4 ms·

Ah, gold. Some things in the gold market worth being aware of: 1) China opened up a new gold exchange [0, 1] recently [2] and started a push to get more active

by roenxi 2y ago

Ah, gold. Some things in the gold market worth being aware of: 1) China opened up a new gold exchange [0, 1] recently [2] and started a push to get more active in the market. 2) Central banks have been net buyers of gold since around 2007. 3) As part of the Ukraine war effort the US confiscated a bunch of money off Russia. It isn't entirely clear [2] what impact that will have on gold but it is conceivable that the risk of holding US dollars is high enough to make something interesting happen. There is a tipping point here somewhere and the US has been looking for it. The basic trend in the gold market is it is in flux and there is a definite question of how the BRICS are interacting with it. I'm interpreting the situation as a revolt against US and British influence over the gold market as the productive capital moves to Asia. [0] https://en.sge.com.cn/eng_about_Overview https://en.sge.com.cn/eng_about_Overview [1] https://www.gold.org/gold-market-structure/global-gold-market https://www.gold.org/gold-market-structure/global-gold-marke... [2] Gold is a sedate commodity.

jazzyjackson 2y ago
My favorite fact I learned just the other day is that gold held by the federal reserve is "on the books" at a value of $42.22 per troy ounce and would represent a sizable sum if valued at market rates. But since we'll never sell it I guess it doesn't matter much what we value it at. https://www.federalreserve.gov/data/intlsumm/current.htm https://www.federalreserve.gov/data/intlsumm/current.htm
- roenxi 2y ago
  It'd be a hilarious (though unlikely) situation if it turns out they lied about how much gold they had, but do have the value of gold that was claimed in the books.
  - wmf 2y ago
    FTX bankruptcy accounting.
  - rapsey 2y ago
    Not sure it is that unlikely. They refuse to do an audit of the gold and have not done one in decades.
    - snakeyjake 2y ago
      [flagged]
      - throwbigdata 2y ago
        What audits are done yearly?
      - riehwvfbk 2y ago
        Mental image: a CNN reporter standing in an empty vault spouting off on how the absence of gold is misinformation and something-something alt-right.
    - deleted 2y ago
      [deleted]
    - axpy906 2y ago
      Fort Knox was not shown publicly since 1974
  - TacticalCoder 2y ago
    [dead]
- m00dy 2y ago
  It matters a lot, it can make balance sheet look a bit better and therefore can help to reduce interest on treasury bills. I think and I'm almost sure Trump is not okay with the current rates.
- guenthert 2y ago
  > that gold held by the federal reserve is "on the books" at a value of $42.22 per troy ounce Bizarre. https://www.youtube.com/watch?v=dYiR0Vh8Gjk https://www.youtube.com/watch?v=dYiR0Vh8Gjk explores that a bit. And a bit of history: https://www.bullionstar.com/blogs/koos-jansen/can-pretend-forever-gold-worth-42-22/ https://www.bullionstar.com/blogs/koos-jansen/can-pretend-fo...
- bpoyner 2y ago
  Huh, interesting. They claim to have $11B of gold but at market rates it's closer to $450B.
- jt2190 2y ago
  > Zachary Griffiths, head of investment grade and macro strategy at CreditSights Inc., said revaluing gold stocks “might be a viable consideration if we [the United States] had a debt problem, but we really have a deficit problem. It’s kind of crazy to say $800 to $900 billion doesn’t do a whole lot for us over the longer run, but it’s pretty much a fact.” > Yawning fiscal deficits, currently nearly 7% of US gross domestic product, are one of the reasons investors flock to bullion to seek safety. That has helped drive gold prices to repeated record highs since last year. Total US federal debt held by the public now stands at nearly $29 trillion. > “To use ‘a trick’ to try to plug at least the near-term deficit, I think the risk associated with that is far greater than any near-term benefit,” Griffiths said. “It seems desperate and shows an unwillingness to address the source of the problem, which is our outlays and revenues are way out of whack.” [1] [1] “Wall Street Talk of Revaluing US Gold Is Drawing Attention — and Skepticism” by Jack Ryan, Yvonne Yue Li and Saleha Mohsin, February 13, 2025 (Bloomberg) https://finance.yahoo.com/news/wall-street-talk-revaluing-us-180943811.html https://finance.yahoo.com/news/wall-street-talk-revaluing-us...
donavanm 2y ago
re: #3 a lot of the recent reporting (usually citing 'world gold council') points out that most of the large central bank purchasers are some combination of russian commodity purchasers, intertwined with the russian economy, or might otherwise want insulation from relying on USD for international exchange. Because of that I'd also clarify/quibble on the 'confiscation' aspect. I expect the larger motivation is freezing russian entities out of SWIFT and dollar denominated banks. That interrupts foreign transactions even more than losing access to reserve capital. PS: I dont think anyone's moved beyond freezing access to existing russian assets, eg disputing rightful ownership, yet.
- fuoqi 2y ago
  >I dont think anyone's moved beyond freezing access to existing russian assets, eg disputing rightful ownership, yet. They "just" appropriate "profits" from those assets, which effectively means inflationary erasure of purchasing power on the scale of several billions per year, and use assets to back Ukrainian loans with everyone's tacit understanding of future prospects of those loans.
- roenxi 2y ago
