same supply of goods => inflation. Real assets and notably gold are unchanged in value (in usefulness), it’s just that to buy them you need more and more of a collapsing currency. 

So the early phase of a currency decline is seductive. It feels like a boom. Asset prices climb, optimism abounds, and governments convince themselves the problem is under control. In reality, it’s the first act of a slow-moving tragedy.

2. The Flight to Hard Assets

As faith in money falters, investors turn instinctively towards what is real and finite. Gold and silver rise first. Commodities follow. Real estate attracts capital too, because it is tangible and usable. These are the classic havens in times of monetary excess. Property owners can be well pleased. During the last great inflationary decade, from 1971 to 1980, gold outperformed equities by a factor of 10 - ten! This is the essence of the flight to hard assets: the search for value that cannot be printed.

Currency Erosion

3. Equities in Nominal Boom, Real Decline

Equities can appear to thrive in an inflationary world, but the reality is less kind. Companies raise prices to match inflation, but input costs rise even faster. Energy, labour, and debt all become more expensive. But watch out - profits shrink in real terms.The result is an inflationary bull market - one that looks spectacular on paper but quietly erodes purchasing power. The chart goes up, yet the investor “mysteriously” grows poorer.

4. Gold Miners and the Leverage Trap

Gold miners offer extreme leverage to gold’s price movements. When gold rises faster than mining costs, profits soar. But when inflation spreads into fuel, wages, and equipment, the advantage vanishes. Late-stage inflation often squeezes miners hardest - especially the smaller juniors. A big part of costs is energy so if oil dips then junior miners rise .This is why ETFs like VanEck Junior Gold Miners (GDXJ) swing so wildly: they are turbocharged plays on both gold and confidence.

Loss of Control - Dollar Devalues

5. The Loss of Control

Eventually, inflation becomes chaos. Bonds collapse as yields rise uncontrollably. Governments respond with price controls or capital restrictions. Markets lose faith in policy itself.This is the next phase - the loss of control - when gold ceases to be an investment and reverts to what it always was: money. Equities, once buoyed by cheap printed liquidity, deflate both nominally and in real terms. The public, sensing betrayal, retreats from all paper promises.

6. The Dollar’s Paradox

The dollar remains a special case. It is both the world’s problem and its refuge. When crises erupt, capital still runs to it - the “scramble for dollars". Yet this safety is temporary. If confidence in US fiscal discipline breaks, there will be no replacement large enough to absorb the shock.

The Great Reset

The next rotation will be into gold, commodities, and perhaps a few disciplined currencies such as the Swiss franc or Singapore dollar. Analysts are already calling this “the post-dollar rotation”.

7. Recap: The Phases of a Currency’s Decline

(1) First comes monetary expansion, when printing presses hum and markets cheer.

(2) Next, currency erosion, when inflation bites and investors seek shelter.

(3) Then, loss of control, when policy fails and faith collapses.

(4) Finally, the reset, when a new measure of value emerges.

Gold survives every reset because it is not anyone’s liability. Fiat currencies depend on promises ... and promises are the first casualty of panic.

8. Gold and Equities in the Endgame

In the early stages of devaluation, both gold and equities rise together. Later, gold continues upward while equities stagnate. Finally, as trust in paper disintegrates, gold becomes the numeraire ie the yardstick by which all else is measured. This is why serious investors still see gold as the foundation of wealth, a yard stick and they store of wealth, not a mere trade.

9. The Modern Parallel

Today’s conditions are eerily familiar: soaring deficits, massive liquidity, and record asset prices. Real yields wobble. The Fed’s balance sheet is swollen. Debt-to-GDP ratios have entered uncharted territory.It is the same old pattern, only on a global scale. The illusion of wealth persists, but the repricing of reality is already underway.

10. What could derail the trend?

Gold - at October 2025 - looks technically overbought in the short term but remains in a structural uptrend. The last great bull run in the 1970s only ended when two conditions appeared together: belief that the Fed had conquered inflation and real GDP growth running twice its long-term average. Neither condition applies today. If anything, industrial commodities like copper and oil hint at weakness, while the Fed’s recent rate cuts show tolerance for higher inflation. Trade frictions between the US and China reinforce a stagflationary backdrop – historically positive for gold.

11. The 1970s Playbook

Is history a guide? Some people think so.

From 1973 to 1983, gold rose fivefold while the S&P 500 gained just 50%. Four stagflationary episodes saw inflation peaking in 1970, 1974, 1980 and 1982. Gold typically rallied into recessions, dipped 19% after the first rate hike, then recovered within months. Bull runs broke only when GDP soared above 4-5% in post-recession booms – conditions absent today.

When to step in and out of gold?

