News Note: Jim Rickards on Gold Soaring to All Time US Dollar High Over $1921 - Ray Dalio on US Dollar

This is a news note due to events unfolding this Sunday evening. At the time of this writing, gold has clearly gone well above the old all time high price in US dollars at around $1921. Right now, spot gold is quoted on Kitco just above $1930 per ounce.

Earlier today, Ray Dalio issued comments on Fox Business  about his concerns over how all these current events may impact the US dollar and economic stability. He specifically expressed concerns about the "soundness of our money" (see excerpt below).

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"The biggest issue Dalio is worried about is "the soundness of our money."

"You can't continue to run deficits, sell debt or print money rather than be productive and sustain that over a period of time," Dalio said."

Go To Fox Business to find the full comments by Ray Dalio
(note- Fox Business does not permit direct links to articles - search for Ray Dalio)

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My added comments: Obviously, we have a lot of potential stressors going on in various markets alongside a pandemic, the economic fallout from a pandemic and now also geopolitical tension. It pretty much goes without saying that readers need to monitor events closely with all this going on at the same time. I quickly asked Jim Rickards if he would like to offer some thoughts on the events we are seeing tonight. He kindly replied with the email comment below for readers here:

"This new price spike emerged in Asian trading on July 27 before London or New York had opened. Given the deteriorating state of U.S.-China relations and the potential resort to financial warfare, including the possible seizure of China's Treasury note holdings as compensation for victims of China's criminally negligent handling of the initial outbreak, it could well be the case that China and its people are flocking to gold as an alternative to dollar-denominated holdings such as Treasuries."  - James Rickards    (7-26-2020 10:30 pm cst.)


Added note on Jim Rickards - Jim has a new book coming out in October with an update on his most recent analysis as to where he sees things headed. Pretty sure this will be another best seller.

Kitco News - Gold Price Makes History, Analysts Still Looking for More

Below is the Kitco quote at 10:18 pm central standard time. Silver also sharply higher.

Metals	Date	Time (EST)	Bid	Ask	Change		Low	High
GOLD	07/26/2020	23:18	1937.10	1938.10	+35.80	+1.88%	1899.60	1942.60
SILVER	07/26/2020	23:18	24.09	24.19	+1.38	+6.08%	22.66	24.29

Added note 7-28-2020: Goldman Sachs Says Gold Spike Puts Dollar's Reserve Status in Question (thehill.com) - excerpt below:

"A record high price for gold, known as the currency of last resort, is raising questions about the U.S. dollar's future as the world's reserve currency, according to a Goldman Sachs research note published Tuesday."

Gold and Silver Markets Reflect Significant Surge in Demand - Some Reasons Why

While this blog is not investment related and does not claim any special expertise in precious metals, we do monitor these markets because they tend signal when there is a general feeling of uncertainty about economic conditions. Lately, both gold and silver have moved up more sharply in price. Silver has also now begun to "catch up" with gold as reflected in the sharply falling gold to silver ratio.

Rather than try to provide any in depth analysis, we will just list some bullet points below as potential reasons we have seen offered for the recent strong moves higher. Following that are a few links to recent articles noting what is going in these markets.

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- fundamental demand  vs. supply issues - falling supply due to mine closures during the pandemic at the same time as global demand picked up for physical gold and silver

- general uncertainty surrounding the impact of the virus pandemic on the stability of the economy and financial system

- a general perception by investors that the increased monetary stimulus from global central banks in response to the virus pandemic will tend to devalue fiat currencies (the US dollar is certainly reflecting that lately). 

- the markets anticipating possible future inflation because of all the money creation

- possible tightness and/or stress in the Comex futures exchange for both gold and silver that is demanded for physical delivery. Again, reflecting tight supply vs. demand.

- a surge in retail demand for gold and silver coins that is drawing in a broader group of buyers than is the norm for these markets. See video below asking if millennials have "discovered" gold and silver.

-an increasing number of investment advisers recommending clients allocate %5 or more to gold and silver in their portfolios. As noted below, Ray Dalio was advising this a year ago. Of course, Jim Rickards who we have covered here quite a bit, has long advised a 10% allocation to precious metals.

