Buy Gold Or Bitcoin As The “Liquidity Party” Is Ending?

Buy Gold Or Bitcoin? This “Liquidity Party Is Ending”

Goldnomics Podcast (Ep. 5) Key Quotes and Transcript

– “This liquidity party is ending. They’re implementing quantitative tightening”

– “If quantitative easing had positive effects, why shouldn’t quantitative tightening have negative effects for the valuation of those asset classes?”

– “When the tide goes out, as Warren Buffett says, you find out who’s been swimming naked. I think a lot of people will be standing naked in the coming months”

– “Most of the emerging market countries are constantly buying gold; it’s not only Russia or China of course, it’s also India, it’s Turkey, its Kazakhstan and so on”

– “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down…”

– “95 percent or more of all those crypto currencies in the market at the moment are bogus and will be wiped out in in the next couple of years”

– “As soon as we see theses financial head winds becoming tailwinds we’re going to see big moves in the gold market”

GOLDNOMICS PODCAST

DAVE RUSSELL: Hello and welcome to episode 5 of the Goldnomics Podcast where we’re looking at developments in global financial markets through the lens of precious metals.

And I’d just like to remind you before we start that to stay up-to-date with all of our monthly podcasts, you can subscribe to us on YouTube, on iTunes and on SoundCloud as well.

And stay up-to-date with everything in the precious metals arena by signing up for our newsletter on goldcore.com.

Now I’m Dave Russell and I’m joined as usual by our world-renowned precious metals expert Mark O’Byrne.

MARK O’BYRNE: Hi Dave!

DAVE RUSSEL: …and CEO of GoldCore Stephen Flood…

STEPHEN FLOOD: Hi everybody!

DAVE: and our topic for discussion this month is In Gold and Bitcoin We Trust?

And to help us to discuss this we have a very special guest with us this podcast and it’s Ronald Peter Stoeferle. Ronnie is the managing partner of a fund manager called Incrementum, based in Liechtenstein.

Incrementum is a fund and wealth manager and Ronnie manager one of the funds there and they are managed based on the principle of the Austrian School of Economics. Ronnie’s research, his comprehensive In Gold We Trust Report is respected internationally and a must read for all gold investors.

So, welcome Ronnie!

RONALD-PETER STOFERLE: Thanks for having me gentlemen. It’s a great pleasure!

DAVE: Great, great! Ronnie we’ve published and we’ve shared your report the; “In Gold We Trust” report which has been going for… you’ve been doing this for how many years?

RONNIE: 12 years already!

MARK: I thought it was 9 years! Well done!

DAVE: The most recent one has been published within the last month or so.

And bringing it around to our topic of conversation for the day: In Gold Silver and Bitcoin We Trust?, you particularly looked at three key findings and you refer to them as your ‘three tides of change’ when it comes to the financial markets and their effect predominantly on the precious metals markets. What are those three tides specifically?

RONNIE: As you know the 2018 edition of the “In Gold We Trust” report is quite a brick again, it’s 230 pages. The light motif of the report is “The Turning of The Tides”, so the three tides that are turning are: first of all, in monetary policy. We are seeing that this liquidity party that we’re having for ten years now, those 15 trillion that were printed out of thin air by central banks, this liquidity party is ending. So, what we’re seeing is that the Federal Reserve is implementing quantitative tightening. For this year it’s going to be 420 billion but next year it will already be 600 billion. So, starting in October 2018, every month US$ 50 billion will be reduced from the monetary base. This is per definition deflationary and it’s not only the Federal Reserve that is tightening. It is also kind of, although with quite some time lag, the European Central Bank, it’s also the Japanese that might become hawkish etc.

So, the thing is most people underestimated the consequences of quantitative easing. It had tremendous effects on valuation of asset prices, stocks, bonds, and real estate all over the world, creating this everything bubble. The thing is, if quantitative easing had positive effects, why shouldn’t quantitative tightening have negative effects for the valuation and prices of those asset classes? I think that that’s something that the market is completely under-estimating at the moment.