12. Valuation Upside

1. Buy the dips - use technical measures RSI, ADX, Volume, moving averages, momentum

2. Watch miners' margins - use fundamentals spot - AISC

3. Get out when (more likely "if") gold's refuge value falls - use macro indicators: inflation mastered, growth returns, fiscal crisis over. 

Miners' operating leverage

Gold-mining equities have operating leverage to the gold price. You can see that if you compare the share price of the ETF SGLN with the miners GDXJ and AUCP.  Gold has risen ~30% in the last three months, these senior and junior miners ~60%.

When gold rises faster than miners' input costs, margins explode. Even using a conservative $3,900/oz gold price (spot < futures), gold-mining equities appear undervalued (sic) by around 60%. Shares today imply a $3,000 gold price - this is about 25% below spot - and developers could gain materially more as projects de-risk (ie  gap between costs and price of gold widens further). 

Under one blue-sky scenario of $17,000 gold within five years, valuations of miners could rise over 600%, with multiples expanding as the bull market strengthens.

Example:

All-in sustaining cost (AISC): $1,300–1,600 per oz

Cash cost: $1,000–1,200 per oz

Break-even: $1,400–1,500 per oz

When gold trades above $2,400 per oz, margins can double or triple, explaining the strong performance of ETFs such as GDXJ.

Input Costs

But if AISC begin to rise faster than gold in dollar terms, margins - and share prices - could tumble:

12. Closing Reflection

Gold remains the clearest long-term hedge against monetary excess, fiscal instability and rising geopolitical threats. The short-term pullbacks are buy-the-dip opportunities within a structural uptrend supported by policy, politics and history. The Miners have operating leverage and rise faster ... although beware if miners' costs start to inflate faster than the price of gold in dollar terms.

If a currency can be trashed, it can also be rebuilt. But rebuilding requires trust and this is something that cannot be printed or borrowed. Gold, indifferent to politics and policy, endures through each cycle of human "error". That is its unquestionable and unanswerable strength.

© 2025 Living in the Air - Essay adapted from discussions on global macroeconomics and the future of money.

NEXT Three GOLD ETFs worth considering

Glossary

Nominal Price

The face value of a good or asset, expressed in current money terms and not adjusted for inflation. A rise in nominal price may simply reflect a fall in the currency’s purchasing power rather than a true increase in value.

Real Assets

Tangible things that have intrinsic worth because they are useful, such as property, commodities, and infrastructure - as opposed to financial claims or paper instruments. The value of real assets tends to hold up when currencies weaken - hence the illusion that they are going up in price... but no not at all: real assets are holding their value while the currency gets debased meaning you need more of it to buy the same quantity of real asset.

Hard Assets

A subset of real assets that are physically finite and durable: gold, silver, oil, and land. They act as stores of value during monetary instability.

Monetary Excess

A condition where the supply of money expands faster than the growth of goods and services, leading to inflation and speculation.

Bull Market

A sustained period of rising asset prices, often fuelled by optimism, liquidity, or loose monetary policy. Bull markets can exist in both nominal and inflation-adjusted terms.

Purchasing Power

The amount of goods and services that one unit of currency can buy. It declines as prices rise — hence inflation erodes purchasing power.

Price Controls

Government-imposed limits on the prices of goods or services, used to curb inflation. Historically they distort supply and lead to shortages or black markets.

Capital Restrictions

Regulations that limit the movement of money across borders - for example, taxes on foreign exchange or limits on withdrawing funds. Capital restrictions are usually introduced in times of financial crisis to protect a currency.... beware!

Policy (Fed Policy)

The set of actions taken by the US Federal Reserve to influence economic activity on employment and inflation. These are mainly through setting interest rates, controlling the money supply, and managing the size of its balance sheet. Interest rates are very important to a stable economic system, including the government's ability to pay the interest on its debt.

Nominal and Real Terms

“Nominal” refers to figures measured in current prices; “real” means adjusted for inflation. For example, wages may rise 5 % nominally but fall in real terms if inflation is higher.

Paper Promises

A figurative expression for financial assets - shares, bonds, and bank deposits - that depend on the issuer’s solvency and trustworthiness, unlike gold or land which have intrinsic value.

Fiscal Discipline

The ability of a government to control its spending and borrowing. Weak fiscal discipline - large, persistent deficits - undermines confidence in a currency.

Numeraire

An economic term meaning the standard by which value is measured. In stable times the numeraire is the national currency; in crises, gold often resumes that role.

Real Yields

The return on bonds after adjusting for inflation. When real yields fall or turn negative, non-yielding assets like gold become more attractive.

Fed’s Balance Sheet

A record of all assets and liabilities held by the Federal Reserve. It expands when the Fed buys securities or injects liquidity into the banking system - a process known as quantitative easing.

Debt-to-GDP Ratios

A measure of a country’s indebtedness, comparing total government debt to annual national output. High ratios signal that debt growth is outpacing economic growth, raising default and inflation risks.