- low real interest rates (or negative real interest rates) make gold more appealing

- some central banks around the world continue to add physical gold to their reserves

Here are a few articles and videos that talk about various aspects of what experts in these markets are seeing in these markets:

Big Surge in New Retail Buyers (King World News)

Gold/Silver Ratio Key as Markets Surge Higher (Kitco)

Citi Analyst Tom Fitzpatrick Technical Chart Analysis and Price Target on Silver (King World News)

Are Millennials Discovering Gold and Silver?  (Kitco)

More Technical Analysis on Silver  (321 Gold)

Ray Dalio Says Gold a Key Investment for Upcoming Paradigm Shift ( a year ago- CNBC)

Technical Analysis on Gold (Clive Maund)

Gold vs. Major Currencies the last 6 months

At the time of the writing of this article, spot silver is $22.51. Here is a sample of what various dealers want for a one ounce silver eagle at this same point in time. Not much available under $30. This suggests there is still a market imbalance in demand for silver eagles vs. available supply as this is a much higher premium over silver for these coins than we usually see in more normal circumstances.

JM Bullion 

SD Bullion

Provident Metals

Money Metals

Apmex

Ebay listings

Added note: Coming in the next few weeks will be an interview I did with my own daughter who is 25 years old on what she thinks about money and some monetary systems issues. She provides an interesting sample of opinion and some of her comments echo what I see quite often from millennials. After the interview article, I will post a followup article based on her comments on the issues involved. The goal of that article is to try to ask some thought provoking questions about concerns millennials have for the future. I did run this interview by some experts who told me that the interview answers were interesting and provide some useful insight into current thinking in that age group.

News Note: Gold Hits Highest Quaterly Closing Prince Since 2012

It appears our recent educational article on gold was pretty timely. Gold ends the second quarter of 2020 closing at its highest quarter ending price since 2012. You can look at its chart over that time period here. 

Below I have pasted in links to some articles noting the strong closing price for gold for this quarter. Interest in gold is obviously on the increase with the pandemic and the central bank response to the pandemic likely being a couple of the primary reasons for that interest. Gold can be an important indicator so it is always useful to keep an eye on how its price is trending in relation to major currencies.

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Gold Settles at 8 and 1/2 Year High

"Safe-haven demand and dovish central bank expectations have sparked fund buying of precious metals in recent months. Long gold positions in ETFs on Monday rose to a new record high of 3,199.12 MT (data since 2002). Also, long silver positions in ETFs rose to a new record high of 773.68 million ounces on Monday."

CNBC - Gold Sprints towards 8 Year High

“Bulls are delighted with what will almost certainly be a strong close, which provides the basis for a push to $1,800 in short order.” Gold, long considered a hedge against inflation and currency debasement, was headed for its third month of gains, driven by stimulus measures to support economies decimated by the pandemic."

Kitco News - Gold Prices Power to High

"Gold prices are sharply higher and hit an 8.5-year high Tuesday, on technical buying based on very bullish charts that got even more bullish today—suggesting still more (likely much more) upside price potential to come, including new record highs."

                                            

Jim Rickards Weighs in on the Gold Price Action

"Today’s price of $1,782 per ounce is the highest since 2012 and a 70% gain from the low of $1,050 per ounce at the end of the last bear market in December 2015." (editors note: Jim called the low in December 2015 as a bottom and the start of a new bull market for gold years ago).

US Mint 1 ounce Proof Gold Eagle (a collector version)

Here is the bullion coin - still nearly $100 over spot gold

All About Gold

Whenever economic conditions become unstable and the confidence of the general public is shaken, gold tends to re-surface as a topic of interest. As we have explained here before, gold is one market we monitor because it can provide signals as to how much confidence may be waning in the present system at any given point in time.

