Gold Wars

Gold is not the main focus of this blog although it is an important signal we monitor that can indicate that something important may be happening the in the monetary system. Gold has been in and out of the official monetary system for a long time so people do view it more like money than just a commodity like zinc for instance.

Gold tends to generate a lot of emotional reaction from people who love it or who seemingly hate it for various reasons. There are all kinds of articles and blogs that discuss gold and its love/hate relationship with the monetary system. For instance, the same people (central banks) that tend to disparage gold as something out of place in a modern monetary system also happen to hold tons and tons of it in their vaults. The tension that clearly exists when gold is talked about as an alternative to the currencies of the central banks is really there and there are many places that cover those issues.

What I would like to focus on for this article is to look at some new developments in the gold space that may indicate that interest in gold as some kind of alternative payments system might be increasing. Below are some thoughts on it.

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Gold has always been something people around the world look to when there are signs of potential trouble in the world. The most recent example is the flare up between the US and North Korea. When the rhetoric ramped up to a level where people began to pay attention and think an actual shooting war might be possible, gold immediately reacted. People like Ray Dalio were instantly suggesting everyone should own at least 5-10% of a portfolio in gold as an insurance hedge (something we have long talked about and people like Jim Rickards have consistently recommended). Readers should understand that no where near that allocation to gold exists currently and if fund managers and investors actually followed that advice, the demand for gold would explode far above the amount that is available at any given time and the price would explode along with it.

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