The second thing which is a bit more longer-term I would say, is the de-dollarization. We’re seeing that this de-dollarization is getting stronger. We’re seeing that geopolitical tensions are also getting strong and from my point of view they’re often based on economic problems that we’re facing due to our monetary system that was basically implemented in 1971, when we changed to a complete fiat money system. I think this system is at the verge of ending and this de-dollarization is a long process. We’re seeing that most of the emerging market countries are constantly buying gold; it’s not only Russia or China of course, it’s also India, it’s Turkey, its Kazakhstan and so on. Those countries are diversifying out of the US dollar into gold, and the third thing is of course, about cryptocurrencies.

Cryptos have been stealing the show from gold and many people in the gold industry do regard cryptos and especially Bitcoins as an enemy for gold. From my point of view there’s many applications being introduced at the moment that show that they should both be viewed as more complementary rather than incompatible assets. So, I think that’s a very important point that we’re making here. Millennials that are very interested in technology but probably wouldn’t go to a bank and buy physical gold because some of them obviously have never entered a bank in their lifetimes. I think for them it’s extremely important to get an alternative way to buy physical gold and I think the combination of crypto and blockchain technology and gold totally makes sense.

DAVE: Right, okay! So, we got our three tides, as you say. Let’s have a look at a bit more detail at the monetary policy one for a couple of minutes and I’ll bring you in on this Mark. You’ve read the report, the full report. What’s your take on the monetary policy tide change?

MARK: First of all, I’d like say congratulations to Ronnie on another excellent report. It really is a must-read as we said, because it ties together so many things going on in the wider markets but also in the gold market.

And Ronnie and his partner Mark do a great job at just joining the dots and bringing it all together. It’s a great report, it’s the must-read every year as you said and it really is comprehensive and I think anybody even the most sceptical person, anti-gold person in the world would read a report and say ‘you know the guys have made a great analytical database, very empirical, all fact-based very little opinion actually,’ because it’s all data, it’s all the facts and they’ve done a really, really great job.

You know we first published the Ronnie’s report in 2009 because it was so comprehensive. Ronnie was at Erste Bank and I met Ronnie in 2011 or 2012. And every year I think it’s actually getting better you know.

This year what I love about it is the three themes and the tides.

We know in our own small little island nation we know the power of the sea. When the tide comes in, when the tide goes out, it’s a very, very powerful dynamic. And when the tide goes out, as Warren Buffett says, you find out who’s been swimming naked. You know I think a lot of people will be standing naked in the coming months.

To get into the monetary policy, what I thought was great about the report is he focused on the monetary policy and then the monetary order. In today’s media coverage of the gold market and indeed the wider financial markets, focus is solely on the monetary policy. These days it is actually solely on what the Fed will do and to less extent what the ECB and the Bank of England and the Bank of Japan will do in terms of their monthly interest rate meetings. And all the media gets worked up if the Fed is going to increase by 25 basis points or 50 basis points or whatever it is you know. But they’re completely ignoring the elephant in the room, and Ronnie’s report just showed very clearly the powerful effects the quantitative easing has on all our economies and indeed all the various asset classes creating this everything bubble that we’ve covered before in the podcast and…

DAVE: We covered that in episode 2 I think, didn’t we?

MARK: Exactly and then we’re going to see the flip side of that, I mean it’s amazing people, as Ronnie said, are realizing the massive positive effect on one hand and also there is going to be a negative effect when this stimulus is withdrawn, if they managed to withdraw. Because I think they’ll struggle to do it. I think it will lead to deflation in the short term potentially and then they may need to go back to quantitative easing, I think, that’s a fundamental thing. Ronnie had a great chart actually showing exactly what he spoke about there and in it you see the combined increase in the balance sheet of all the central bank’s rising, rising, rising and then it’s the top of the curve. As we’re beginning to come down the other side, it’s quite precipitous actually you know.

I think it’s going to have a quite significant impact on all the markets and particularly I would think the bond markets. The monetary order is something that people don’t cover at all in terms of the dollar as a reserve currency of the world and Bretton Woods and that every day you see a new headline comes across the wires showing how we’re moving to a multipolar world of many currencies.

DAVE: Before we move on to that, I’ll just bring Steve in on this because Steve this is something you have talked about quite eloquently over the last number of podcasts, which is just the vast amount of liquidity that we have seen in the world, particularly over the last 10 years, and how that fact’s going to factor into the gold price going forward. How do you see that at this stage?

STEVE: Congratulations on the report Ronnie it’s an amazing achievement…

RONNIE: Thanks a lot!