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2. THREE GOLD ETFs WORTH CONSIDERING

13 October 2025

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1. Reflections on portfolio construction

2. Trader’s Take section in gold ETFs

See previous article.

1. Balancing Gold with the Real Economy

A sound portfolio doesn’t live on bullion alone. Gold provides the bedrock - protection against monetary folly and market tremors - but lasting wealth also needs exposure to the productive world. Alongside a core weighted towards gold and miners, investors should hold select equities in energy and industrials, the two sectors most closely tied to tangible output and inflation dynamics. This combination anchors the portfolio in real assets while still capturing the pulse of economic growth.

2. ETFs Worth Considering

SGLN – iShares Physical Gold ETC
TER 0.12 % | AUM ≈ £13 billion
SGLN is the simplest sterling-denominated route to hold physical gold. Each share is backed by allocated bullion (?) stored in London vaults, tracking the spot price almost perfectly and remaining unhedged to the US dollar. It’s a low-cost, transparent way to preserve purchasing power or hedge against monetary excess.

AUCP – Legal & General Gold Mining UCITS ETF
TER 0.65 % | AUM ≈ $400 million
AUCP tracks the FTSE Gold Mines Index, providing exposure to leading global gold-mining companies such as Newmont, Barrick and Agnico Eagle. It sits between pure bullion and high-risk junior miners, offering leverage to gold prices without extreme volatility. In strong bull phases, AUCP tends to outperform the metal; in corrections, it retreats faster. Its higher TER reflects the costs of maintaining sector purity and global weighting.

GDXJ – VanEck Junior Gold Miners UCITS ETF
TER 0.55 % | AUM ≈ $4 billion
GDXJ invests in smaller, fast-growing exploration and development miners. It brings higher potential returns - and greater volatility - than large-cap funds like AUCP. When gold rallies, juniors can surge; when sentiment turns, they can fall hard. Best suited to investors who understand the cycle and can ride the swings of this high-beta segment.

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Trader’s Take: How to blend the three in one gold strategy

Together, these three funds offer a complete exposure to gold’s ecosystem: SGLN anchors the portfolio in physical metal, the ultimate store of value; AUCP adds torque through major miners leveraged to gold prices; and GDXJ supplies the speculative edge via junior explorers with outsized upside in a bull cycle. In a stagflationary world where real assets regain power over paper promises, a balanced mix of roughly 50% SGLN, 30% AUCP and 20% GDXJ offers both defence and opportunity - the timeless metal, the producers, and the dreamers who dig it out of the ground.

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WHY GOLD IS GOING UP

18 April 2025

 

Why Gold Is Going Up

https://youtu.be/1rBemqiLsCg?si=J1AXAsaQzn1CLbHF

In this and other videos, Chris says gold is "on a tear", while saying that he has been sitting on the sidelines for these last six weeks.

There are others who say that the gold price is rising because of institutional buying (by central banks and other institutional investors, who are selling their US dollars to buy gold) and that “retail” (the likes of you and me) has not joined in as yet.

They point out that if the job of gold is to balance monetary expansion (creating more and more money expands the money supply), then given all this printing since QE and so on, gold is “dirt cheap.” That's what some are saying.

How does this work? Why is gold going up? 

It used to be that anyone with a dollar bill in their hand could go to the bank and exchange it for gold. It was like that until 1971, when Nixon had to take America off the gold standard - everyone was asking for their gold, Fort Knox was almost empty!

Of course, gold is being mined all the time, little by little, but that supply is more or less fixed, and now value has to match the hugely increased amount of paper money - what’s called “fiat currency.”

So imagine a world with one block of gold and one one‑dollar note. A dollar is worth one block of gold. What happens if you print another dollar? The block of gold now must be worth two dollars. Or if you prefer, a dollar is now only worth half a block of gold. The dollar has been devalued against gold, or if you like, gold has doubled in price.

With all this printing, people lose confidence in the dollar, don’t they, as it buys less and less in the real world. Gold is the store of value that people trust. When they want to buy a loaf of bread, they now have to pay two dollars instead of one. That’s inflation!

And just look at the figures: since the turn of the century, the amount of money in circulation has gone up tenfold, and - surprise, surprise - gold has gone up tenfold as well!

One basic reason for gold going up in price is that money has been printed out of thin air. In fact, you could say that it’s not that gold has gone up in price—it’s that the dollar has been devalued by all this “monetary expansion.”

Currency

This is another reason why the price of gold might change: currency. For example, in Indonesia, the rupiah is constantly losing value against the dollar. Gold is priced in dollars. So you need more and more rupiah to buy gold. Gold is getting more expensive in Indonesia simply because the rupiah is devaluing on the currency market.

