Gold & Silver: Up, Up, and (Possibly) Away

What happened Friday?

Housekeeping: Good evening. Much of the post is in small chapters for easier reading. You can skip around for the parts that interest you most.

Look for an early morning email of reading materials we looked at and recommend to you all. We are just catching up ourselves here. There are a couple at bottom as well.

1. What is Happening?

2. The Biggest Picture: The Crisis of Collateral

3. The Macro Picture: Divisions Grow

4. Friday’s Picture: What happened?

   1. To Start the Day Off:

   2. Jamie Dimon on Banking changes and effects on Markets:

   3. Did Gold and Silver shorts cover and what are the chances of follow through?

   4. Is this Normal Behavior?

   5. What are the chances of follow through Monday?

   6. New Highs Will Attract New Money:

   7. Why did Gold and Silver Rally Summarized?

5. Wars Speed Up All Risk Processes

   1. How does government react to them?

   2. How would that end?

6. Less Obvious Drivers:

   1. China Ditches Dollar Pricing

   2. China’s Precious Metals Vaults Continue to Drain

   3. Inflation Expectations Haven’t Died

   4. US Treasuries are now more volatile than Gold

7. Final Comment: Three is a Magic Number

What is happening?

The answer to that question has been available for months, if not years, at least in the biggest picture. The events of Friday however warrant some specific comments.

The Biggest Picture: The Crisis of Collateral

The world has woken up to uncomfortable realities. However it started, Covid 19 revealed the world’s supply-chains are overextended and fragile. The pandemic accelerated a de-globalization trend that had started (ever so gingerly) post the Great Financial Crisis. Post 2020, whole regions began pulling in the reins on natural resources and logistical partnerships, leading to an every-nation-for-itself movement.

The world’s mercantilist¹ reactions largely consisted of natural resource protectionism (to get paid more), onshoring of supply chains (to safeguard against unreliable partners), and increased holdings of both Gold and Silver Bullion (alternatives to using the dollar), have caused major shortages of physical collateral needed for economies and financialization of trade.

To put the collateral shortage part in perspective: the roots of global trade, natural resources, are not readily available for future deals to be put on anyone’s books². The foundational blocks of trade are being contested.

In revealing the fragility and inter dependency of each nation on the other, it also greatly raised BRICS nations’ awareness that their contribution to the global economic pie is (in their opinion) grossly undervalued.

These behaviors are bound to increase international tensions. As one Founder commented to us, When there is only one beer left in the fridge, people at the party start to get angry. People are definitely getting angry now.

Restriction of resources— especially when the restrictions are levied by ideological opposites— is the stuff of which wars are made. And we have been in an economic world war since February 2022 when Russia invaded Ukraine.

The Geo-Macro Picture: Divisions Grow

As a consequence and an integral part of the “Biggest Picture” above, Geopolitics is now a driver of all Macro economic policy in a world where no prior relationships can be taken for granted. Most wars, big and small, are fought over natural resources or ideological differences.