A number of global factors are converging that may cause gold prices to rise. Let’s take a look at some of the key factors at play.
Banks are Recognizing the Value in Gold
In their most recently released recommendations, The Bank for International Settlements (BIS), known as, “the bank of all central banks”, classified gold as a 0% risk asset. In making this statement, the BIS officially recognizes gold as money, if not in policy, then by intent. It’s a real change of tune from when the BIS had a vested interest in denying the true value of gold in favor of artificial fiat currencies like the US dollar.
And it’s not just the “bank of banks” who are showing signs that gold is on the rise. Central banks around the world are ridding themselves of US dollars to invest in gold. Countries like Iran, Venezuela, and especially Russia are buying massive amounts of gold, partly to lessen the effects of US sanctions, partly to dethrone the US dollar, and partly to strengthen the value of their own currency. These banking signs all point to favorable support in gold prices.
China’s Gold-for-Oil Trade
In response to the escalating US-China trade war, China has decided to start phasing out their reliance on the US dollar. They are doing this by using gold to buy oil which will, in turn, allow them to bypass the US Petrodollar. Not only might this rewrite the rules of global trade, particularly among the US’s mideast allies, it constitutes yet another huge step toward gold re-monetization.
Trump Supports Gold and May Take Steps to Reintroduce Gold Into the Monetary System
Trump has always been a big fan of gold and a not-so-big fan of the Federal Reserve. His policies may also be showing that he’s willing to walk the walk. Among Trump’s economic advisors, such as Judy Shelton who advocates backing US Treasuries with gold, and Fed allies, there are a number of pro-gold advocates in the crowd.
The Fed’s monetary manipulations have put them at an awkward position–not having enough room to counter another recession while being saddled with a massive national debt. Contrary to their initial program of clearing their balance sheet it appears that the Fed may be, once again, lowering interest rates. Keeping interest rates artificially low which tends to be positive for gold.
Gold Mining Companies are Combining and Gaining Strength
2019 is set to be a record year for mergers and acquisitions in the gold mining industry. There hasn’t been any huge gold mine discoveries in recent years, and gold discovery operations may be financially prohibitive due to the decline of gold prices. So companies are combining.
Right now physical gold as well as gold stocks are still at value prices, so now big companies are pouring Billions of dollars to scoop up these gold miners, positioning themselves to reap potential benefits.
These are just a few of the factors at play. Other factors such as gold-backed cryptocurrencies on the rise, concerns over the Democrats’ embrace of a more socialistic stance or MMT, and the trend toward “de-dollarization” should that ever take place.
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