Well, if you lived in Indonesia and were trying to save, would you prefer a rupiah in the bank or gold tucked under your pillow? You’d buy a bit of gold every month as part of your savings and investment plan, wouldn’t you.

Risk

Market risk. Chris is sitting on the sidelines. If you thought American tech stocks were now a risky asset to hold, you’d probably sell them and if you’re looking for safety, you’d maybe buy gold instead. Before, investors bought US Treasuries, ie government bonds, notes and T-bills (according to the duration), but at the moment people are worried about the dollar, so they prefer to store in gold.

Geopolitical risk. with all these sanctions and the threat of hot war, people are worried because conflict destroys value. You’d want to sell the assets that are in the line of fire and buy gold instead.

Three Reasons Why Gold Is Going Up

Why buy gold?

1. Money printing: Devalues fiat currency - more dollars chase the same goods, so people lose confidence and turn to gold as a store of value.
2. Currency hedging: If your local currency is losing value against the global reserve currency (the dollar), you’d rather hold gold than your home currency.
3. Risk hedging: In times of economic or geopolitical crisis, gold acts as a safe haven. When uncertainty is high, people flee to assets that historically have been shown to hold value. Economiccrisis

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WHERE IS THE GOLD

26 February 2025

WHERE IS THE GOLD?

Where is australia's gold

We all remember when Germany asked for its gold back, in 2013, and was told delivery would take seven years. 

Are the countries asking for repatriation of their gold from the LBMA being told the same thing? 

And if LBMA runs out of gold and goes bankrupt, what happens to the owners of ETFs with unallocated gold? Eg SGLN? SGLN is backed by physical gold, valued at spot prices, held in LBMA and certified by  Blackrock. It is the most convenient and least risky ETF.... But what happens if the LBMA vault turns out to be empty. And it goes bust?

In fact, this hypothecation and rehypothecation is how governments manipulate the price of gold.The paper gold market (COMEX, LBMA) trades maybe 20 times more contracts than there is actual gold. It is done on futures contracts. Means banks can massively short-sell gold futures, artificially suppressing spot prices.

Why do banks do this?

The truth is that their currencies are devaluing all the time. A fiat currency is a currency that is not tied to the value of any asset. So governments* can just borrow all they want, they can print as much as the desire. They can have these mad spending programmes where there's no proper fiscal control, i.e, spend more than they tax. The States is doing two trillion of extra debt every year.

* with their own currency.

So why do these fiat currencies devalue all the time? 

Devalue means that they buy less and less of what people want in the real world. And this is because the governments are constantly expanding the money supply, so more and more money is available for the same amount of goods, which inflates the currency.... more and more currency is needed to buy the same thing.

Fiat currencies are not tied to an asset in the real world, this is the trouble and the blessing, but gold is. If central banks didn't keep shorting the price of gold, then gold would rise in value according to the inflation in the money supply and be worth an absolute bomb, and people would see gold as a reliable store of value - as it has been since the time of stonehenge - and put their money into gold and not into government issue treasuries, which are promises to pay, packed solely on the credibility of the government..

So if gold was only traded in physical form - ie if you buy at the spot price and take delivery of the physical gold itself - prices would without doubt be much higher. And when the day of reckoning comes, this is the day where the government can no longer borrow enough to meet its obligations, which in includes paying interest on it's treasuries, then we'd expect gold to rise to its real price, while paper assets burn.

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GEOPOLITICS AND THE PRICE OF GOLD & PROPERTY

12 February 2025

What happens to economies at the outbreak of war

Every time a war starts, stock markets collapse, there's capital controls, price and wage controls & rent freezes, there's rationing.

This is behind my feeling that markets have reached the top. 

             Has VHVG peaked at 92.30?

What affects the price of gold

There's three main factors that correlate to the price of gold (see an earlier article, here), and according to long run analysis, gold is seriously overvalued by about 25 or 30% at the moment. 

The rise of geopolitical risk

It is not just the threat of inflation and tariffs that is pushing gold to all time hires. Largely untalked about, but geopolitical risk and the certainty that the west has lost in ukraine, and that the middle east is out of control, needs a heavy weighting at this time. Central Banks and Investors are pulling out of equities and paper derivatives of markets, they're unhappy with government bonds or should be as they're based on fiat currency which collapses with printing and inflation, and they're putting their money into things solid, things physical.... Perhaps banks will do well if interest rates have to rise to protect the currency, but commodities really could rise as manufacturing needs to continue in a war economy, though it's true that a following recession would dampen demand.

Trump's policies

So it's the uncertainty, the unpredictable irrationality, that Trump the aging narcissist creates and thrives upon, that's driving capital flows out of unsafe maxed-out assets and into these different physical asset classes: 

- Gold & Silver → Best safe-haven assets during war & geopolitical risk

- Oil & Gas → Strongest performers if war affects major producers

- Wheat & Agriculture → Food commodities spike in supply-chain disruptions

- Industrial Metals → Short-term gains, long-term risks if recession follows.