If you do any significant research into gold, you know that gold is a topic that for whatever reasons generates a lot of drama and passionate feelings pro and con. Here, we prefer to look at gold without the drama and examine its role over time as money, a hedge, and an insurance policy of last resort. That is what gold has been for thousands of years for billions of people. Anyone who wants to understand the kinds of economic and financial issues that shape world events must have some level of understanding of gold's economic role in both history and at the present time. 

With that in mind, we will feature the two part video documentary below as an educational opportunity for anyone interested in learning all about gold. This documentary does as good as any I have seen in providing that kind of educational opportunity.

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The Story of Man's 6,000 Year Obsession

Part I

Part II

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My added comments: While this documentary is a few years old now, the information presented is as relevant today as it was when it was released. The documentary traces the historic role of gold as money going back thousands of years, walks you through how gold is discovered, mined and refined into retail products, and attempts to peek into the future to see what role gold may play going forward either inside or outside the official monetary system. No matter how you feel about gold, you cannot watch this documentary and come away without learning anything. For that reason, we will include this article in our Marketplace of Ideas for Monetary System Reform as an educational resource on gold.

Added notes: Jim Rickards authors this recent article he titles "Why Gold?" and Jan Nieuwenhuijs authors: Why Gold and Why Now?

Alasdair Macleod, in this recent article, presents a potential worst case scenario where the US dollar collapses within the next year and only gold and silver survive the carnage. 

Former US Mint Director Edmund Moy says he keeps physical gold close at hand and views it as a hedge.


Reuters- Goldman Hikes 12 month gold price forecast to $2,000


Reuters article: World's Ultra Wealthy Go for Gold (excerpt below):

"Nine private banks spoken to by Reuters, which collectively oversee around $6 trillion in assets for the world’s ultra-rich, said they had advised clients to increase their allocation to gold. Of them, four provided forecasts and all saw prices ending the year higher than they are now."

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Additional added note: A thank you to blog reader BK who sent me the comment below by email related to the Reuters article above on wealthy clients being advised to allocate 5% to gold.

"A 5% allocation to gold is, fortunately, only $300 billion, about the market cap of Visa in the Dow.

However, a ton of gold only sells today for about $55 million, so it takes about 5400 tons, at "present prices" to achieve that allocation.

Since China and Russia produce combined about 600 tons of annual gold production, which they do not sell abroad, the total remaining production of about 2400 tons is what is available to fulfill this “new demand”.  So, if no other demand were to compete with these newcomers, it would still take 2 years and 3 months to complete this allocation from new stocks of metal.

But, how likely is it that the traditional sources of demand, augmented by more recent central bank purchases, would suddenly stop?  Will India weddings abandon gold?  World Jewelry demand? Industrial uses?

If I am correct, and the figures above have any validity, the claim that wealth advisors now recommend a 5% allocation to gold, to their super rich clients, is meaningless.  They are, as a group, already “locked out” of the physical market.  If they try to make a move, within a short period of time, they will so quickly spike the price that they will shut down the market. So, how much gold could they acquire without jolting the market?   Perhaps 4,5, maybe 600 tons per year? That might be do-able, but they would need 10 years to complete their acquisition.

One unlikely assumption in all the above is that “present prices” would prevail during this small shift in allocation to gold.  If prices increased by a factor of 10, then much less NEW gold would be needed, and indeed some significant selling from EXISTING private stocks would be expected to occur, particularly from areas ( The East ) where buyers are “price sensitive”. ( they buy when prices drop, and sell when prices have risen )   Would those “super rich” new gold buyers mind that they had to pay a huge premium to achieve their allocation?  That is hard to say.  They clearly don’t mind paying 4 or 5 times as much for a share of stock as they did 2 or 3 years ago, so perhaps they wouldn’t mind doing the same for gold.  (but for stocks, there always has to be a story.  For gold, what would the “story ”be? )

Physical gold has one huge problem for the financial industry, which takes in hundreds of billions in earnings per year in advisory, trading, and market making roles.  NO FEES.  Physical Gold sits quietly in a vault, and apart from minor storage costs, that’s it."  from reader BK

Signals from the Gold and Silver Markets?

