> Neither gold nor oil revolve around stable values over similar timescales so why should their ratio?
Well both are real commodity goods, as opposed to fiat. Thus it would make sense that their ratios would stay nearly constant even as fiat fluctuates around them.
Cool article! I'm reminded of smart people who respond to the gold bulls by saying: "You don't actually want to live in a world where your OZ of gold is worth $10,000."
I’ve been mulling some of the same questions if the gold price tripled or rocketed higher. What are the societal consequences?
I do believe there is gold price manipulation - cannot remember who covered this. Simon Hunt or Simon Mikhailovich on a podcast. The court case where the Head of JPM Commodities desk was convicted for manipulating the gold price - they use massive paper derivative positions (JPM dealing on behalf of the Bank of International Settlements) to keep the price of gold stable. The issue is when counterparties to gold derivatives (loss of trust sets in) want physical delivery of gold - and gold is becoming scarce in London and Comex warehouses - the derivative game will unravel.
Absolutely. The JPM case was about spoofing orders that moved the price on an intraday basis. If that has a long term effect on the overall price level it is probably through participants mistrusting any quoted price when they suspect people are playing games which is relatively minor compared to what is probably happening in the paper market or from sovereign actors, both of which could move the price level more persistently.
1. I read the Satoshi whitepaper in 2012 and decided bitcoin wasn't suitable for me. I have no regrets. I think it has mostly been used as a casino and for money laundering and I just don't want to be a part of that. I say this to give you my bias up front.
Bitcoin is untested. It has historically tended to correlate with the Nasdaq and with global liquidity. These are procyclical phenomena. A societal crisis is anticyclical. I still think commodities and precious metals have a stronger track record there. Ultimately, I have no idea. Time will tell.
2. Russell Napier mentioned the book "Travels with my Aunt" during a podcast some time back which gives some insight into this question. Highly worth a read. But, the gist is there will likely be capital controls because when governments panic about their money, capital controls are among the first things they deploy. Could that affect gold? Could we get another Executive Order 6102? Time will tell. One thing to note, there is a popular gold bullion ETF who holds all of their gold in a vault that used to be owned by the Candian central bank. Canada's central bank officially owns no gold. If there are moves toward a new gold standard, how strong will the temptation be for Canada to look upon the gold in their own vault with something resembling envy? What would a Trudeau-esque character likely do?
I feel like the above are nonanswers. LIke I said in the article, I only have questions ;)
Nov 17, 2023·edited Nov 17, 2023Liked by Ken Smith
It would be fantastic to make a killing on my gold holdings but I may not like what I see when I leave my front door. Thanks for writing this! Do you have any thoughts on the gold/copper ratio? Gold is an indicator for the financial system and copper is an indication on the real world economy?
I don't look at that ratio often but something about it makes sense. I guess it is a way to connect the monetary macroeconomic weather with that of industry. Should I pay closer attention to it?
> Neither gold nor oil revolve around stable values over similar timescales so why should their ratio?
Well both are real commodity goods, as opposed to fiat. Thus it would make sense that their ratios would stay nearly constant even as fiat fluctuates around them.
Right, but is there a reason why their ratio should be robust through time?
It makes sense for it to be more robust over time than either is to the fiat dollar.
Cool article! I'm reminded of smart people who respond to the gold bulls by saying: "You don't actually want to live in a world where your OZ of gold is worth $10,000."
It could be scary.
I’ve been mulling some of the same questions if the gold price tripled or rocketed higher. What are the societal consequences?
I do believe there is gold price manipulation - cannot remember who covered this. Simon Hunt or Simon Mikhailovich on a podcast. The court case where the Head of JPM Commodities desk was convicted for manipulating the gold price - they use massive paper derivative positions (JPM dealing on behalf of the Bank of International Settlements) to keep the price of gold stable. The issue is when counterparties to gold derivatives (loss of trust sets in) want physical delivery of gold - and gold is becoming scarce in London and Comex warehouses - the derivative game will unravel.
All the questions are worth raising.
Absolutely. The JPM case was about spoofing orders that moved the price on an intraday basis. If that has a long term effect on the overall price level it is probably through participants mistrusting any quoted price when they suspect people are playing games which is relatively minor compared to what is probably happening in the paper market or from sovereign actors, both of which could move the price level more persistently.
Great article. Not sure if we get out of this fiat mess without a good ole societal crisis. I’m curious about your opinion on two things:
1. Where do you see Bitcoin’s place in all this mess? Does de-globalization and a manipulated gold market thrust Bitcoin into global reserve status?
2. In a hyper inflationary environment, how difficult would it be to sell your gold bullion? How would I find a market and would there be any buyers?
Love this stuff, keep it coming!
Thank you, Michael.
1. I read the Satoshi whitepaper in 2012 and decided bitcoin wasn't suitable for me. I have no regrets. I think it has mostly been used as a casino and for money laundering and I just don't want to be a part of that. I say this to give you my bias up front.
Bitcoin is untested. It has historically tended to correlate with the Nasdaq and with global liquidity. These are procyclical phenomena. A societal crisis is anticyclical. I still think commodities and precious metals have a stronger track record there. Ultimately, I have no idea. Time will tell.
2. Russell Napier mentioned the book "Travels with my Aunt" during a podcast some time back which gives some insight into this question. Highly worth a read. But, the gist is there will likely be capital controls because when governments panic about their money, capital controls are among the first things they deploy. Could that affect gold? Could we get another Executive Order 6102? Time will tell. One thing to note, there is a popular gold bullion ETF who holds all of their gold in a vault that used to be owned by the Candian central bank. Canada's central bank officially owns no gold. If there are moves toward a new gold standard, how strong will the temptation be for Canada to look upon the gold in their own vault with something resembling envy? What would a Trudeau-esque character likely do?
I feel like the above are nonanswers. LIke I said in the article, I only have questions ;)
I love it, thank you for your insight! I’ll check out Napier’s book. I think we all know what Trudeau-esque character would do in that event
It would be fantastic to make a killing on my gold holdings but I may not like what I see when I leave my front door. Thanks for writing this! Do you have any thoughts on the gold/copper ratio? Gold is an indicator for the financial system and copper is an indication on the real world economy?
I don't look at that ratio often but something about it makes sense. I guess it is a way to connect the monetary macroeconomic weather with that of industry. Should I pay closer attention to it?