Maybe mag7 earnings will continue to please on the upside... But what if they don't?

Can this uncertainty be mitigated away

I don't think this uncertainty is going to get mitigated away this year and I don't think change is unfolding in favour of Western markets. I mean, Trump is not simply tinkering with the system as new governments normally do. We are looking at major disruption, transformative change, big idea change - with little evidence of forethought and planning. The deep state that pushes across the decades for coherence and continuity, seems to have gone in America at least, Trump has overcome it, and that just leaves the Fed as the only consistent attempt to manage all this.

Factor's holding back the price of gold

If the risk of war seems to be driving the price of gold, what might work against the rise of gold?

Capital controls are governments trying to prevent a run on their currency. In the case of gold, I imagine that governments would oblige holders of these - and probably all assets - to register their holdings centrally. A national wealth inventory, a register of who owns what, that goes beyond financial numbers in the banks and into the physical holdings of the people.

This would be a further development of the cashless economy.

And after that? Once they've got everything you own on a central register, they'd tokenise it, meaning there'd be quotas, meaning there'd be taxes and confiscations, or at the least, you wouldn't be able to buy gold anymore.

I don't understand digital gold, but take care because war creates uncertainty and volatility in property prices:

- Local wars cause prices to collapse locally

- Global wars drive investors to safe-haven real estate markets like London and Edinburgh

- Higher inflation & interest rates can depress housing demand

- Supply chains start to fail, construction costs rise, new supply is hit, this could be expected to support prices in those stable markets.

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TRUMP'S TARIFFS AND THE PRICE OF GOLD

11 February 2025

I feel the markets might have put in highs for the year.

Markets don't like tariffs, especially when they could be symmetrical.

Trump's just announced 25% on iron an aluminium, "to level up the playing field". 

It's the purchaser in the US who pays that tariff, so 

will suppliers eat the tariff i.e. lower their sale price?

No, they will get together and find a counter tariff or quota. 

Will the American companies buying iron and steel for their products, such as construction companies, "eat" their profit i e absorb the tariff?

Maybe they'll have to 

Or will they pass the profit on to end-users, the consumers, the americans who consume their products?

Quite possibly, and this would be inflationary.

Trump has explained his idea, that in the medium term at least, the companies producing abroad will onshore, 

but there's no "system test environment" in which to trial his ideas 

and in production, there are so many moving parts that one slip and everything could easily go belly up.

It is this uncertainty, added to 

- debt levels approaching and above one hundred percent of GDP that risk crashing the currency or the economy

- Growing threats of communitarianism, which means instead of integrating in a pluralist society, we have groups that are splitting and dogmatically taking positions against other groups, and 

- the extremely serious global geopolitical risks.

These are the three fundamental risks, to which we now add 

- a tariff war, 

that are driving the price of gold. 

I don't think that countries that are in a balance of payment surplus feel very confident putting their money into dollars any more.

They need to keep some dollars in a reserve account for foreign trade, which is still largely in dollars.

But a country like China is just going to put its trillion dollar profit from last year into its belt and road initiative (BRI) in the form of loans to participating countries.

And these surplus countries will just further stock up on gold.

And incidentally, they will drain the London bullion vaults, arrange for their goal to be repatriated, for fear that it's all paper, that it have disappeared!!!

"It's only when the tide goes out, as Warren Buffet said, that you see those who are swimming naked."

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RUSSIA TO CREATE RIVAL METALS EXCHANGE

28 October 2024

The LBMA sets the spot price and the COMEX exchange in new york sets future prices and the two work together to determine the  price of gold. But Russia is done with this.

I remember 10 years ago there was a huge scandal because Barclays and a handful of other banks who were charged with setting the price in London were actually colluding. And as a result of that, the whole thing moved on to some electronic auction system, and so it - the method for establishing the price of gold - is more open and transparent.

So although people are still suspicious that the method fiddles with supply and demand in some way, avoiding corrupt practises isn't the real objective of the new exchange that Russia is intending to build over the next three years.

Instead, anew rival metals exchange is part of the BRICS plan to de-dollarise, and to escape sanctions and Russia can expect plenty of pressure from the americans.

Putin recently clearly rejected a common currency for BRICS. But I recall a couple of years ago, Jim Rickards explained how a half-common currency could be engineered if all the different currencies each had a fixed exchange rate of its own to the price of gold, which would vary. But what I couldn't really believe was that they would fix to a gold price established in london and new york. So evidently, this new exchange will be managed by the BRICS themselves and not by the West.

There's a few things to think about.

One is of course, what effect will the competition between the two metals exchanges have on the price of gold, given that there will be competition and volatility and arbitrage?

