After falling in the past three trading sessions, the yellow metal surged over $8 per troy ounce to $1,335. “The trade war is going on and it is getting worse, so that might be the reason that people are selling dollars and buying gold,” said Yuichi Ikemizu at ICBC Standard Bank in Tokyo, as quoted by Reuters.
China has introduced additional tariffs of up to 25 percent on 128 US products including frozen pork, wine and certain fruits and nuts, in response to Washington’s duties on imports of aluminum and steel.
The index, which compares the dollar against six other major currencies, slid 0.3 percent. Gold prices slid 1.7 percent last week in its biggest drop since early December, but the precious metal has surged 1.7 percent in January-March, a third quarterly gain in a row.
Analysts say gold may have hit rock bottom, and investors are going to be lured with the current situation in the market. “Even the most steel-nerved trader will be tempted to go in now,” Ikemizu said.
Last week, analyst Larry McDonald, publisher of the Bear Traps Report, predicted a “perfect storm” of rising gold prices is coming. The turbulence around the US political situation and a possible trade war with China can send gold prices higher, he said.
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US gold of low purity & that’s why audit of reserves will never be allowed
The US government claims to hold 8133.5 tonnes of physical gold in its official reserves. Fifty-eight percent is reportedly held in Fort Knox, Kentucky, 20 percent at West Point in New York State, 16 percent is said to be at the US Mint in Denver, Colorado and five percent is held at the NY Fed.
“The entire story around the US gold reserves is opaque and secretive. There has never been a full independent audit of the US gold reserves, and the custodians of the gold, the US Mint and the Federal Reserve of New York will not let anybody into the vaults to view the gold or to count it,”Manly told RT.
However, despite the numerous accusations against the US Treasury that it has much less gold than it claims, there is another reason, according to the expert – US gold is of bad quality.
“Even the details that have been provided on the supposed US gold holdings show that a majority of the gold bars are low purity and in weights that don’t conform to the industry standard ‘Good Delivery” gold bar specifications,” says Manly.
“So even if the US has the amount of gold it claims to have, most of this gold would not be acceptable for trading on the international market, and could only be used in swap transactions with other central banks that wished to swap Good Delivery gold bars for low purity and unusual weight US held gold bars,” he added.
If the claims about lower-than-claimed US gold reserves are true, it would re-shuffle the entire global economy, Manly predicts. Though it wouldn’t hit the US dollar directly, or result in an immediate shift away from using the US dollar for international trade, the consequences will be sizable.
“Firstly, proof of lower US gold reserves than claimed would add pressure for a full independent audit of all US gold reserves. It would also put the spotlight on the gold reserves of other major trading blocs such as the eurozone and China and Russia, and open up a debate as to what is the role of gold in the international monetary system. Which is something the US government constantly tries to avoid,” the expert says.
“It would also then refocus attention on international holders of US dollars pre-August 1971 when Nixon closed the gold window because after all those outstanding dollars held at the time by foreign central banks are still technically convertible into gold at the official gold price of the time,” he added.
Moreover, if the US Treasury gold holdings are falsified, it would put additional pressure on other central banks around the world, which have gold in the United States.
A proper check of the US gold reserves should include weighing all gold bars, checking assays, and publishing a full weight list in the public domain; the audit would have to be conducted by an entirely independent auditor. It will never be allowed by Washington, Manly says.
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‘Gold price will explode & dollar get wiped out’ – warns investor Peter Schiff
“I predicted a lot more than just the stock market going down back then. I predicted the financial crisis, but more importantly, I predicted what the government would do as a result of the financial crisis and what the consequences of that would be because that’s where we’re headed. The real crash I wrote about in my most recent book is still coming,” Schiff said in an article posted by Greg Hunter’s USAWatchdog.com and quoted by ZeroHedge.
According to Schiff, the US Fed has inflated a gigantic bubble, which is impossible to pop, but when it bursts, the consequences would be very painful for the economy and much bigger than the 2008 meltdown.
“I think this bubble is too big to pop. I think it’s the mother of all bubbles, and when it bursts, there is not a bigger one that the Fed is going to be able to inflate to mask these problems, meaning we can’t kick the can down the road anymore. This time, the crisis is going to hit everyone in the wallet,” he said.
He compared the $20 trillion US debt to a camel loaded with straws.
“How many straws can you put on a camel’s back? You don’t know until you put that final straw that’s one too many and you break his back. So, can we go to $25 trillion in debt? Maybe. At some point, we are going to break the back of the camel with all this debt. Then we are going to find out how much debt we can pile on, and it’s not going to be pretty,” Schiff said.
“Everybody is going to lose. Everybody is going to get wiped out who has been partying in the stock market, the bond market and the real estate market. The dollar is going to tank, and purchasing power is going to get wiped out.”
Schiff says the current financial system would also fail to artificially curb the prices of precious metals.
“They can’t keep doing it, and it will end. It’s just like how much debt can we take on. It’s not an unlimited amount. We will know when we get there. How long can they keep the price of gold suppressed? We will know when we get there. At some point, the price is going to explode because there is real physical buying, and all that paper selling can’t camouflage that,” said the money manager.
According to Schiff, gold is the real alternative to fiat money, and people are starting to doubt they can really trust central banks.
“People don’t trust fiat currencies…More and more people are looking for alternatives, and the real alternative is gold. When they embrace it, it’s going to overwhelm the central banks’ ability to suppress the price. In the meantime, enjoy the gift that they are giving,” he said.