Major Tectonic Geopolitical Shifts
April 5, 2024 turned out to be a major event day. The US non-farm payroll report and unemployment numbers for March, 2024 were released. It was expected that high employment numbers and lower unemployment would give the Federal Reserve more time before cutting interest rates, and therefore cause a pull back on the equites and gold.
The numbers exceeded the forecasts: 303,000 jobs created (well above the estimate of 200,000) and the unemployment numbers dropped from 3.9% to 3.8% (in line with estimate). It should be noted the new jobs added were apparently low paying unskilled jobs from the millions of migrants legal and illegal being let into the USA.
Well, the equites responded with modest gains, and most notably gold surged to all-time new highs:
Gold finished the day at $2329.52 (up $40.09 1.75%). Silver finished the day at $27.49 (up $0.548 2.03%).
What is going on with gold and silver? Why the disconnect with US economic data?
Henry Johnston released a brilliant article that explains what is going on (link to the article below).
In summary and with additional commentary, central bank demand for gold (not all central banks) and high demand from the Chinese private sector have offset the ability of Western paper gold markets (COMEX and OTC London Market) to keep the gold price in check. Typically with higher interest rates, Western institutions ditch gold for higher yielding assets such as bonds, equities, market funds, and thus pushing down the gold price.
The Western paper and derivative commodity markets have lost control over the price of precious metals. Eastern demand for the metals has overridden the Western paper markets.
In relation to the USA, China, Russia, India etc., have been converting US dollars into gold (and not all central bank gold purchases are reported), thus creating a "hidden de-dollarization".
The weaponization of the US dollar through sanctions on any country, organization, and individual that goes against the dictates of the US establishment has been a primary driver behind ditching the US dollar for gold. The US and EU's seizure of $300 billion of Russian central bank foreign holdings has only accelerated the process.
The Ukraine Proxy War is an extension of the financial weaponization, but in the sense of weaponization of NATO as an aggressive military alliance for US hegemony and the Unipolar Rules-based World Order. The fact that Russia has won the proxy war and the only questions that remain are how much land will Russia claim, when the Zelensky Regime will be toppled and replaced, and will NATO risk nuclear war to try to avoid losing to Russia? Just like the US dollar as the reserved currency days are numbered, NATO days are numbered (especially since the US is unable to afford the alliance... and alliance is premised on delusional fearmongering).
In addition, the unsustainable US debt now at $34.7 trillion and mounting debt service payments near or above $1 trillion a year, is adding to the movement from the US dollar to gold.
The US hegemony is centered on the US reserved currency, which is under major threat.
There is no easy way out this for the US establishment. A World War is a definite possibility, but if the US loses or it ends in a stalemate, then the situation will be worse for US.
In terms of policy, Johnston contends that the best US policy action (all bad choices) is to lower interest rates (thus reduce the debt servicing payments), while endure higher inflation. Yet, this approach will only push gold higher....
Henry Johnston, “A great wealth transfer is underway: How the West lost control of the gold market”: