Disclaimer
This is meant to be just a segment of a greater analysis in gold. This author will not hide an inherent disdain for an asset class that prides itself on being outside the running economy, but this author is of the inherent mind to understand and tame all risk asset classes. This segment starts with a simple question in the face of a rampant inflation regime. The purpose of these segments is to work through the problem, share findings with the publicly curious, and learn from discussion. Please feel free to chew through my work and leave what you will.
This one is legitimately all over the place, and I am publishing it specifically for help. I feel like there is something I want to say and don't quite know the words. Please help :D!
Gold: Segment 2
At the end of the day, Gold is held to a relativistic position as is every other store of value. The Dollar may be the blood of choice, but that blood supports an evolving body in a perpetual cycle of life. As the cost of living increases, how does gold behave? This is the ultimate question of gold's value now, in an era of high inflation and inflation volatility. In an equal-weighted system, the Cost of Living would be an equal burden on all members of the system. However, data shows something quite contrary. While only US data is shown below, many of the developed countries around the globe suffer from wealth inequality, an effect accelerated over the past 2 decades. The more something costs, the less one can buy with the same amount of money. The more everything costs, the less one can buy.
Supply & Demand is less simple than just "Gold is always wanted and there is less and less gold available". First, Gold is like Oil, given a high enough and stable demand, there is always more to find. Second, it is a live trading asset. Investors, Banks, Central Banks are always finding the trades they need to keep their treasuries positive. While individuals have a tendency to use the worst case scenario as the default, such as looking at sovereign bankruptcy issues in Sri Lanka, El Salvador, Venezuela; a majority of nations do not bankrupt on their sovereign debt because they are modifying their holdings appropriately. This author has maintained the position that Russia's gold stockpile isn't a boon for Gold prices, rather a potential bust. Unsurprisingly, Russia has just been charged with selling a chunk of it's gold reserves. All while Central Banks around the world are increasing their interest rates, withdrawing global liquidity wherever it may come from. Personal savings in the United States are at an extreme low, with credit increasing, an environment mirrored across major developed and developing countries. The simplest question is who is going to buy all this gold and leave a resting bid. The US Dollar is backed only by the trust in the United States upholding it's value, and being respected by global economic participants. The Federal Reserve, nor any other Central Bank, is beholden to Gold for international trade. Especially in the regime of a strong dollar, the only currency emerging markets want is the USD. Sovereign bonds are written in Sovereign currencies, save for one country that offers Sovereign Gold Bonds- India.
If there was a risk off figure, this should be it. Consumer spending rises with the Cost of living, which is a rule of inflation. If a coke used to cost a nickel, now it costs 2 dollars, the value of coke hasn't grown, it's inflated. Personal savings are rebounding off multi-generational lowers from pre-GFC, but still well below the levels when inflation was this high - the early 80's. Consumer credit is at all time highs, mimicking GDP et al., but Consumer Credit is showing to be a greater percentage of that GDP, again similar to times of high inflation. Gold has long been prescribed as the risk-off asset, a title it has failed in every major market crash. This may get tested yet again.
Final DISCLAIMER
This is in no way, shape or form, fluid and function, an analytical, qualitative or intelligent compte rendu. The function of this essay is the maddening diatribe of a curious mind, and how this one manages micro- and macro-economic data for a critical investigation into the micro- and macro-economic world. This text is not suitable for direct consumption, and should never be used as a primary or secondary source. The contents of this text are often illogical and offensive, and great care should be given to the reader's personal qualifications and senses. This text is delivered on TradingView, where the userbase is expected to have a level of financial and investigative understanding that would enable them to query appropriate thoughts and abdicate nonsense to the void. May whatever sovereign and omnipotent being you believe in, guide you through this.
This is meant to be just a segment of a greater analysis in gold. This author will not hide an inherent disdain for an asset class that prides itself on being outside the running economy, but this author is of the inherent mind to understand and tame all risk asset classes. This segment starts with a simple question in the face of a rampant inflation regime. The purpose of these segments is to work through the problem, share findings with the publicly curious, and learn from discussion. Please feel free to chew through my work and leave what you will.
This one is legitimately all over the place, and I am publishing it specifically for help. I feel like there is something I want to say and don't quite know the words. Please help :D!
Gold: Segment 2
Supply & Demand is less simple than just "Gold is always wanted and there is less and less gold available". First, Gold is like Oil, given a high enough and stable demand, there is always more to find. Second, it is a live trading asset. Investors, Banks, Central Banks are always finding the trades they need to keep their treasuries positive. While individuals have a tendency to use the worst case scenario as the default, such as looking at sovereign bankruptcy issues in Sri Lanka, El Salvador, Venezuela; a majority of nations do not bankrupt on their sovereign debt because they are modifying their holdings appropriately. This author has maintained the position that Russia's gold stockpile isn't a boon for Gold prices, rather a potential bust. Unsurprisingly, Russia has just been charged with selling a chunk of it's gold reserves. All while Central Banks around the world are increasing their interest rates, withdrawing global liquidity wherever it may come from. Personal savings in the United States are at an extreme low, with credit increasing, an environment mirrored across major developed and developing countries. The simplest question is who is going to buy all this gold and leave a resting bid. The US Dollar is backed only by the trust in the United States upholding it's value, and being respected by global economic participants. The Federal Reserve, nor any other Central Bank, is beholden to Gold for international trade. Especially in the regime of a strong dollar, the only currency emerging markets want is the USD. Sovereign bonds are written in Sovereign currencies, save for one country that offers Sovereign Gold Bonds- India.
If there was a risk off figure, this should be it. Consumer spending rises with the Cost of living, which is a rule of inflation. If a coke used to cost a nickel, now it costs 2 dollars, the value of coke hasn't grown, it's inflated. Personal savings are rebounding off multi-generational lowers from pre-GFC, but still well below the levels when inflation was this high - the early 80's. Consumer credit is at all time highs, mimicking GDP et al., but Consumer Credit is showing to be a greater percentage of that GDP, again similar to times of high inflation. Gold has long been prescribed as the risk-off asset, a title it has failed in every major market crash. This may get tested yet again.
Final DISCLAIMER
This is in no way, shape or form, fluid and function, an analytical, qualitative or intelligent compte rendu. The function of this essay is the maddening diatribe of a curious mind, and how this one manages micro- and macro-economic data for a critical investigation into the micro- and macro-economic world. This text is not suitable for direct consumption, and should never be used as a primary or secondary source. The contents of this text are often illogical and offensive, and great care should be given to the reader's personal qualifications and senses. This text is delivered on TradingView, where the userbase is expected to have a level of financial and investigative understanding that would enable them to query appropriate thoughts and abdicate nonsense to the void. May whatever sovereign and omnipotent being you believe in, guide you through this.
