London South East | The UK's favourite investor portal.

Lets take two stabs at this mystery, one geopolitical and one financial. It has been clear for three years that Russia, China and Iran are operating in collusion, each feeding opportunistically on each other. All three have fostered belligerent hyper-nationalism as a means of regime survival, and all aim to press their advantage against a fatally complacent West before the window of opportunity closes.

This menace on three fronts has reached a dangerous juncture. None of the major democracies have put their economies on a war-time footing despite the obvious threat.

The West has dropped the ball on Ukraine – or worse, it is preventing Ukraine from hitting Russian oil facilities – and has therefore left the door wide open for a knock-out blow by the Kremlin this summer.

Iran has been emboldened by Putin’s military comeback. It is also flush with money. Joe Biden is so worried about rising petrol prices that he has turned a blind eye to sanctions busting, letting Iran sell as much crude as it wants. This has enabled Tehran to advance its pawns in the Middle East, and now to risk a direct missile strike against Israel.

The third shoe has yet to drop, but China knows that the West has run down its stock of military kit trying to contain these other two crises. Xi Jinping may never have a better moment to tighten the noose on Taiwan with a naval and air blockade, gaining a stranglehold over the West’s supply of advanced semiconductors that can then be used as a bargaining chip. How would the democracies respond to this?

There is a strong suspicion among gold experts that China is behind the surge in buying, building up a war-fighting bullion chest through state-controlled banks and proxies. But others, too, can see that we are living through a fundamental convulsion of the global order, and that the dollarised financial system will not be the same at the end of it. Gold is the hedge against dystopia.

However, there is a parallel explanation. Covid finally broke our spendthrift governments. The talk in hedge fund land is that some big beasts are taking bets against “fiscal dominance” across the West.

It is a collective judgment that too many countries have pushed public debt beyond 100 per cent of GDP and beyond the point of no return under prevailing economic ideologies and political regimes. Budget deficits have broken out of historical ranges and are running at structurally untenable levels for this stage of the cycle.

Central banks will bottle it – under this scenario – in order to mop up issuance of treasury bonds. They will let inflation run hot to help states whittle down debts by stealth default. You might argue that this is what they already did by letting rip with extreme money creation during the pandemic.

A very interesting read on things related to Gold and CEY, but a few might regard as off topic. ALICE (new book) by Stuart Kells (Australian so beware) is about the farce, that passes with grim effect, as a Financial System, and if you ever wondered what happens in the marvellous banking system, and their friends in high places then grab a copy, and a glass of good whisky. The Fin system has been in disrepute for a few decades now, but has survived on information asymmetry, and outstanding amounts of BS from the chosen few (we can guess who they are). The brainwash asymmetry has been steadily eroded, and this is probably one of the more succinct exposes.

Misunderstandings about money and banking affect the incentives and tactics of the largest private banks, and how well citizens and taxpayers hold governments and financial regulators to account (joke really, as they do not). They prevent us all from having an adult, evidence-based conversation about debt, taxes and monetary policy. Without such a conversation (knowledgeably adjudicated by finance writers and journalists) citizens will forever be bit-part players in capitalism – the irresistible targets of participants with better information.

Protecting customers, taxpayers and the community as a whole from the excesses of modern banking requires a new understanding of the roles of banks and governments in finance; a new understanding of loans, deposits and derivatives as one family of financial contracts; and a new awareness of the privileged position of private corporations in the global financial system.

Crucially, society as a whole needs to think differently about the nature of money –possibly by first discarding the term itself. “Money” encompasses a range of phenomena that have intrinsically different purposes and risks. Commercial bank deposits are materially different to banknotes, for example, which are different to reserve funds. Money as a concept is increasingly outdated and misleading.

A better understanding of money would open up the possibility of important innovations such as lending-only and deposit-only institutions; new mechanisms of financial prudence and oversight; and an integrated monetary and fiscal policy that uses monetary and fiscal levers in concert.

A new financial conversation would make the causes of inter-generational inequities more explicit, and it would allow the community to rethink allowing “too big to fail” banks to earn, year in year out, enormous risk-free profits.

The banks operate under a social contract (almost) with the tax payers via the governments of the day, but have managed to write the terms and conditions of the contract, oddly enough, to their advantage? Pass the risk and the bailouts to the tax payers, and they take the bonuses and the Ferraris, and the odd yacht (etc, yawn).

and on the show goes ...

Isnt enough enough? The great thing about gold is it is arguably in our DNA and cannot be printed adh

Gold’s dizzying ascent isn’t over yet, say fundies

Sybilla Gross and Yvonne Yue Li

Gold’s rally to successive record highs isn’t over, according to macro fund managers, and the factors that have powered a near-20 per cent surge since mid-February are expected to fuel more gains in the precious metal.