STEVE: …You’re a credit to your industry and to everyone else.

You know if we’re ever going to get ourselves out of this this problem, this man-made problem it’s through knowledge, you know, insights. It’s through research and fact-based decisions, evidence-based decisions. And this report is something that’s now on everyone’s desk and everyone’s looking at it. It’s helping to focus people more than ever.

I thought what was fascinating in terms of your question there Dave, it’s a Pandora’s box you know, they’ve opened it up. They solved a problem many years ago, a debt-based problem and they basically created an enormous amount of liquidity, it’s washed its way into every major market. It’s an everything-bubble and now the problem is how do you take that, how do you deflate that bubble and not blow up the system?

You know they’re looking at a double-edged sword. They’re looking at a massive inflation threat and all of the problems that brings and yet they’re trying to deleverage as fast as possible but as safely as possible. You know maybe they’ll get away with it, I don’t know. But it’s going to be a fascinating period of time to watch. We’re in an uncharted territory in that every asset class has appreciated, but I think on the other side in terms of the political landscape, in terms of the middle classes, right across the West and maybe to a less extent East, many people haven’t felt the benefits directly of these everything-bubbles in their own financial balance sheets. A lot of their assets may have gone up but their debt has also gone up. As countries, as sovereigns, our debt has gone up too and I think you show in the report too, the debt to GDP is up around three hundred and thirty-odd percent whereas it was 260 or 270 percent at the last crises.

I thought the report was fascinating and I don’t know what’s going to happen. I think if you look at the political backdrop you know these last few years it’s almost its own bubble you know. The market’s progressing as if everything’s fine. You have more debt going on balance sheet, central banks expanding their balance sheets and you have this political discourse that is anything but coherent so I think they’ve created a serious monster and now we need to see what happens.

Gold will, I think protect the average of investor’s balance sheets. I think the case for it has never been stronger. The price is pretty good and it hasn’t appreciated as much in percentage terms as other asset classes. So, a lot of people are looking at it with fresh interest now.

I thought it interesting, I love all the quotes by the way at left hand side, they really make the report too. Because it gets quite heavy and you have those quotes there, they’re quite entertaining. I thought the world currency analysis was quite interesting. When you look at the trade weighted currency of gold over time I think it’s still fairly valued and the precipitous drop wasn’t as precipitous as it might be, measured purely in dollars as many people and analysts look at. And also, when you look at the average price of gold over those periods of time it doesn’t look like it’s as volatile as well as many people might think.

And you know it’s a fantastic piece of work. My clients are talking about it. Our clients are talking about it all the time. A few of them have mentioned it. We sent a Tweet out the other day that we’re going to have superstar Ronnie on the podcast and they were going through the report all weekend and they’ve got some questions to us as well!

DAVE: Ronnie let me let me just ask you then just in relation to this particular tide as you call it, how is this going to affect the gold price? What’s the action? What’s the effect on the gold price going to be and how is that actually going to happen? How do we tie that particular tide back to what’s going to happen in the gold price going forward?

RONNIE: Well I think that many people have been quite disappointed with gold the last couple of years and actually QE3 didn’t have any major impact on gold. And I think that we should not forget that gold rose from $200 up to $1900 and of course, the central bank actions were also a main reason of that.

We have seen mostly negative real interest rates during that time so it seems that after this huge bull market people expected just too much. Quoting one of the colleagues that are most respected in the industry, Adrian day, he said, ‘People expect too much from gold at the moment.” I thought about that for quite a while and it’s such a brilliant statement because it’s very easy, it’s very intuitive to understand. The reason why I like it is we should not forget that equity markets are trading at, or close to, the all-time highs. Bond markets, corporate bond but also sovereign debt is still doing well. Alternative assets like private equity and so on are still doing extremely well. Real estate all over the globe is going crazy. We’re seeing that the Fed is raising rates, that the Fed is implementing Quantitative Tightening and that also the other central banks are becoming more hawkish. We’re seeing that price inflation is not a big problem yet, and we’re seeing that cryptos are stealing the show from gold.

