India Repatriates 100 Ton Gold

On the week of August 17th, spot gold prices broke through the significant milestone of $2,500 per ounce for the first time, having accumulated a 21% increase year-to-date.

This marks a new historical high.

Concurrently, the most active December gold futures contracts on COMEX, GC00 and GCZ24, closed at a historical peak of $2,537.80 on Friday, with an intraday gain of 2.16%.

This represents the 28th record settlement price high for gold futures year-to-date.

This indicates a sense of concern among traders, possibly due to geopolitical risks, U.S. inflation, high interest rates, or a combination of all the above... With the Federal Reserve's current interest rate at 5.5%, even a 50 basis point cut in September would have a limited effect on preventing a liquidity disaster in the market over the next few quarters.

However, the market's attitude towards gold is currently showing signs of divergence.

A senior market analyst at Trade Nation suggests that profit-taking could pull the gold price down to the $2,450 range.

Meanwhile, a Wall Street trader remarked, "If gold is making the front page of CNBC every day, my bullish sentiment on gold wouldn't be as strong."

Senior market analyst at FxPro, Alex Kuptsikevich, believes that the gold price could reach a high of $2,800-$2,900 per ounce.

His reasoning is based on the trend of gold from its bottom in October 2022 to September 2023.

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There is also a view in the market that the sustainability of the international gold price's rise may depend on the trajectory of geopolitical conflicts in the Middle East and the Russia-Ukraine situation.

As Keynes said, gold, as the last guardian and the reserve asset in times of emergency, has no better substitute.

Some analysts even set the next target price for gold at the round figure of $3,000.

Torsten Slok, Chief Economist at Apollo Global Management, attributes the rise in gold prices mainly to the gold-buying spree by central banks.

Over the past five years, comprehensive data from multiple central banks worldwide shows that nearly one out of every ten ounces of gold produced by the mining industry has been taken in by central banks.

Since 2004, the total amount of gold reserves held by central banks has increased by nearly 19% in weight, and its value has grown sevenfold, reaching $2.4 trillion.

This means that global central banks may have replaced up to $2.4 trillion worth of U.S. Treasury bonds and other broad dollar assets with gold reserves.

Analyst Mike Maharrey said on August 18th that over the past two and a half years, many countries have turned to "stateless currency" gold to break free from the shackles of the dollar.

Among them, the total purchase of central bank gold in 2022 was 1,136 tons.

This is the highest net purchase on record since 1950 (including since the dollar decoupled from gold in 1971).

Subsequently, the net purchase of gold by central banks worldwide in 2023 totaled 1,037 tons.

For the second consecutive year, it exceeded the 1,000-ton gold purchase threshold.

In the first half of 2024, central banks worldwide have net increased their gold holdings by 483 tons, 5% higher than the record of 460 tons in the first half of 2023.

For thousands of years, gold has become a universally recognized currency that spans oceans, territories, languages, and cultures.

Some analysts argue that if you are worried that the U.S. will pull the "dollar carpet" from under your feet, why not exit the dollar system first?

Gold, as a stateless currency, is the perfect reserve.

Compared to the risk of the dollar bubble created by the Fed's printing press, simply put, if I lend you $200, you are very likely not to pay it back.

This possibility represents the counterparty risk I bear.

However, when I exchange it for gold and store it in a safe place, there will be no other parties involved.

No one can default on gold.

Its value will never be zero.

Peter St. Onge, an economist at the American Heritage Foundation and a researcher at the Mises Institute, believes that before the Fed enters a new round of interest rate cuts and starts the dollar printing press, people need to prevent the collapse of the dollar.

Currently, the United States' deficit accounts for about 8% of GDP - this is unprecedented in peacetime.

And the total national debt of the United States has also broken through the $35 trillion mark this month, which is unprecedented in human history.

By looking at the chart below, it can be seen that since 1250 AD, the global reserve currency has always been unsustainable, and according to this pattern, the utopia of the green dollar will also face collapse sooner or later.

In fact, as early as more than forty years ago, the then Chairman of the Federal Reserve, Paul Volcker, warned: "An alarming fact is that the Federal Reserve system has exacerbated inflation rather than easing it.

We did very well with the gold standard and passive monetary authorities in the 19th century.

However, after that, the power of the Federal Reserve was to create money, and in the end, the power to create money is to move towards destruction."

As shown in the chart below, this is also the first time since the establishment of the Federal Reserve by Wall Street in 1913 that the Chairman of the Federal Reserve has admitted failure.

In contrast, under the gold standard, in 1913, the national debt of the United States accounted for 8% of GDP.

As of August 18, 2024, this ratio has risen to 122%.

The role of the Federal Reserve is indeed extraordinary.

It is a private, federally licensed counterfeiter, which means that the U.S. economy can take everything in the world by printing money.