One of the sign posts we keep an eye on here is the precious metals markets. These markets historically can provide signals that something unusual is going on in the financial system. There are a couple of things that come to mind in this regard.  

One is that sharp rises in gold (and sometimes silver prices) often indicate sagging public confidence in the status quo of either the present financial system or at times anxiety that the some kind of disturbance in the normal social order is a concern. For example. a feeling that some kind of major geo political event may rattle the existing status quo. Gold is often viewed as a kind of refuge of last resort insurance policy in times like that. 

Secondly, whenever public confidence in an existing national currency diminishes, people often move into gold (and also silver in some cases) as a kind of currency hedge. Again, as an example, if there is a public perception that all the massive liquidity creation by the government and the central banks in response to the virus related financial crisis might weaken their national currency, some will move at least a portion of their savings into gold (and silver). This is true for the US dollar as well as any national currency. The more public confidence falters, the more demand for gold (and silver) resulting in strong bull markets for those metals. 

This year, we have already seen gold perform very well in response to the unfolding crisis and lately silver is starting to show signs of life as well. Since these markets can offer important signals as discussed above, we should watch them closely in the coming months. Below is a bullet point list for some of the things we can observe going on right now in these markets that may be worth your time to review.

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- in 2020, gold is at or near all time highs in many currencies and may be targeting an all time high is the US dollar price of gold later this year. If gold makes a new all time high in the US dollar price in 2020, we need to pay attention to that signal

- many technical analysts are saying that long term historical charts for gold and silver are indicating the potential for much higher prices ahead in the coming months and years. Here is one example of that kind of technical analysis.

- both gold and silver have had unusual price variations between the prices as set in the futures exchanges (such as the Comex exchange) and the actual prices to purchase real physical metal rather than a paper futures contract. In late March (on the 24th) I watched a real time example of weird gold price variation take place. That day, I checked the gold price as shown by Kitco, a leading precious metals web site that shows the gold price continuously as the market trades. At the exact same time I looked at the gold price showing on CNBC on TV. The gold price on CNBC was nearly $100 per ounce higher than the Kitco price. This is extremely unusual behavior. Normally, any variations are fairly minor. In fact, I have never seen this happen before in over 20 years of watching this market. (see this Reuters article related to this activity)

- as I write this article, Kitco shows the closing gold price for 5-22-2020 as $1732.70 while CNBC shows a gold price at close on 5-22-2020 of $1,734.70. This is more like normal. The same kind of wide variance I watched in late March has popped up several times over the past few weeks since then. This kind of unusual pricing variance can be an indicator that there is more demand for physical gold than supply and that gold futures contracts may be under unusual duress. If the situation persists, it can also indicate there is a stress in the futures paper markets that is a systemic risk to futures contract trading. So, it bears watching in the months ahead.

- this same unusual pricing activity is also happening with silver. Below I will illustrate this by pulling some silver prices from various sources at the market close for 5-22-2020. The retail market for actual physical silver is really acting in an unusual way. All you have to do is search the internet and see if you can buy a one ounce silver eagle coin anywhere for less than $25 (@ 5-23-2020) while the paper futures markets say silver is $17.29 per Kitco. It is normal for silver eagles to carry a premium to the price of silver ($2.75 to $3 per ounce), but the premiums out there right now of anywhere from $7 to $9 per ounce above the $17.29 price shown on Kitco indicates a very tight retail market for actual physical silver. Below I am pasting in an example from one typical dealer to illustrate this situation. Notice that this dealer will actually buy silver eagles from you for $4 per ounce ($21.37) over the futures market price of silver and wants $8 per ounce ($26.76) from you if you want to buy one from them. This is very typical of what is gong on right now in this market. Just search the internet if you want to observe it for yourself.

Also, as of market close on 5-22-2020, CNBC is showing a silver price of $17.69 (recall Kitco shows $17.29). Looking at all this, a couple of questions come to mind. What is the true price of silver? What is going in this market to create these kinds of price variances? In coming weeks we should keep an eye on this market for any signals it may send us.