Another point is that this will make it a lot easiet for BRICS central banks to amass gold, with the idea that this will back their currencies. So a welcome change from the fiat currencies of the West, which abandoned the gold standard back in 1971 under Nixon, permitting massive increases in fiscal spending and inflation as a consequence.

And thirdly, metals exchanges don't just trade gold, they trade other metals, precious metals, and so Putin intends to diversify bank assets into silver and platinum as well. 

So final point, it seems like it might be difficult to predict the effect of this new exchange on the price of gold. On the one hand, banks are buying gold to support their currencies and yet, on the other hand, diversifying into other precious metals might reduce demand for gold....watch this space!

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WHY GOLD

22 October 2024

Factors affecting the price of gold. 

Generally, as we saw in a previous post, the price of gold in USD is affected by three factors: interest rates, inflation and risk levels eg geopolitics.

https://youtu.be/diQhegS7fPQ?si=5R0lNrjmbIYi6Ocx

https://youtu.be/Z3F4DJWquL0?si=w25PZbgdAA3CRKEW

https://youtu.be/PTZ3qAYwYAE?si=GZJVXGvgWpaPunF1

The signs are that gold is heading to 3,000 USD a Troy ounce and this is because the BRICS are now trading more and more in their own currencies, and their currencies are backed by gold, so there will be a demand for gold. Indeed. 

Since 2022 with the war and the theft of Russian sovereign assets, Central banks have been buying gold. The euro dollar is about twelve times the size of the world's gold assets, so a change away from US treasuries towards gold would squeeze up the price. Central banks ex china and ex russia account for about fifty to sixty percent of gold purchases since 2022.

Putin has said the BRICS are not going for a common currency. What does this mean? Well, if they are to gradually de-dollarise and trade in their own currencies, then there must be some exchange rate mechanism, and this would probably be by each currency tying its value to the price of gold. That's what Jim Rickards was surmising, a year or two ago.

Plus of course, there's geopolitical uncertainty with wars in Ukraine and the Middle East and uncertainty over China and this means a flight to gold and the US dollar, seen as stable in troubled times

Plus there's the upcoming US presidential election, which is looking increasingly certain to go in favour of Trump, which means more short-term uncertainty.

It is difficult to fathom out all the weightings to assign to the multiple cause-and-effect factors even for the price of gold between now and the end of the year, still more unpredictable going forward to next year 2025.

We could expect geopolitical risks, BRICS actions, and the US election to continue conditioning gold’s outlook, potentially driving it higher in the short and medium term. But who knows, volatility and competing factors, like inflation and US monetary policy, will also impact its movement.

Float away the debt

It's not much talked about in the Main Stream Media for obvious reasons, but US government expenses are six trillion and receipts are four trillion, so there's two trillion to borrow or print each year. If the treasury borrows, it will have to offer higher interest rates in view of the risks of holding dollars. and if it prints, this will raise inflation. 

The government could cut spending on social or defence or interest on the debt. Everyone says that's impossible and inconceivable, but then they do it. 

But surely the only possible solution is one that we talked about many years ago at the time of the GFC, which is to inflate the debt away. Nominal interest rates much lower than inflation would encourage borrowing and spending ("reflate the economy", " the Fed pivot"), this increased demand raises prices thus inflation.

With inflation prices, income and tax receipts go up, but the debt is fixed in nominal terms, so it becomes easier to pay off. But of course the dollar crashes.

There are only three ways to increase inflation. One is by lowering interest rates, as above. Another is printing masses of money, ie QE, and a third would be Trump, especially increases government spending by building roads and fences and pushing a lot of demand into the economy that way.

If you think all that sounds a bit risky or possibly disastrous for the american economy then you'd be right. And this is why people are prepared to put money into gold, gold or crypto.

Note on the us government's income and expenses

In FY 2023, the US government collected $4.5 trillion in revenue, with about half coming from individual income taxes and a significant portion from payroll taxes (such as Social Security and Medicare). Other sources included corporate taxes and customs duties.

On the other hand, the government spent nearly $6.2 trillion. The major expenditures were for Medicare, Social Security, defense, veterans' benefits, and interest on the national debt. This resulted in a budget deficit of around $1.7 trillion for the year.

In FY 2024, projections show similar trends, with revenue continuing to come primarily from income and payroll taxes, and spending focused on healthcare, social services, and defense.

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BUY GOLD

5 April 2024

Today, gld went past 40kTHB, opening at 41,150. Seems gld should no longer be considered a simple insurance "in case of", or a buffer against loss of main income to tie you over, it is now a respectable asset class taking its own place in many investment strategies.

