Founders: First Look

INELASTIC DEMAND

INELASTIC DEMAND

Deutsche Bank’s use of the phrase “inelastic demand” this week is exactly what we have been waiting for. In our view, it signals two things.

First, the floor is rising again (and rising faster), using our preferred framing.
Second, nations are increasingly printing money for one purpose only: to buy gold. More precisely, as we first told subscribers back in July 2024:, they are budgeting for ounces instead of budgeting in money terms.

This is what we outlined in They Don’t Want the Gold, They Need the Gold.

Transcript¹

It is also the second time Deutsche Bank has used the phrase “inelastic demand” in as many months.

What does this imply?

It implies that these governments are doing exactly what the United States did in 1971. They are printing more currency than they need in order to acquire twenty-first-century collateral.

It implies that they are quietly rebasing their currencies toward gold and stepping away from USD-centric liquidity.

It implies that Bank of America was correct when it projected that central banks would aggressively increase their gold holdings.

And finally, it implies that these nations may tie their economic growth to that gold, using it as HQLA and repo collateral to support domestic credit expansion, which means the collateral is unlikely to be sold once acquired.

In short: nations are printing whatever amount of domestic currency is required to purchase a predetermined number of ounces.

Central bank and sovereign gold accumulation is nowhere near finished. Logically, that translates into higher prices.

The following will be broken down for Premium this weekend