The Gold market, like other markets, is reflecting the chaos present in global markets and geopolitics. With wild fluctuations of $50-$100 in single days, gold remains in the headlines, whilst silver continues consolidation between the $39 and $42 range, after having tested $32.50 to $36 upwards of ten times. As margin requirements are hiked, speculators continue to be shaken out of the market, meaning that those left in gold and silver are those who have paid cash upfront for their holdings. It is these folks who are not easily scared out of the market. Instead, they hold on for the longterm, anticipating appreciation of commodities and resources in the face of money market devaluation. It is these folks who represent the growing and longterm buying pressure in gold and silver.
In this environment, the need for sound money is gaining attention, as Ron Paul’s movement in the United States demonstrates. The clearer it is to the public that the internationalist Federal Reserve is a private body above and beyond the control of any U.S. institutions, the more talk of an alternative money system there is. In the interim, people are discussing the few ways in which they can preserve the wealth they have now, while U.S. policy continues dollar devaluation, if not through QE3, but through other covert means. In Utah, gold and silver is increasingly being seen as money.
The United States Utah Legal Tender Act recognizes gold and silver as legal tender in the state of Utah. This movement has gained attention worldwide. Even state-run China TV has interviewed the man who spearheaded the act, Ken Ivory. He has said that the Chinese were curious what he thought the impact would be with respect to the federal government…we explained to them the very simple example; a silver dollar in 1960 would buy approximately five gallons of gas. Well, that dollar today won’t buy you one fourth of a gallon, but the silver will nearly fill your tank.”
“Then with respect to the federal government, we have about eleven states now that are looking at running the same legislation. And to the extent that we get the states standing in unison, that sends a very strong political message to Washington that the guardians of the liberty of the people in the states are not going to tolerate any longer the unchecked devaluation of our earnings and savings.”
As for why he founded the Act: “… We’re seeing a federal government $14 trillion in debt, overspending by over $1 trillion+ per year, that’s paying for 57% of the government as we go and pushing 43% off to our children and seeing the devaluation of our currency. It’s that same idea that we really need to look at something to preserve the purchasing power for our citizens....
You know…like everybody else we saw the things that are going on and we wanted to preserve the purchasing power of the earnings and savings of our people of Utah. So the Utah Legal Tender Act recognizes gold and silver, federal government issued coins as legal tender in Utah.”
Meanwhile, as Utah prepares itself to move forward without federal funding, Venezuela’s president Hugo Chavez has lost confidence in western markets, in particular the international mega-banks which function as shepherds of most nation-states and global markets. Deeming U.S. and European economic prospects too uncertain, Chavez has decided to place Venezuela’s gold reserves and other liquid assets in China, Russia, and perhaps even Iran. Chavez’s decision, in part, might have to do with his domestic petroleum reserves. He can sit on his petroleum reserves at home, with a stash of off-shored gold in emerging nations.
Venezuela’s gold holdings, 440 tons, ranks 15th in the world. And so, Venezuela holds more gold than Saudi Arabia or the United Kingdom. So, with this in mind, markets should not expect Libyan gold to hit the markets, resulting in a drop in the gold price. Instead, much of this gold might find its way onto the balance sheets of Venezuela. In order to drop the price of gold, with demand as high as it is, only further margin hikes will do the job.
UBS has raised its 3 month forecast in silver from $30/oz to $50/oz, suggesting, as LCPM did in last week’s post, that investors were not shorting gold, and choosing instead to buy silver, which sits today still more than 16% below the nominal high seen in late April 2011 and January 1980.