BUY GOLD IN THAILAND

BUY GOLD IN THAILAND

PRICE

Gold is same price everywhere in the world.

http://www.goldtraders.or.th/

The buy and sell prices of bars and jewellry.

https://gold.price-today.info/en/THB/thailand_chiang-mai_chiang-mai/

The purpose of buying gold is to insure against currency collapse or at least to have money that cannot be touched by any counter-party, for spending in retirement or when unemployed.

However history has shown that there is a real risk that the government will not tolerate individuals holding gold and if they know where you are they will call and take it off you. See last section.

CASH

Buy in cash, not credit card, to save 3% fee.

TAX

No tax on nuggets (bars) (normally 7% in Thailand).

But tax is 7% on jewellry (7% is low compared to my country).

Jewellry - a bracelet and necklace - I can take out of Thailand and into my country. But this is very difficult - I would sell in Thailand.

COMMISSION FEE

Low commission. About 0.02%.

WORKMANSHIP

 (ทักษะฝีมือ)

For jewellry, pay for workmanship (ทักษะฝีมือ) - 500b (?) for a simple necklace.

When you sell, you do not get back the ทักษะฝีมือ fee.

PURITY

Pure - in my country, pure 100% gold is 99.9%  24 karat. Most gold is 18 karat = 75% pure.

In Thailand, you buy 96.5% pure (see the website) which is 23.2 karat.

But be careful with the gold - 96.5% is very soft.

WEIGHT

Need to buy a cheap scale that can fit in your pocket so you can verify weight measurements of any gold you buy. Get a precise 0.01g scale.

จำเป็นต้องซื้อเครื่องชั่งน้ำหนักราคาถูกที่สามารถใส่ในกระเป๋าของคุณได้ เพื่อให้คุณสามารถตรวจสอบการวัดน้ำหนักของทองคำที่คุณซื้อได้  รับสเกล 0.01g ที่แม่นยำ

WHERE TO BUY

Your shop. Is it in Chinatown? We need the biggest and the oldest shops in Chinatown. They won't scam.

CONFISCATION RISK

  COMPARE WEIGHT

There is a big difference between the density of gold and silver: gold is 19.32 g/cm³, silver only 10.49 g/cm³.

With the result that a 1 oz bar of gold will be almost half as small as a 1 oz bar of silver.

  COMPARE VALUE

The gold/silver ratio changes. It is the weight of silver it takes to purchase one ounce of gold. If the ratio is 25 to 1, that means, at the current price, you could use 25 ounces of silver to buy one ounce of gold. 25 to 1 would be considered a narrow ratio. 

A narrow ratio indicates that silver’s relative value is up and a wide ratio indicates that gold’s relative value is up. This ratio is an indicator that can be used to determine the right and wrong times to buy or sell gold and silver.  

SPEND

If you are buying gold to cover a shortfall of income at some point in the future, then bear in mind that you may want to sell small portions of gold - perhaps single coin - and therefore when you purchase gold keep in mind this requirement to later sell gold in small units.

WAYS TO BUY GOLD

There are three main ways to gain exposure to the gold price as a retail investor: bars and coins, gold-backed exchange traded funds and gold mining equities.

Bars and coins give you a piece of metal you can store at home, giving you something physical to hold in your hands. They range in size from one-tenth of an ounce to one kilo or larger. The disadvantage is that the premiums to pay over the spot gold price to buy bars and coins can be substantial, meaning there is a big transaction cost once you sell the gold back, as well as storage and insurance costs.

Gold-backed ETFs have evolved into two main categories of high and low-cost products. These save the buyer from taking physical custody of the bullion. The higher-cost products provide greater liquidity with low transaction costs but are better suited to fund managers moving hundreds of millions of dollars at a time. For retail investors, a newer generation of ETFs with lower management fees and less liquidity are better suited such as Invesco’s Physical Gold ETF or BlackRock’s iShares Gold Trust.

Gold mining company equities is another option to gain exposure to prices of the yellow metal. However, these can come with surprises, positive and negative. If discoveries are made, the share price may rally sharply but if there are technical or political problems, the shares can tank irrespective of the gold price. The world’s largest gold mining companies — Newmont, Barrick Gold and Agnico Eagle Mines — are all dual-listed on the New York and Toronto stock exchanges. Gold mining equity funds including VanEck Vectors Gold Miners ETF are a way to diversify risks.

Precious metals streaming companies are another set of equities to consider, since they take small cuts on sales of many projects in return for providing financing, meaning the risks of each project or company is diluted in a broader portfolio. Among the largest listed precious metals streaming groups are Canada’s Franco-Nevada and Wheaton Precious Metals.

BIG WARNING

Here is a persuasive set of arguments for buying gold. This is at 25 March 2023

https://youtu.be/A2G3MAxdZfU

I follow and agree with all the arguments made in that video. In particular, there's a line something like, 

"How to manage members of the general public, who have more faith in the system than people people sitting round this table do"

At offset Kitco 13'40".

