Gold is insurance against chaos. It is THE safe haven when confidence in the economy falters. Times of great uncertainty are ripe for gold to rise. In the short term, two markets greatly influence the price of the yellow metal. The Dollar Index and the Stock Exchange.
The Dollar, after regaining shape two weeks ago, is turning down again. The feverishness of the greenback since March is the consequence of a US presidential election under high tension. Indeed, Democrats and Republicans have each hinted that they might not to recognize the election result… The perfect recipe for a civil war and a deepening recession.
A historic recession since the latest figures point to a decline of 31.4% of GDP in the second trimester. This is the biggest recession since 1950… The consensus, however, expects that GDP rebounds 30% in the last quarter. Much will depend on the eventual extension of unemployment benefits and the second check of $ 1,200 for every American.
The dollar and the barbarian relic historically have a inverse correlation. Gold goes up when the dollar goes down and vice versa. Even though the Gold Standard is gone, there is still a strong psychological tilt in favor of gold. The inverse correlation This can be explained by the fact that the depreciation of the dollar automatically increases the purchasing power of other currencies. What increases demand for gold, which is becoming more affordable for the rest of the world. There are no secrets …
If the DXY (Dollar Index) returns below 93, there is a good chance that it will support gold. A new low below 92 could surely allow theor to get back on the road for the $ 2000.
Manipulation of the price of gold
Note in passing that the JP Morgan recently admitted to manipulating the precious metals market via the technique of ” spoofing “(Flood the order market to pull the price one way before canceling those same orders). Jamie Dimon’s bank just fined closely a billion dollars. A record.
JP Morgan was not, however, found guilty of manipulating the price of gold specifically to the drop. Which is a shame because that is the Gordian knot in this affair. Private banks keep the price of gold as low as possible and do so more readily than States and central banks are looking elsewhere.
Chris Powell – who has been investigating for two decades – even asserts that Central Banks influence the value of gold via the derivatives market (Futures) and that banks like JP Morgan are only intermediaries …
Which is far from being a simple theory since the Gold Reserve Act of 1934 gives the US government the right to intervene secretly on the price of gold. Moreover, the CFTC (US financial regulator) admitted that the CME Group, which is a derivatives exchange (Futures in particular), offers “discounts on large volumes from central banks“…
In short, the conviction of JP Morgan suggests that the price of gold is now much more free to rise …
Why put the JP Morgan at the fine if the government has an interest at lead the gold?
Thegold is the canary in the coin mine. It is imperative that it stay on the mat to camouflage inflation and not erode confidence in international currencies, especially the dollar. The latter could well, one day, be crushed by the historic international currency: thegold.
So to understand why the Trump administration has offered itself the scalp of JP Morgan, several things need to be highlighted:
The first is that Jamie Dimon, CEO of JP Morgan is no friend:
The second is that JP Morgan seemed very interested in a crisis during Donald Trump’s term. The hidden goal being to be able attack Trump on his economic record :
Jamie Dimon made an enemy of the White House when it announced its bank would cope with a crisis. The JP Morgan shot himself in the foot when hinting that she would be part of an economy collapse. Indeed, what better than an economic crisis to prevent a re-election …
These are not rants. JP Morgan indeed tried to trigger a crisis at the end of 2019 via the REPO market.
The “repo” market, also called “interbank market”, is the place where the banks lend money to each other, in the very short term: they place securities they own as collateral and undertake to buy them back quickly. Banks typically deposit US Treasury bills or AAA-rated corporate bonds for 24 hours. In exchange, they get cash at an interest rate close to the key rate set by the Fed (0%).
In short, the mastodon JP Morgan, at the material time, controlled 46% of REPO loans the 6 largest US banks (Bank of America, City group, Goldman Sachs, Morgan Stanley, Wells Fargo). On September 17, the JP Morgan pulled out of the market, pushing the repo rate up to 10%.
Donald Trump then forced the Fed to intervene to prevent the stock market from falling and not jeopardize his chances of re-election the following year. The FED went so far as to provide $ 75 billion every day. Never seen.
Finally, let’s not forget that Donald Trump appointed to the board of governors of the Fed a Gold Standard lawyer: Judy Shelton. We will come back to the Gold Standard but all this to say that Donald Trump had good reasons to put pressure on JP Morgan. He killed two birds with one stone.
UBS recommends buying gold
Now that the JP Morgan traders indicted revealed manipulation of gold, UBS says “Buy gold“.
Apparently, the dismantling of the gang that handled the gold is likely to give the Swiss bank the confidence to advise clients to buy gold. Kelvin Tay, UBS’s regional investment manager, urged the buy on CNBC last week, saying “the ounce is expected to reach around $ 2,000 by the end of the year“.
This recommendation would have made more sense on July 16, when gold was trading at $ 1,800 an ounce… It would also have been helpful to call for profit on August 6, when gold hit an all-time high in 2 $ 089. Since, the trend is downward with consistently lower highs.
Stock market bubble
Gold also has an inverse relationship with the stock market, but only during stock market crashes and sovereign debt crises. We explained in a previous article how Bitcoin (BTC) could react depending on whether it is Trump or Biden who ends up in the Oval Office. We wrote there that the Democrats’ (Biden) taxation program could cause a drop in the stock market and therefore ultimately a rise in Bitcoin and gold.
That being said, the “markets” don’t like to signal that the tenant of the White House would scare them … so they have tendency to rise regardless of the winner, even if marginally. Such a scenario would not have much influence on gold.
Assuming that a clear victory for Donald Trump pushes the stock market up, it doesn’t say that gold suffers since we said it, Trump wants to prepare for the inevitable as soon as possible: a return of the gold standard and the inability to import as much as before. And especially Chinese products …
Over the longer term, it is clear that the extremely “accommodating” monetary policies of the Fed and the ECB are bullish for gold. Not to mention that we are currently witnessing massive purchases of gold by many central banks all over the world. And in particular China, which is seeking to revive the Gold Standard … Same analysis for Bitcoin, the alter ego of gold.
Child of Satoshi, the alchemist who turned a cryptographic algorithm into gold.
I’m talking about monetary geopolitics, not shitcoins.