Silver American Eagle - RANDOM Year, BU (Dates our Choice) - (Money Metals Exchange)

Quantity	Premium/Unit	Total Price Each
1 - 39	$9.39	$26.76
40 - 499	$8.79	$26.16
500 - 2500	$8.29	$25.66
2501+	Call for discount
Full Tube Qty = 20

Silver Price:

$17.37

Sell to Us Price: $21.37 each.

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Concluding Comments: Anyone who follows the gold and silver markets knows there is unusual activity going on right now. Some attribute this to short term disruptions in supply and demand due to the virus pandemic impact on the supply chains. Others say this unusual activity is sending us important signals that major changes in these markets are coming (leading to much higher gold and silver prices) and if those changes are very large it could indicate the entire current financial system is under stress. It's always important to monitor these markets, but even more so under the present conditions.

Keep in mind, we have had unusual activity in the repo markets from the US Fed since last fall following years of very easy monetary policies. On top of that we have now had a global pandemic leading to a shut down of the global economy. This has created millions of job losses, high volatility in many markets, and very high levels of uncertainty for what happens over the next year. No one really knows for sure what is coming towards us. Given all this, gold and silver could be trying to send us signals for the future and we need to be alert to anything they may have to say.

Added notes: 

Other current retail prices for silver eagles around the internet as of 5-23-2020:

JM Bullion - $26.64

Apmex - $28.36

SD Bullion -$26.82

Pinehurst Coins - $26.35

Provident Metals - $26.64

US Gold Bureau - $25.90

Gainesville Coins - Out of Stock


In normal times, silver eagles retail for anywhere from $2.75 to $3 per ounce over the price of silver and dealers will only pay the spot price of silver to buy them or at most a slight premium to spot price. A shortage of silver eagles may be partially due to the US Mint having to close due to the virus pandemic for a period of time. But it's back open now so everyone is watching to see if this abnormal pricing activity persists. Before closing, the Mint was experiencing a huge surge in demand.

Added note 5-27-2020: Above we illustrate that there is clearly a tight supply situation in the retail market for silver eagles that anyone can easily see. In this new interview, London metals trader Andrew Maquire confirms that the wholesale market for large silver bars is also very tight at this time. Mr. Maguire is in a position to see the supply and demand in the wholesale silver market that is pretty opaque to the general public. All this suggests we should watch and see what silver does over the next few weeks.

Willem Middelkoop - Towards a New "De Facto Gold" Standard

Author Willem Middelkoop has long offered commentary on the prospects for major monetary system reform including his book on the subject, "The Big Reset". In this recent article published on the OMFIF web site, he says we may be seeing a new unofficial gold standard being adopted even though no nations are moving towards adopting an official gold standard. 

Willem is an OMFIF (Official Monetary and Financial Institutions Forum) Adviser (see Industry and Investment section). Below are some excerpts from his article.

Willem Middelkoop

(author - The Big Reset)

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"Last year, 22 central banks, situated largely to the east of Germany, bought the largest amount of gold since 1967, the year the London Gold Pool collapsed. The gold repatriations by many European countries of the last few years are another sign that we are reaching the end of four decades of monetary calm. This could bring about the largest monetary changes since the closing of the gold window by US President Richard Nixon in 1971.

The US wants its fiat dollar system to prevail for as long as possible. It has every interest in preventing a 'rush out of dollars towards gold', as happened in the 1970s. Since then, bankers have been trying to exercise control over the precious metal's price. This war on gold has been ongoing for almost 100 years, but gained traction in the 1960s with the forming of the London Gold Pool – whose members included the US, UK, Netherlands, Germany, France, Italy, Belgium and Switzerland."

. . . . 

Clearly gold is making a remarkable comeback to the world financial system. A new gold standard is being born without any formal decision . . . . ."      click here to read the full article



Added note: Willem posted this news about France calling for a monetary system reset on his Twitter page

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Expert reaction:

I had a brief email exchange with Willem related to his new article. Many readers (and myself) have noticed the recent sharp move up in gold allowing it to break above key resistance price points that have been in place for several years. I asked Willem if this may be a signal that another bigger up leg in the price of gold is coming? He offered  this comment on that question:

"Wouldn’t surprise me at all"

So we will keep an eye on the gold market over the coming months to see if a new major uptrend has begun and also if that indicates other changes may be coming our way in the overall monetary system. As always, time will tell us the answer. 