This is also another reason why the international gold price has continued to rise over the past two and a half years, although the Fed has continued to raise interest rates.

Because commodities priced in dollars tend to fall in price during a strong dollar cycle, obviously, gold has broken away from the shackles of the dollar.

From this perspective, no matter how aggressive the Fed's interest rate hikes, it can never truly suppress inflation in the United States, nor can it save the huge national debt of the United States.

As shown in the following data comparison, although the data released by the U.S. Department of Labor on August 14 showed that the U.S. CPI rose by 2.9% year-on-year in July, falling below 3% for the first time in three years, the latest data shows that the price of hamburgers in U.S. supermarkets is still hovering at a historical high.

This is also one of the reasons why Harris, who is eager to seek votes, said two days ago that if she is elected successfully, she will issue the first federal ban on food price gouging in American history.

Although this seems to violate market rules, it is also a slap in the face of the United States' long-term claim of a free economy.

In response, Harris's opponent Trump exposed the facts of U.S. inflation and the decline in the actual purchasing power of the dollar on August 17th.

The data shows that over the past three years of the "Biden-Harris" period, the price of eggs in the United States has risen by 48%, butter by 31%, and biscuits by 27%.

Trump said that this is just the beginning, this is a disaster...

So, if Trump enters the White House, will the United States not experience inflation in the future?

Multi-party analysis, whether it is Harris or Trump, or others, no one can change the inflation in the United States, which is determined by the Fed's money printing mechanism and the special phenomenon of the U.S. debt economy model, which continuously exports debt.

And Trump's trade strategy will undoubtedly increase the cost of living for Americans, which will also directly raise inflation.

Although many people, including U.S.

Congressman Alex Mooney, have continuously proposed that the United States should return to the gold standard as soon as possible and re-peg the dollar to gold to avoid the continuous harassment of high inflation to the American people.

However, due to the greed for printing and borrowing, in the foreseeable future, those U.S. economic operators who are closest to the dollar printing press are almost impossible to restore the gold standard.

It should be noted that during Trump's four years in the White House, the national debt of the United States increased by $6.7 trillion, reaching a historical high of $26.9 trillion.

And by the three and a half years of the Biden-Harris period, it further increased by $8.1 trillion, setting a new historical high.

This shows that no matter who it is, the operation of the U.S. economy by printing and borrowing is only increasing.

Based on this, combined with the analysis of Nomura analysts and U.S. financial analysis institutions such as ZeroHedge, no matter who enters the White House, the United States may not rule out the possibility of refusing to repay its debts when facing huge interest and fiscal pressure in the future.

This is also one of the potential outcomes of the United States' years of using the dollar and debt to devour the world.

However, it will further push up the price of gold.

Based on concerns about the U.S. fiscal situation, central banks of various countries have been continuously diversifying their purchases of U.S. debt and significantly replacing gold in recent years.

This has also driven some central banks of countries to accelerate the process of transporting gold back from overseas vaults such as the Federal Reserve and keeping it themselves.

For example, according to the second quarter report of the Indian Times, the Reserve Bank of India has transported 100 tons of gold from the Bank of England's vault in the UK back to India.

This is the first time since 1991 that such a large amount of precious metals has been added to India's domestic vaults.

The Indian media said that this marks a major shift in India's gold storage.

The transfer is due to logistics and storage diversification reasons.

It is expected that in the next few months, a similar amount of gold may be transported from overseas vaults such as the UK and the United States to India again.

Data from the World Gold Council shows that the Indian central bank increased by at least about 37.2 tons in the first half of this year, bringing India's gold reserves to 840.8 tons, accounting for about 9.6% of its foreign exchange reserves.

Despite the continuous rise in gold prices, India, which is good at purchasing at low prices, is one of the world's largest gold buyers.

This surprised the market.

This seems to be India's concern about the dollar bubble and the potential major events in the world economy, or even a concern that the United States may refuse to repay its debts to India.

According to the latest international capital flow report released by the U.S. Department of the Treasury on August 15th, as of June this year, India's holdings of U.S. Treasury bonds were $241.9 billion.It is worth mentioning that, according to a report in India's Economic Times last week, India and Russia are exploring the establishment of a benchmark exchange rate between the Indian Rupee and the Russian Ruble to facilitate direct trade using these two currencies.

Indian media reported that India and Russia hope to establish a new mechanism that bypasses the US dollar.

An Indian banking official stated that the "trading market and exchange rate between the Rupee and Ruble... as well as a financial settlement system that can replace SWIFT" are particularly important.

Coupled with India's accelerated increase in gold reserves and the repatriation of gold held overseas, this indicates that after India announced in 2022 that it had already used non-US dollar currencies to purchase Russian oil, India is once again challenging the US Federal Reserve's monetary system and the US dollar.