Sometimes you need to read the tea leaves. Sometimes tea leaves bludgeon you over the head with a sledgehammer.
I have been writing over the last few weeks about how gold appears to be one of the “least loved” assets of any sector. In my most recent portfolio updates, I have written about how miners and metals appear to me today to be like energy was in April 2020: completely thrown out to trash and forgotten.
You can read my most recent update here.
Being unloved, of course, presents opportunity, in my opinion. But the best part is that the backdrop with which the metals are selling off against makes it even more appealing. For months, I have been writing about how we are witnessing, in real-time, a bifurcation of the global economy the likes of which we have never seen before. The BRIC nations – now inclusive of Saudi Arabia – are purposefully separating from the West and looking to forge forward with their own economy.
And did I mention they have all of the oil, productive capacity and gold?
Which brings me to the latest massive canary in the coalmine for precious metals: all of a sudden we have a sovereign “mystery buyer” in the gold market. And they appear to have an insatiable appetite for the precious metal.
Reuters reported this week:
Central banks bought a record 399 tonnes of gold worth around $20 billion in the third quarter of 2022, helping to lift global demand for the metal, the World Gold Council (WGC) said on Tuesday.
Demand for gold was also strong from jewellers and buyers of gold bars and coins, the WGC said in its latest quarterly report, but exchange traded funds (ETFs) storing bullion for investors shrank.
Bloomberg called the buyers “mystery whales” and postulated that the mystery buyers were likely either China, Russia, Saudi Arabia or India.
It noted that the Central Bank purchases were nearly double the previous record.
What do all those names have in common? They are all part of the newly strengthening BRICS alliance. Yes, the same one that has said it hopes to create a global reserve currency to challenge the dollar.
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In total, the world’s gold demand amounted to 1,181 tonnes in July-September, up 28% from 922 in the same period in 2021, the WGC said.
Buying by central banks in the third quarter far exceeded the previous quarterly record in data stretching back to 2000 and took their purchases for the year to September to 673 tonnes, more than the total purchases in any full year since 1967, according to the WGC.
For those that have not yet, I strongly recommend you listen to the following interview I did about a month ago with Andy Schectman of Miles Franklin.
In what can only be described as an extremely disturbing interview that left my jaw agape by the end of it, Andy and I have a frank discussion about:
- The price of oil and the country’s response to higher prices
- How the Fed is trapped between a rock and a hard place, between inflation and recession right now
- The BRIC nations banding together economically and challenging the U.S. dollar as global reserve currency
- Andy’s thoughts on how nearly all traditional assets – including stocks, bonds a real estate and the dollar, may wind up “vaporized”
“I do think the whole system could blow up with the loss of the dollar’s petro-reserve status,” he said at the time.
“There are certain signposts along the way, that when you see, it becomes clear we are on a path to de-dollarization,” he says. “The dollar hegemony is right about ready to break when you realize that Saudi Arabia is about to join the BRIC nations. Do you think Biden is going to fly there to ask for more oil? He went there to beg them not to join BRIC.”
“The dollar was made reserve currency only because of our protection of the Saudi kingdom,” Andy continues. He then notes that Saudi Arabia has signed new protection agreements with Russia.
“All of the Eastern European countries that have repatriated their gold. They’re all part of the EU but they all trade their own currency. They’re all going to break away from the Western system!”
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