Keep in mind that both Jim Sinclair and Ray Dalio have also recently said they see a "reset" or paradigm shift coming including much higher prices for gold which we noted in this recent article.

Reset Watch Note: Jim Sinclair and Bill Holter Believe a "Reset" Has Now Begun

Anyone who has followed the issues that we do here on this blog for a long time knows the name Jim Sinclair. Jim is well known for his ability to do amazingly accurate long term price forecasting in the gold market. He famously called the top of the first huge bull market in gold back in the early 1980's. More recently (in this century) he incredibly made a long term gold price forecast of $1,650/oz way back when the price of gold was trading well below $500/oz. in the early 2000's. Gold hit that and more within his time frame.

In collaboration with Bill Holter (also hailing from Texas), they have been very consistent in the view that the present monetary system is unsustainable long term due to the combination of too much overall debt along side too many high risk derivatives that interconnect all through the banking and financial system 

In this very recent interview with Greg Hunter, they repeat the warning they have been issuing now for many years and are going on the record to say they believe that this recent sharp move up in the price of gold is a signal that the first "reset" of the present system they have long predicted is now starting up. Jim Sinclair says the events that he and Bill expect to unfold during this reset process will be completed by 2025. 

Below I have pasted in the video of the interview. 

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Bullet points from the interview:

- the present system is unsustainable due to too much debt and risky derivatives
- Democratic candidates for President are basically calling for a debt "jubilee" reset
- central banks are cornered and running out of ammunition to stave off a reset
- the recent sharp move up in gold is an early warning signal
- there will be two resets higher in the price of gold over the next few years
- the events that are part of the reset process will unfold by 2025


Added note 7-17-2019: Ray Dalio describes his own version of a coming reset which he labels a "paradigm shift"
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My added comments: The conditions we all live in these days are not easy to get a handle on. Trying to make a prediction about anything happening within a certain time frame is extremely difficult to do. I will say that having followed Jim Sinclair for a long time that he has done a pretty good job of long term forecasting, especially in terms of predicting price levels for gold many years in advance.

Some people who were alert and alarmed when the 2008 financial crisis arose have since gone off alert because the enormous coordinated effort by central banks around the world to stave off a failure of the present system seems to have accomplished at least that much up to now and the system seems stable to them now. A decade has passed since that last major crisis.

In this new interview, Bill and Jim offer a reminder that by no means have the problems and issues that triggered the big 2008 crisis been permanently solved. Instead, they feel that the unusual and unprecedented monetary stimulus actions that were taken have at best simply managed to push a day of reckoning off into some unknown future date. Jim Sinclair thinks that date will come before the year 2025. Readers should watch the video to see why he believes this.

If you want more evidence that even those who were directly in the heat of battle in the 2008 crisis don't feel like all the problems are solved and have some similar concerns, please go back and read our articles (first one here, followup here) from earlier this year that feature Mike Silva. Mr. Silva was the Chief of Staff to Tim Geithner at the NY Fed. Near the end of his article describing how it was to deal directly with the 2008 crisis, Mr. Silva offered this comment:

"Once a financial mob panics, the only thing that will end that panic is for a central bank with a large billy club to show up and announce: "Break it up everyone. Go home. This crisis is over." Unfortunately, the Dodd Frank Act (DFA) has crippled the Fed's ability to play this role. I guarantee that curbing the Fed's emergency authority will come back to haunt us."