So, if you factor in all those all those topics I think that people expect too much from Gold because per definition it’s probably not an environment where gold should be doing very, very well. The question is when will this headwind that we are seeing from the other asset markets, when will this become a tailwind? Because I think the moment the feds will have to say okay the emperor has no clothes, this monetary policy normalization does not work. As soon as recessionary fears come up, as soon as the stock market will become more volatile and enters the bear market, this is going to be the point in time when gold will really take off and this is going to be the time when gold will hedge other asset classes. But we’re not there yet and I think it’s very, very important to say if we see such a turning of the tide in asset markets. What distinguishes the current phase decidedly from the run-up to earlier big Stock Exchange crashes like 1929, 87, 2000 and 2008, is that we are seeing simultaneously high valuations of stocks and bonds because previously bonds would help contain any losses on the stock market because they were negatively correlated to equities. However, at the moment, bond valuations have climbed into extremely thin air at this point. We’re quoting a great study that analysed bond market returns since the year 1400 and it showed that this is the second most extreme bull market in bonds since the year 1400. So, the question is, as soon as equities and bonds take a dive and enter a bear market what’s going be the safe haven? Is it going to be cash? Perhaps! Is it going to be real estate? I’m not sure about that! Is it going to be Bitcoin? Not sure! Bitcoin has to live through a whole business cycle and through a whole financial cycle and I’ve got no clue how Bitcoin and cryptos will develop in the course of a market crash. Is the safe haven going to be gold again? From my point of view, it’s going to be gold.

As soon as we see the head winds becoming tailwinds, I think we’re going to see big momentum in the gold market. I think that gold will take out all those resistances at 1360 1380 and then the media will also pick up interest in gold again. Then all the private bankers, wealth managers will say you know perhaps we should have some allocation to gold five to ten percent, exactly the same way that they had their allocations in gold; let’s say, I don’t know in 2009, 2010.

DAVE: just on that allocation and those percentage that you’re talking about there from a private bankers point of view saying to their clients, “have five percent ten percent”, what are you saying to your clients and are you saying now is the time to start to increase that allocation, because effectively if we look at gold as financial insurance, well that financial insurances is relatively cheap at this moment in time so it is a good opportunity for us to start putting more financial insurance into a portfolio. Where’s your allocation percentage advice at this moment in time?

RONNIE: Well, it’s hard to give an estimate or a recommendation. I think it clearly depends on the age of the whole structure of the portfolio of the client. Of course, our clients have a significantly higher allocation to gold than most other asset managers would recommend. Our clients in the wealth management department have been doing very, very well because they also had exposure to the stock market, to real estate markets, to the bond markets. This insurance, this golden insurance we didn’t really need that during that time.

We should not forget that gold in monetary terms got cheaper and cheaper because the gold backing of the US dollar is probably at the same level like in 2000 and in 1971. So, gold got cheaper due all to the monetary printing. So, I just like buying cheap stuff. It’s a bit like Warren Buffett once said, he said that ‘Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.’ And nobody cares about gold at the moment. We are recording quite a lot of sentiment indicators and you can tell that the market is between extreme pessimism, agony, bearishness. Nobody really cares about gold at the moment. Volatility is extremely low, so that’s actually a point in time when as a contrarian, most of the market participants of course are not as contrarian, you should have a close look at stuff like that negative sentiment in combination with the cheap valuation.

DAVE: There was one indicator that you talked about in the report which is Google queries for; “Buy Bitcoin” vs. “Buy Gold”. Maybe you might talk about that for a second?

RONNIE: Yeah as I’ve said before the cryptos are stealing the show from gold. If I was a journalist and I had to sell my story of course I would probably go for Bitcoin, because I don’t know, a price tag at fifty thousand Bitcoin is going to explode! That’s a headline that people obviously want to read.

While if you say yeah gold could go to thirteen eighty in the next couple of weeks that’s…

DAVE: …nobody’s cares!

RONNIE: Exactly. Then there’s the fact that the Google search term “Buy Bitcoin” was more popular than search terms “Buy gold”. That shows that the sentiment was very negative about gold and it’s not only the media sentiment, it’s not only analysts basically saying that in the next three to four years the price of gold will go sideways. So that’s the big market consensus nobody has a strong opinion. Remember back in 2011 every big Wall Street Bank was extremely bullish on gold; Citi, JP Morgan had priced targets between US $2,500 and US $3000. At the moment we’re far away from that, and that makes me pretty confident. But of course, we have to see some catalysts, and from my point of view a recession and/or inflation will be the main drivers.

