Alasdair Macleod: The Fed’s Priorities are Changing in Gold’s Favor
Palisade Gold Radio: 12-22-2023
Tom welcomes back Alasdair Macleod to the show. Alasdair notes that gold prices rose significantly last week, but the miners did not hedge their positions.
He believes this is because mining boards have come to realize that it is the weakening US dollar, not gold, that is the cause of the price increase.
As a result, they have decided to hold off on hedging their positions. However, energy costs are still a concern as they can rise unpredictably.
The reverse repos facility provided by the Federal Reserve has seen a decline in usage as money market funds have shifted to investing in Treasury bills, which offer better interest rates.
Despite the rising government debt, funding frustrations have been avoided as money market funds find alternatives. However, this could put pressure on the bullion banking community if liquidity dries up and makes it difficult to fund government debt.
There is speculation that a significant amount of gold, half of the world’s total reserves, may no longer exist due to leasing and potential disappearance from the New York Fed.
The Fed’s announcement of a dovish pivot has caused the US dollar index to drop, leading to a decline in the yen carry trade. Investors are seeking alternative investments like gold.
The Middle East conflict, particularly due to Houthi-Iranian aggression, could introduce further instability to the credit market. The Federal Reserve’s priorities are shifting to focus on job creation for the upcoming presidential election. This shift has resulted in a fall in profits for the carry trade and a decline in the US dollar’s trade weighted index.
Central banks, including the Federal Reserve, have become more focused on funding governments rather than protecting the public from inflation and devaluation.
The banking system, particularly in Europe, is highly leveraged and vulnerable to rising interest rates.
The return of free banking is advocated by many, where banks are responsible for their own problems. The LBMA is experiencing a decrease in market share due to the popularity of places like Dubai, where gold is sold based solely on weight at the gold souk.
The LBMA’s efforts to gain preferential treatment from the Bank of International Settlements have been unsuccessful. Gold’s value has been denied and downplayed by the US government, as a rise in gold prices would not be geopolitically beneficial.
The situation in Argentina, with its President Milei considering switching to gold, is worth watching. Escalating tensions in the Middle East and Ukraine are also impacting energy prices and geopolitical dynamics.
Time Stamp References:
0:00 – Introduction
0:32 – Gold’s Recent Move
6:13 – Reverse REPOs
10:25 – Gold & Rates in 1970s
15:10 – Middle East Concerns
17:20 – DXY & Yen Carry Trade
24:42 – Banking Weakness
30:14 – Central Bank Alternative
38:34 – 2024 Outlook & the East
42:55 – Gold Vs. The Dollar
46:40 – Argentina Thoughts
48:16 – Conflict & Tension
1:00:09 – Russia/China Relations
1:03:27 – Wrap Up
Talking Points From This Episode
– Governments have used central banks to influence markets and manipulate interest rates, leading to decreased services for small and medium-sized businesses.
– Central banks have become predatory institutions when dealing with the private sector, controlling the money supply and leading to an increase in government debt.
– The attempted alliance between Russia and China, and the potential implications for geopolitics.