Mr. Silva offered this answer to his own question about whether we will see another major financial crisis:

"Absolutely. As long as we have a financial system, we will have financial crises. The only question is how often and how severe. Personally, I think a crisis is likely to happen sooner rather than later because of the large number of possible crisis triggers that are currently being squeezed." (see page 15)


Mr. Silva also stated in his article (see page 14) that the system did come very close to failure during that 2008 crisis and he was right in the middle of it at the NY Fed at that time:

"This was a terrifying moment. Central banks know how to support individual institutions, but no central bank had ever tried to support entire markets. And that was what we had to find a way to do."

My point here is, that while none of us can know if or when the next big crisis may strike, it is beyond foolish to assume it can never happen. It is also foolish to make no effort of any kind to understand these important issues and try to make some basic simple preparations in case another huge crisis does one day emerge. That's just common sense like buying auto insurance. You hope you never need it, but you would not think of not having it. In fact, it is deemed by society as so important for people to have it that it is illegal to drive without having it. Surely, the same prudence should be used in relation to the issues we cover here that might some day actually lead to some kind of major "reset" to a new financial and/or monetary system. 

If a major "reset" to the present system does come, we would hope for a gradual change under controlled conditions. But we can not rule out a disorderly reset resulting from a sudden, unexpected failure of the present system. We have documented numerous system risk warnings from officials at the BIS, IMF, and central banks here over many years. Over time some risks decrease, others increase. But risks never completely go away. The goal here is to monitor events, report what actually happens over time, and document various ideas on how to "reset" the system should that be necessary at some point in the future.

News Notes - Gold, Dollar, Facebook

There is quite a bit going on all of a sudden that touches on things we watch for here. This post is just a news note update to provide links to some of that news. We see that gold has broken out of a years long range bound pattern and has shot quickly over $1400 as of this post. We see that the US dollar has had some weakness alongside the move in gold. We need to keep an eye on these markets to see if this is the start of new major trends in gold and the dollar or just short term reaction to increased geo political tensions and recent Fed news.

The release of the Facebook white paper set off an intense storm of debate as to what impact their proposed Libra coin will or will not have on our present monetary system. The group of experts I hear from have been engaged in a similar discussion. They are as interested as everyone else to see what happens with this over time and how much traction it gains. I don't detect any consensus view yet other than all seemed to agree that there are a lot of hoops for the Libra coin to jump through to achieve its goals.

Below are some links to a variety of reaction articles out there and some that were part of the discussion from my panel of experts.

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Gold Breaks out over $1400   (see current price here - $1406 at time of this post)

CNBC on Impact of the Fed on Gold

Yahoo Finance

The Street.com

Gold Bulls React to the Sharp Move Up

Dollar Pulls Back


Facebook Reaction Articles

Bloomberg - France Reacts

Wired.com

Scoop.Co - New Zealand

CNBC - US Congress Reacts  (letter requesting a Congressional hearing)

AVC.com

Financial Times Series of Articles

NY Times 
(Professor Lawrence White responds to NYT article here)

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My added comments: Even though a white paper is now released, there are still many unknowns related to the Libra Coin Facebook intends to launch sometime in 2020. These are a few points I noted in the white paper:

- actual testing of whatever technology will be used for this project has not been done yet

- there is only a partial list of members for the Libra Foundation at this time who will govern the coin and manage it. The stated goal is to have 100 members.

- the system begins as a more centralized permissioned system with a goal to transition into a more decentralized "permissionless" system sometime in the future (5 years is noted as a goal)

- the regulatory status of the coin is still unknown in many jurisdictions

- the coin will be tied to a basket of major national currencies (not specified yet)

- the coin will have a floating exchange rate with the national curencies that is intended to be non volatile

- a reserve fund to fully back every coin is to be set up allowing Libra coin owners to convert to national fiat currencies at any time. Example, if you exchange 50 US dollars for 50 Libras, the fund will hold 50 US dollars in assets to fully back your Libras.

In some respects, this coin seems a little like a private sector version of the SDR used by the IMF since it will be tied to a basket of currencies and will have floating exchange rates with the national currencies daily. Of course it will not be a state sponsored coin or have any ties to the IMF. 

As we can see, this is still an early stage concept with a lot that has to happen before the coin can go live for public use. We will monitor this project over time to see how things go with it.