The higher prices have been fuelled by expectations that the US Federal Reserve will lower interest rates this year, typically an environment that reduces the opportunity cost of holding the metal. Meanwhile, messy conflicts in the Middle East and Ukraine support demand for safe-haven assets, and purchases by global central banks add to a bullish backdrop.

On Wednesday, gold was trading at a record high of $US2,352.78 an ounce before key inflation data that could help shape the Fed’s outlook on interest rates.

The current momentum is a signal to increase holdings in gold, according to Rajeev De Mello, global macro portfolio manager at GAMA Asset Management. Prices might now be vulnerable to a slight correction, he said, but any pullback was likely to bring in more buyers.

“It’s a relatively small market, and it can squeeze higher very fast,” he said, comparing it to the size of US government debt securities. “It’s a very momentum-driven asset, really.”

Gold’s sharp and sustained move higher has vexed some observers because it’s happening at a time when real yields remain elevated. That’s typically a headwind for precious metals because they don’t pay interest.

But investors have not been deterred. In New York’s Comex gold futures market, money managers are placing more bullish bets on gold, with net long positions rising to a near four-year high in the week ended April 2.

One key factor has been enthusiasm among central banks, encouraging buyers such as Matthew Schwab, head of investor solutions at Quantix Commodities with $US933 million under management.

Central bank purchases

The firm’s long-only fund has been overweight gold since 2022, with bullion’s weighting about 30 per cent – compared with about 15 per cent in the Bloomberg Commodity Index.

Purchases by central banks totalled more than 1000 tonnes in 2022 and 2023 with much of that led by economies, particularly China, where efforts to diversify away from the US dollar have accelerated.

“What I think is really, really bullish about gold is that those ounces will be taken off the market and never come back,” said Duncan MacInnes, investment director at Ruffer Investment Co. “And that’s clearly very different to the [exchange traded funds] where ultimately everyone’s a trader of it.”

Last month, he increased his exposure to gold and silver to roughly 8 per cent across his two portfolios, which combined have about $US3 billion under management.

The idea that people will always make rational decisions in their own self-interest is just plain wrong...one of the key planks of economic theory (lets not use the word wisdom)

Kahneman’s greatest insight was that investors make mistakes, which sounds like the bleedin’ obvious. But his groundbreaking realisation was that our mistakes are the norm, not the exception. In our busy lives, we constantly rush to judgment using mental shortcuts (or heuristics), leading to persistent biases in our decision-making. Even when clear evidence suggests we ought to rethink our positions, we often cling fast to our initial judgments. Gulp, sounds like me?

...once you accept the humbling conclusion that you will inevitably make mistakes, you can seek to understand them and therefore become a better investor.

We hate losing money far more than we enjoy gaining it!!?? Losing $100 hurts twice as much as the pleasure from gaining $100. Even in sport, it has been shown golfers play better when putting for par (fearing the “loss” of a bogie) than when putting for the “gain” of a birdie. Loss aversion is in our DNA. As humans evolved, threats were always far more consequential than opportunities...phew its not just me ...

A study revealed 74 per cent of professional fund managers think they are above average. The other 26 per cent thought they were average. Mathematically, this is simply impossible, half must be below average. In Kahneman’s view, overconfidence is the most significant of our biases. He said: “What would I eliminate if I had a magic wand? Overconfidence.”

Research by Kahneman and Tversky provided important insights into the phenomenons known as “anchoring bias” and the “endowment effect”.

Anchoring bias describes the fact that investors rely too heavily on the initial opinion or piece of information they are given on any topic. Imagine, for example, you were told a widget sells for between $85 and $100 but is available today for $75. You might view this as a good deal.

However, if you were simply told a widget costs $75, you’d far more likely question what is a widget? And you’d question its true value. The deliberate “anchor” placed first in the information you are given distorts your financial analysis and is a common pitfall in financial decision-making.

The endowment effect is a term coined by Richard Thaler, and in a 1991 study, Kahneman and colleagues proposed that it occurs, in part, due to loss aversion. A mistake investors make is when we own something (such as a share in BHP), we mentally give it more value than it might objectively hold. This leads to a paradox where we are more likely to keep a BHP share we own rather than acquiring one we don’t, despite the result being the same in both scenarios – ownership of the share.

This cognitive bias skews our perception, often preventing us from selling assets when it might be prudent to do so, as we overestimate their worth due to per

Latest Share Chat

Member Info for goldgnome

Followers

Following

Posts (Last 30 Days)

Posts (All Time)

Last Post

Member Since

Share Chat Post Distribution (Last 30 Days)

Activity Log (Last 30 Days)

Latest Share Chat

Member Info for goldgnome

Followers

Following

Posts (Last 30 Days)

Posts (All Time)

Last Post

Member Since

Share Chat Post Distribution (Last 30 Days)

Activity Log (Last 30 Days)

Please enter at least 2 characters

No results found

Search results

Recently viewed

Trending