  > ...are some combination of russian commodity purchasers, intertwined with the russian economy, or might otherwise want insulation from relying on USD for international exchange. I'm going to twiddle my thumbs for another year or two before even looking up data because the Ukraine war will be obscuring the trends - but that phrase could be describing all of Asia and most of Europe as far as I know. A lot of people trade with Russia. "want insulation from relying on USD for international exchange" could even include US citizens. > I expect the larger motivation... Do those aspects affect gold though; it seems like it'd maybe affect the crypto markets and international diplomacy. Scenarios where gold is used for everyday transactions still seem a bit far fetched to me. It seems more likely that people would trade in local currencies. Maybe, I suppose. Reserve confiscation is something that the central banks have to worry about more directly and they tend to be gold holders.
  - fuoqi 2y ago
    >It seems more likely that people would trade in local currencies Use of local currencies is certainly on the rise, but the problem is lack of bilateral financial trust caused by various factors, including capital controls. There is the recent example of Russian companies being unable to get rupee-denominated profits out of India, they had either to buy something from India or invest money there. China is also quite strict with its onshore RNB flows which is multiplied by risks of secondary US sanctions. Honestly, I am really surprised that BRICS+ countries haven't yet developed a gold-based settlement system centered around central bank reserves. My main guess: such system would work fine with a more or less balanced trade, but many countries intentionally pursue the export-oriented model, which would work poorly with such system.
JumpCrisscross 2y ago
> I'm interpreting the situation as a revolt against US and British influence over the gold market as the productive capital moves to Asia This doesn't make sense. If you think gold is the new dollar, this is a story about gold being flown into America. Mostly from Britain, because of historic financial ties, but also from elsewhere.
- roenxi 2y ago
  I was sneaking a generic comment in with context that has little to do with the article. This article isn't particularly interesting on its own. Someone(s) wealthy thinks their physical gold is better off in the US than the UK. Cool. I wouldn't trust the UK with my gold either but it isn't clear what these wealthy people are thinking. There are some rumours that this is happening because of tariffs. That seems a bit weird; if the gold is happily stored in London then a tariff won't affect it - it'll still be in London. But whatever.
  - JumpCrisscross 2y ago
    > if the gold is happily stored in London then a tariff won't affect it - it'll still be in London People aren't taking gold out of London because they're scared about it being in the UK. They're taking it out because they can sell it for more in America. There is a price gap between physical gold in America and claims on gold outside it; that's the article's point. America is a net importer of gold. Our top source of gold is Canada. If we put a 25% tariff on gold tomorrow, its cost would go up. Someone who brought in gold today would be able to sell it for more tomorrow. We know that today, so the price starts rising in anticipation of tariffs. Put another way, if you can get gold into America on the eve of the tarriffs' rollouts you can capture some of the value of that tariff yourself.
    - roenxi 2y ago
      But as far as I'm aware there are no gold tariffs, there has been no announcement of gold tariffs, any new general tariffs might have an exception for gold and the tariffs we've seen to date aren't even that big - gold already has years where the price goes up 25%. There also isn't a reason for Trump to put a tariff on gold; that won't help the US - there'll be a couple of gold bugs who can't afford as much gold and not much else changing. It could be preparation for a tariff. But it might not be.
ucla_rob 2y ago
The basic trend in the gold market is it is in flux end.
yieldcrv 2y ago
Gold permabulls crack me up Missing out on gains in every macroeconomic environment, QE, ZIRP, NIRP, rate hikes, deflation to finally get a little rally that rewards their multiple decades of dollar cost averaging all while apparently central banks have been hoarding it endlessly for twenty years and you’d think that would be the bull case to the stratosphere but nope. anyway enjoy the all time highs. just needed threat of tariffs all along
- TacticalCoder 2y ago
  > Missing out on gains in every macroeconomic environment, QE, ZIRP, NIRP, rate hikes, deflation People who had 10% of their wealth in gold before 1929 only lost at most 30% of their wealth, something insane like that (losing 30% when nearly everybody loses all their savings is quite a feat). I don't know if goldbugs and gold permabulls are literally only stockpiling gold coins and gold bars. Actually I wouldn't be surprised if most gold permabulls only had 10% of their wealth in gold. And if anything I've noticed when talking to people that most who like gold actually consider the USD and EUR to be toilet paper: it's not so much that they're goldbugs, but they're "anything that's not toilet paper bugs". So from what I've seen those who bought gold overlap a lot with those who bought digital gold (aka Bitcoin). I'm not sure who missed on gains here.
  - bitmasher9 2y ago
    Exactly, gold reduces risk in ways no other asset can. It’s a preservation of wealth tool. One thing we know about low risk investments —- they have low returns.