Notice who is sitting round the table. This is an FDIC meeting and the table is members of its systemic resolution advisory committee, SRAC

The SRAC advises the FDIC on how to manage threats to "too big to fail" financial institutions. Love it. 

The quandary they are in is how to prepare such institutions - and the bond holders and depositors - for a systemic failure, whilst at the same time making sure these depositors and bondholders do nothing about it ... for example they don't pull their deposits or sell their bonds.

I suppose first you sting them, to numb and paralyse; and then you suck out all their funds. Ha ha.

But I would say two things about this video and its concluding advice to buy gold.

1. One is that it's a video promoted by the Gold Mining whatever they call themselves, so raise one eyebrow "-).

2. And the other thing is that if all goes in the way they suggest, and you have a safe under the floorboards stuffed full of gold and silver, tge fiat currency collapses as per the govt plan, there's a smooth transition to the new central bank digital curreny, and now the government is running a tight ship using its digital currency.

So, what makes you think that if you take your gold to the bank, they will give you the digital currency equivalent that you need to buy bread and pay your rent?

Wouldn't it be more likely that before the transition, the government says,
"bring us your gold! Bring us your silver! and  we will give you the digital currency equivalent, but after the transition we will not recognise your gold"

And probably what they'll do instead, is call on you - because when you buy gold you have to declare your name and address - locate and break into your safe, and take your gold and put it into their safe!

So raise the other eyebrow ""-).

CONCLUSION

Considering relative weight and price, in the light of confiscation risk, you might like to consider whether it is worth holding this insurance in silver rather than gold or some mixture of the two. This is because the authorities would be very unlikely to call to collect your silver, whereas with gold if the s*** hits the fan they will almost certainly find out where you are and take your gold.

NOTE ON MEASURES - TROY OUNCES / BAHT

Gold internationally is usually measured in Troy ounces. One ounce = 31.1035 grams.

A baht of gold is just under one half troy ounce.

When wr speak of “One ounce of gold”, we typically mean one troy ounce = 31,1035 gram of 100% pure gold.

When a Thai speaks of “One baht of gold”, you typically mean 15.24 grams of 96,5% pure gold = 14.71 grams of 100% pure gold.

NEED 

-Scales

-Passport

-Cash

-Check shop

FLY INTO HEATHROW WITH GOLD IN YOUR POCKETS

When flying into Heathrow Airport (or any UK entry point) with pure gold in bars, there are specific rules you must follow. These rules concern customs declarations, tax implications, and security measures.

### 1. **Customs Declaration**

You must declare any goods that you bring into the UK from outside the EU if their total value exceeds £390. For gold, this rule applies regardless of its form (bars, coins, etc.). The declaration should be made at the customs red channel or red-point phone.

### 2. **Value and Taxes**

Gold, particularly in significant amounts, can easily surpass the value threshold for declarations. Failure to declare could result in fines or confiscation of the gold. Additionally, you might be subject to Value Added Tax (VAT) or other taxes upon entry, depending on the current legislation.

### 3. **Quantitative Restrictions**

While there's no limit to the amount of gold you can bring into the UK for personal use, large quantities may raise suspicion and necessitate proof of ownership and the origin of the gold. This is part of measures to prevent money laundering and the illegal trade.

### 4. **Safety and Security**

Transporting valuable items like gold bars requires careful consideration of security. You should ensure they are securely stored and consider using secure transport services if the value is particularly high.

### 5. **Insurance**

It's advisable to have insurance coverage for the gold you're transporting. This will protect you against potential loss, theft, or damage during your journey.

### Glossary of Terms

- *Customs Declaration*: A document that lists and gives details of goods that are being imported or exported.

- *VAT (Value Added Tax)*: A tax on the amount by which the value of an article has been increased at each stage of its production or distribution.

- *Money Laundering*: The process of concealing the origins of money obtained illegally by passing it through a complex sequence of banking transfers or commercial transactions.

CLARIFICATION

"You must declare any goods that you bring into the UK from outside the EU if their total value exceeds £390. For gold, this rule applies regardless of its form"

But also:

"there's no limit to the amount of gold you can bring into the UK for personal use".

Let's clarify these points:

### 1. **Declaration Threshold**

When entering the UK, you are required to declare any goods you bring from outside the EU if their total value exceeds £390. This threshold applies to the combined value of all goods you're bringing in, not just gold.

### 2. **Unlimited Quantities of Gold**

The statement that there's no limit to the amount of gold you can bring into the UK for personal use means there are no quantitative restrictions on gold specifically. You can bring in as much gold as you want, but it's subject to declaration and potentially taxes if the value exceeds the £390 threshold.

In essence, while you can technically carry unlimited quantities of gold, the value of the gold dictates the need for declaration and the potential financial implications (like paying VAT). Always declare and follow the guidelines to avoid legal issues.

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