DAVE: and I gather that when it comesto Bitcoin, it’s not a case of ‘in Bitcoin we trust’ for you going forward then?

RONNIE: Pardon. What do you mean?

DAVE: I said, I take it from how you’re talking about Bitcoin, it’s not a case of ‘in Bitcoin we trust’ going forward particularly when you talk about Bitcoin not having weathered a storm in the past. It’s still relatively new and hasn’t gone through the full gamut of economic cycles, so it’s not a case of ‘in Bitcoin we trust’ going forward.

RONNIE: Exactly. I mean when it comes to cryptos, I have to say I’m not only from Austria but I also very much adhere to the Austrian School of Economics. Therefore, I really like competition and I think competition makes the market more resilient, more anti-fragile if you will, more robust. I think as Friedrich August von Hayek said, ‘Why shouldn’t we accept competition in currency markets?’

He wrote about the de-nationalization of money and we had a very good interview with Dr Richard Zundritsch who is the nephew of Hayek, and also one of the world leading experts on Hayek’s works. He said Hayek would be very, very favourable, very positive about this currency competition that is happening at the moment because let’s face it, the reason why cryptocurrencies are coming up and they’re so popular, is also a sign that the market is basically losing confidence in government money. I think it’s clearly a sign that people are losing trust in our financial system and also Dr. Zundritsch said that Hayek would prefer gold to Bitcoin.

From my point of view, I think there’s place for both. We’re actually describing some combinations of new technology and the oldest monetary technology, gold. So, from my point of view, it’s a monetary trial and error process that we’re in. There will be many errors. I think that 95 percent or more of all those cryptocurrencies that are in the market at the moment are bogus and will be wiped out in in the next couple of years. But there’s more behind this new technology and therefore it doesn’t make any sense to fight it. Charlie Morris once said, ‘Bitcoin is digital gold.’ I think very much about that because Satoshi Nakamoto, if you read his white paper you can tell that this guy really understands money, he understands the Austrian School of Economics, he understands the stock to flow ratio and therefore, yeah as I’ve said I’m accepting this competition. I think that that crypto and gold they’re friends and not enemies.

DAVE: Right, ok! Steve if I can just bring you in there at this point because this is something that’s close to your heart as well. When it comes to Bitcoin and technologies moving forward, how do you see that development?

STEVE: Yeah, I’d share what Ronnie said. I think we’re going through an experimental phase right now. I think the demand is coming from people wishing clear transactions cheaper and faster. We’re very much locked into a financial system which takes its pound of flesh on every transaction. It’s a big bloated organization with increasing regulation and costs that are transmitted through our economies so why not use technologies to disrupt, to create efficiencies, to create speed of payment and receipt?

If I want to buy a magazine from a seller in China. It costs 30 cents or something like that for subscription. I should be able to do that and not be charged two or three percent and have him charged another percent or two on the side by his bank. So, there’s a great need for efficient payment technology and then, if you go back to, you know, what money is supposed to be. It’s supposed to be a unit of measure, a mechanism for transfer. I think we’ve lost faith in our government-backed currencies because they’ve abused their right. They’ve abused their position. They printed money which essentially devalues the money in everybody’s savings accounts and after-tax you’re being taxed again. And if you think about it, if a central banker says this that I have to protect the system here so I’m going to do some unorthodox things, I’m going to print money and, in the future, we’re going to take it back and everything’s going to be fine. But in the act of printing money he’s acting like a taxman you know and he’s not elected, he’s appointed. And to me that’s a tyranny in in in all but name.

So, what you’re seeing is the effects of that abuse of power by central banks. They have assisted and helped their chosen friends and friends in private equity markets and what not. It hasn’t trickled down into the real economy in some places, it has in other places. People are not feeling richer. They’re not feeling more secure in their employment and they’re voting accordingly. So, it’s creating disruption.

I actually would put all the problems that we’re facing around the world, in terms of discontent, at the feet of central bankers who have acted like gods. And that’s what we’re; that’s where we are. So, I think bitcoin is one part or a blockchain is one part of that story and I think it’s very telling in the times that we live in, that it has had such wide acceptance in such a short period of time. It has faced the headwinds as well in terms of clearing systems, and abuse in terms of key providers who cleared these transactions, and slowed them down, and charged lots of transaction costs. But this is a phase we’re going through. We’re experimenting with new technologies and payment systems that are used on the backbone of our internet and I think gold has a very, very important role in its credential as a safe-haven asset that can’t be printed, and abused, and infinitely printed. And I think that there’s so many crossovers there it’s so fascinating. It’s a big part of our conversation here at GoldCore and I think it will be for the years to come.