by roenxi 2y ago

jazzyjackson 2y ago

My favorite fact I learned just the other day is that gold held by the federal reserve is "on the books" at a value of $42.22 per troy ounce and would represent a sizable sum if valued at market rates. But since we'll never sell it I guess it doesn't matter much what we value it at. https://www.federalreserve.gov/data/intlsumm/current.htm https://www.federalreserve.gov/data/intlsumm/current.htm

roenxi 2y ago
It'd be a hilarious (though unlikely) situation if it turns out they lied about how much gold they had, but do have the value of gold that was claimed in the books.
- wmf 2y ago
  FTX bankruptcy accounting.
- rapsey 2y ago
  Not sure it is that unlikely. They refuse to do an audit of the gold and have not done one in decades.
  - snakeyjake 2y ago
    [flagged]
    - throwbigdata 2y ago
      What audits are done yearly?
    - riehwvfbk 2y ago
      Mental image: a CNN reporter standing in an empty vault spouting off on how the absence of gold is misinformation and something-something alt-right.
  - deleted 2y ago
    [deleted]
  - axpy906 2y ago
    Fort Knox was not shown publicly since 1974
- TacticalCoder 2y ago
  [dead]
m00dy 2y ago
It matters a lot, it can make balance sheet look a bit better and therefore can help to reduce interest on treasury bills. I think and I'm almost sure Trump is not okay with the current rates.
guenthert 2y ago
> that gold held by the federal reserve is "on the books" at a value of $42.22 per troy ounce Bizarre. https://www.youtube.com/watch?v=dYiR0Vh8Gjk https://www.youtube.com/watch?v=dYiR0Vh8Gjk explores that a bit. And a bit of history: https://www.bullionstar.com/blogs/koos-jansen/can-pretend-forever-gold-worth-42-22/ https://www.bullionstar.com/blogs/koos-jansen/can-pretend-fo...
bpoyner 2y ago
Huh, interesting. They claim to have $11B of gold but at market rates it's closer to $450B.
jt2190 2y ago
> Zachary Griffiths, head of investment grade and macro strategy at CreditSights Inc., said revaluing gold stocks “might be a viable consideration if we [the United States] had a debt problem, but we really have a deficit problem. It’s kind of crazy to say $800 to $900 billion doesn’t do a whole lot for us over the longer run, but it’s pretty much a fact.” > Yawning fiscal deficits, currently nearly 7% of US gross domestic product, are one of the reasons investors flock to bullion to seek safety. That has helped drive gold prices to repeated record highs since last year. Total US federal debt held by the public now stands at nearly $29 trillion. > “To use ‘a trick’ to try to plug at least the near-term deficit, I think the risk associated with that is far greater than any near-term benefit,” Griffiths said. “It seems desperate and shows an unwillingness to address the source of the problem, which is our outlays and revenues are way out of whack.” [1] [1] “Wall Street Talk of Revaluing US Gold Is Drawing Attention — and Skepticism” by Jack Ryan, Yvonne Yue Li and Saleha Mohsin, February 13, 2025 (Bloomberg) https://finance.yahoo.com/news/wall-street-talk-revaluing-us-180943811.html https://finance.yahoo.com/news/wall-street-talk-revaluing-us...

donavanm 2y ago

re: #3 a lot of the recent reporting (usually citing 'world gold council') points out that most of the large central bank purchasers are some combination of russian commodity purchasers, intertwined with the russian economy, or might otherwise want insulation from relying on USD for international exchange. Because of that I'd also clarify/quibble on the 'confiscation' aspect. I expect the larger motivation is freezing russian entities out of SWIFT and dollar denominated banks. That interrupts foreign transactions even more than losing access to reserve capital. PS: I dont think anyone's moved beyond freezing access to existing russian assets, eg disputing rightful ownership, yet.

