gold is money

Good morning and welcome to Tequila Tuesday! Lynyrd Skynyrd greets me this morning with their 1974 hit, “Sweet Home Alabama."

This morning as I read the news, economic reports, and precious metals updates, I ran across some very interesting stuff worth sharing. Gold is again a booming business in India. Yesterday, the Indian government reversed its ruling that for the most part, kept buyers from making gold purchases above 50,000 rupees ($766). In less than one day, the stocks of Jewelry Company’s Titan advanced 5.7%, Tribhovandas Bhimji Zaveri Ltd. was up 8.1%, and Gitanjali Gems climbed 6.9%. What’s this mean? It means that India is going to have a huge increase in precious metal imports beginning immediately. Why immediately? The Hindu festival of Diwali, the peak season for (18K gold) jewelry demand begins October 19th and wedding season immediately follows.

Further, the World Gold Council announced plans last Thursday to establish India’s first physical gold exchange. Although this exchange will probably take at least a year to consolidate retail buying and selling, keep in mind that Indian households now hold over 22,500 tons of gold and with these moves, expectations are that it will be competing with China as the leading consumer of the yellow metal.

So with this increase in demand, will the spot price go up? Based on the fundamental economic concept of supply and demand, yes it should go up. But keep in mind what I shared last week. The spot prices of precious metals are based on futures, not economics. So if the “futures” traders believe that the Fed will raise interest rates and/or the U.S. economy will continue to hit milestones, gold futures will continue to languish.

Do you remember when then Federal Reserve Chairman Ben Bernanke faced off with Ron Paul way back in 2011? When asked whether gold is money, Bernanke flatly responded “No.” The vast majority of our leadership wants us to believe the same and are willing to do anything within their power to keep gold’s spot price in check. Why? From my cheap seat, it’s a way to keep the economy and dollar strong. A strong dollar allows us to continue living in a comfortable style and them in power. And from the Fed’s perspective, they and all of the government want us to believe that gold is an investment vehicle, not unlike stocks and Treasuries.

I see precious metals differently, and if you are reading this, you probably do too. Gold and silver have always been monetized. If and when the U.S. dollar is no longer the global or reserve currency, the rest of America will be shocked to realize the same.

Before I wind-up today's musings, I don't want to forget to share yesterday's close of the New York Spot. Gold closed up $7.50 to $1,283.60 and silver was up $0.14 to $16.95. In overnight trading gold is up an additional $8.30 and silver up $0.24. Both platinum and palladium were also up.

Finally, on September 1st, The People's Republic of China, the world’s top oil importer announced that they are launching a crude oil futures contract denominated in Chinese yuan and convertible in gold! This circumvention of U.S. dollar trade will allow oil exporters such as Russia and Iran, for example, to bypass U.S. sanctions by trading in yuan. During September, the U.S. imposed sanctions on Venezuela and threatened an embargo of Venezuela’s oil. At the same time Venezuela and China began trades implementing the new Shanghai (Oil) Futures Exchange. Could this be why the industry gurus are all saying gold will surpass $5,000 an ounce by December?

Well, I’ll let that be it for today. Go out there and make a difference! See ya’ll later!

*Disclaimer: Precious Metal Musings™ is written for entertainment and news purposes only and should not be used in making purchases and/or sales of precious metals.