DAVE: Right, Ronnie, in our last episode we covered the topic saying that not all gold is equal. How do you actually hold your gold? What do you see is being the best way for people to hold gold going forward?

Ronnie: Well I think it should be a gold ETF issued by a big Wall Street bank (laughs).

I know I think you have to differentiate. That’s what we always tell our clients: What’s your motivation? What’s your purpose? Why do you want to buy gold? Do you want to make performance? Of course, then you can go for mining stocks; you can go for paper gold. But if you really want to hedge against a big financial crisis, above a monetary reform. If you want to buy insurance for, I don’t know financial repression and all that kind of stuff then of course you have to take care of counterparty risk. I always wonder why people expect a currency reform and then they go for a gold certificate. Yeah, that’s ridiculous.

If you want to really have the insurance of gold, we recommend our clients to be very, very cautious when it comes to storage. You have to be very careful regarding the jurisdiction. we can tell that many of our clients and inquiries are all about geographical diversification. You guys at GoldCore, you’re putting quite a lot of work and thought regarding that topic about safe storage outside of the banking system. I think that’s really, really crucial to understanding, especially if you learn and then study from monetary history like we do. We always want to present the readers of our In Gold We Trust report. So I think that Gold stored in a safe jurisdiction, outside of the banking system, should be a good idea going forward.

Dave: Awesome. Excellent. Nice.

Mark, I’ll just bring you in on that, just to help us wrap up here and because obviously that’s very much what Goldcore is all about.

Mark: Thanks for saying that. Really, I mean that’s very much all we specialize in.

So just to go back to what Ronnie said, I agree with what both the chaps said. They’re at the Nexus of gold and cryptocurrency and blockchain and FinTech. I think that it’s a very, very powerful nexus. It’s terrible this whole thing of pro gold/anti Bitcoin, Pro Bitcoin/anti gold; instead of saying, ‘well hang a second there’s a lot a lot of real synergies there you know’. I think the combination of the old and tried-and-tested gold as a safe-haven asset and the new technologies is going be very powerful.

There’s a lot of people i.e. competitors of ours and other companies that we work with, and we know in respect we’re working on this. I think it’s actually 95 to 99% of these cryptocurrencies will probably fall to zero and they’d be gone in five ten years. But there will be a few that will evolve and they will transform into new iterations. We’ll see massive trader’s destruction and the good crypto currencies and crypto bullion. And I think asset backed crypto currencies, with gold and silver, actual physical bullion behind it, will do very well indeed you know.

So yeah, that’s what we specialize in. We’re looking at opportunities in that space. But yeah we think of gold as a safe-haven asset and, exactly what Ronnie said about Bitcoin, the notion that bitcoin is a store of value is just nonsense at this stage you know. And it’s funny the Bitcoin evangelists know they took their gold Bitcoin as a medium of exchange and then it became ‘oh! it’s no longer a medium of exchange because you’re going to spend your money on a pizza because the price has gone up so much!’

So, then they started talking about Bitcoin as a store of value but a store of value is something that is created over decades. and centuries, and hundreds and thousands of years you know. Bitcoin is not a store, who knows it may become in time!

I think that there are certain risks to it becoming so, and obviously governments are going to be very slow to tolerate that. But yeah, the bottom line is it’s an interesting answer that could do very well indeed but I think it should be a small part of a portfolio. I think you should concede we have higher allocations to gold but especially for older people who are about wealth preservation, Bitcoin should not be seen as a safe-haven asset at this moment.

It is more of a speculative asset, that’s why Millennials who have more of a risk appetite very much like it and they’re familiar with the technology. So, everybody should dip the toe-in, only a tiny bit in Bitcoin, buy ten or fifty dollars of Bitcoin. I think the technology is going to be around in some form and I think it’s very, very exciting time also but I think the Nexus is going to be very, very powerful indeed.

Steve: I have one last question there Dave if you don’t mind.