fuoqi 2y ago
>I dont think anyone's moved beyond freezing access to existing russian assets, eg disputing rightful ownership, yet. They "just" appropriate "profits" from those assets, which effectively means inflationary erasure of purchasing power on the scale of several billions per year, and use assets to back Ukrainian loans with everyone's tacit understanding of future prospects of those loans.
roenxi 2y ago
> ...are some combination of russian commodity purchasers, intertwined with the russian economy, or might otherwise want insulation from relying on USD for international exchange. I'm going to twiddle my thumbs for another year or two before even looking up data because the Ukraine war will be obscuring the trends - but that phrase could be describing all of Asia and most of Europe as far as I know. A lot of people trade with Russia. "want insulation from relying on USD for international exchange" could even include US citizens. > I expect the larger motivation... Do those aspects affect gold though; it seems like it'd maybe affect the crypto markets and international diplomacy. Scenarios where gold is used for everyday transactions still seem a bit far fetched to me. It seems more likely that people would trade in local currencies. Maybe, I suppose. Reserve confiscation is something that the central banks have to worry about more directly and they tend to be gold holders.
- fuoqi 2y ago
  >It seems more likely that people would trade in local currencies Use of local currencies is certainly on the rise, but the problem is lack of bilateral financial trust caused by various factors, including capital controls. There is the recent example of Russian companies being unable to get rupee-denominated profits out of India, they had either to buy something from India or invest money there. China is also quite strict with its onshore RNB flows which is multiplied by risks of secondary US sanctions. Honestly, I am really surprised that BRICS+ countries haven't yet developed a gold-based settlement system centered around central bank reserves. My main guess: such system would work fine with a more or less balanced trade, but many countries intentionally pursue the export-oriented model, which would work poorly with such system.

JumpCrisscross 2y ago

> I'm interpreting the situation as a revolt against US and British influence over the gold market as the productive capital moves to Asia This doesn't make sense. If you think gold is the new dollar, this is a story about gold being flown into America. Mostly from Britain, because of historic financial ties, but also from elsewhere.

roenxi 2y ago
I was sneaking a generic comment in with context that has little to do with the article. This article isn't particularly interesting on its own. Someone(s) wealthy thinks their physical gold is better off in the US than the UK. Cool. I wouldn't trust the UK with my gold either but it isn't clear what these wealthy people are thinking. There are some rumours that this is happening because of tariffs. That seems a bit weird; if the gold is happily stored in London then a tariff won't affect it - it'll still be in London. But whatever.
- JumpCrisscross 2y ago
  > if the gold is happily stored in London then a tariff won't affect it - it'll still be in London People aren't taking gold out of London because they're scared about it being in the UK. They're taking it out because they can sell it for more in America. There is a price gap between physical gold in America and claims on gold outside it; that's the article's point. America is a net importer of gold. Our top source of gold is Canada. If we put a 25% tariff on gold tomorrow, its cost would go up. Someone who brought in gold today would be able to sell it for more tomorrow. We know that today, so the price starts rising in anticipation of tariffs. Put another way, if you can get gold into America on the eve of the tarriffs' rollouts you can capture some of the value of that tariff yourself.
  - roenxi 2y ago
    But as far as I'm aware there are no gold tariffs, there has been no announcement of gold tariffs, any new general tariffs might have an exception for gold and the tariffs we've seen to date aren't even that big - gold already has years where the price goes up 25%. There also isn't a reason for Trump to put a tariff on gold; that won't help the US - there'll be a couple of gold bugs who can't afford as much gold and not much else changing. It could be preparation for a tariff. But it might not be.

ucla_rob 2y ago

The basic trend in the gold market is it is in flux end.

yieldcrv 2y ago

Gold permabulls crack me up Missing out on gains in every macroeconomic environment, QE, ZIRP, NIRP, rate hikes, deflation to finally get a little rally that rewards their multiple decades of dollar cost averaging all while apparently central banks have been hoarding it endlessly for twenty years and you’d think that would be the bull case to the stratosphere but nope. anyway enjoy the all time highs. just needed threat of tariffs all along

TacticalCoder 2y ago
> Missing out on gains in every macroeconomic environment, QE, ZIRP, NIRP, rate hikes, deflation People who had 10% of their wealth in gold before 1929 only lost at most 30% of their wealth, something insane like that (losing 30% when nearly everybody loses all their savings is quite a feat). I don't know if goldbugs and gold permabulls are literally only stockpiling gold coins and gold bars. Actually I wouldn't be surprised if most gold permabulls only had 10% of their wealth in gold. And if anything I've noticed when talking to people that most who like gold actually consider the USD and EUR to be toilet paper: it's not so much that they're goldbugs, but they're "anything that's not toilet paper bugs". So from what I've seen those who bought gold overlap a lot with those who bought digital gold (aka Bitcoin). I'm not sure who missed on gains here.
- bitmasher9 2y ago
  Exactly, gold reduces risk in ways no other asset can. It’s a preservation of wealth tool. One thing we know about low risk investments —- they have low returns.