Ronnie, just China! Renminbi big oil contracts, big news, this year. What does the future hold in terms of the Chinese currency? The background being: they have a lot of debt as well, what do you think is going to happen with the gold price going forward there and their economy? And the fact that they’re moving into kind of reserve currency status?

Ronnie: Yeah well, of course China. I think if you combine, if you make the comparison about strategy between China and the US. The national sport or the national game in China is ‘Go’, which is a very, very strategic game to play. While the national sport in the US. is basically baseball or football, which is more focused on the short-term, hit and run. And I think this analogy kind of makes sense also in a broader perspective. When it comes to this de-dollarization I think in US they know that that the time of the US dollar, the best time is basically over. And they know that there are big competitors coming up; not only China but also Russia. I think it’s no coincidence that the first trip of Donald Trump abroad was to Saudi Arabia because of course, they’re one of his closest and most important allies and of course supporters of the Petro-dollar system.

I think this Petro-Yuan, it represents the intersection of the dying petro-dollar and an ascendant Renminbi and that’s a long process as I’ve said before. I think that this year but also last year we have seen major steps in this de-dollarization game. We have seen the gold exchange, but especially now with the oil exchange in Shanghai, where volumes are much bigger than anticipated, I think those were really big steps in this whole de-dollarization game. We should not forget all those competitors of the US dollar, all those growing economies with very favourable demographics, not only China. Still they are buying gold and we always said that gold is going to the most productive, most innovative, most prosperous nations and it’s flowing from the west to the east. yeah exactly. so, I think that’s a long process, we’re seeing that not only central banks, but also private people, private individuals in those countries are constantly buying gold. The Russians, for example, nowadays have the by far the highest gold backing of the currency the Rubel.

We’re seeing so many deals being signed between net oil exporters and China, basically circumventing the US dollar. So, I think the US and especially Donald Trump, they realized that the best days for the dollar are over but of course they just won’t say ‘Okay we we’ve lost this privilege of having the world reserve currency. Let’s move over to the next currency system.’ So that might also be a trigger that geopolitical tensions are rising at the moment. I think you can say that many problems that we’re facing, from a geopolitical point of view, are actually based on the fundamental flaws of our currency system.

Unfortunately, everybody is always looking only at the symptoms nobody cares about the real reasons. But from my point of view and I think you guys will probably agree to that many of the reasons of the problems, that we’re facing nowadays, can be traced back to 15th of August 1971.

Dave: okay gents! Well that’s about all we have time for in this episode of the Goldnomics podcast. I just need to say a very special thank you to our special guest today Ronald Peter Stoeferle from Incrementum, thank you very much. It has been absolutely brilliant having you on the podcast this month.

Ronnie: Thank you very much. Thank you very much, thanks a lot.

Dave: We’ll link again to Ronnie’s report in the show notes from this podcast. We’ll put up a few of the charts as well, just intermittent in this conversation so thank you again Ronnie, Steve, Mark. Thank you very much gents.

And I just want to finish by reminding everybody to subscribe on YouTube. You can follow us on iTunes, on SoundCloud as well subscribe wherever it is that you like.

We’ll be bringing you more content again. We’re trying to get a podcast at least once a month at this stage and so if you have any questions comments or anything, stick them in the comment box below, anything that you’d like us to cover in the future as well anything gold related, as we say the Goldnomics Podcast looking at global financial market developments through the lens of precious metals. And that’s what we’ve been doing again today!

So goodbye and thank you all for listening and watching, thanks!

Everyone: Thanks!

Never miss an episode of The Goldnomics Podcast – Listen and subscribe on YouTube, ITunes, Soundcloud or Blubrry

News and Commentary

Stock Rally Endures Trump WTO Report; Euro Jumps: Markets Wrap (Bloomberg.com)

As China Markets Plunge, Here’s How Vital Signs Look Versus 2015 (Bloomberg.com)

Asian shares rally on China rebound; trade worries linger (Reuters.com)

Gold nudges up but on track for worst month since November 2016 (Reuters.com)

Fed’s Powell to deliver monetary policy report to Senate (MarketWatch.com)

Source: ZeroHedge

Brexit: Bank Derivative Contracts Worth Some £30 Trillion At Risk Warns Bank of England (TheGuardian.com)

India Central Bank Intervenes As Rupee Crashes To Record Low (ZeroHedge.com)