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The price of gold has surged, reaching all-time highs in U.S. dollar terms. This notable increase has significant implications, especially for North American investors who need a deeper understanding of the forces at play in the global economy that drive such changes.
 

Gold’s recent peak in dollar terms is significant, yet it is crucial to recognise that gold had achieved new highs in several other currencies long before the U.S. dollar showed similar movement. This phenomenon occurred because the U.S. dollar had lost purchasing power relative to other currencies on the global market, a situation often obscured until it reflects in commodity prices like gold. Therefore, the increase in the dollar price of gold was more a confirmation of the dollar’s decreased purchasing power than a sudden increase in gold’s inherent value.
 

However, it is essential to note that these highs are not all-time highs in real terms, which consider the purchasing power or inflation-adjusted values. In real terms, gold’s price still has a way to go to match its 1980 purchasing power. Using the U.S. inflation calculator, one can determine that $850 in 1980 is equivalent to about $3,222 in 2024 dollars. This calculation indicates that gold needs to be nearly a thousand dollars higher per ounce to truly replicate the purchasing power it represented nearly four decades ago. This discrepancy is crucial for investors, as it provides a more accurate measure of gold’s value over time, contrary to the nominal figures that headline news articles.
 

The skepticism towards the Consumer Price Index (CPI), which is often jokingly referred to as the ”CP-LIE”, further complicates the understanding of gold’s real value. Many argue that the CPI does not accurately capture the true rate of inflation, suggesting that it is systematically understated. This underestimation of inflation distorts the real economic conditions, affecting investment decisions and the economic forecasts that rely on these figures.
 

The current rise in gold prices is a bellwether for a shifting investment climate, hinting at a broader move from traditional assets like stocks and real estate into commodities. Initially, this shift may be gradual, marked by subtle hints and small movements. However, as more investors recognise the stability offered by commodities like gold, especially in turbulent economic times, a more pronounced shift is likely to occur. This trend is reinforced by the general economic instability and the inflationary pressures that have been prevalent in recent times, which traditionally increase the allure of gold as a ”safe haven” investment.
 

TEMPERING INFLATION

The recent Federal Reserve’s decision to postpone any interest rate cuts due to persistent inflation underscores this new economic environment. This decision, which was anticipated by those closely monitoring economic indicators, suggests that the existing interest rates may not be sufficient to temper inflation. This stance is likely to cause unrest in the financial markets as investors and financial algorithms alike adjust to the new data, potentially leading to a realignment of investment strategies away from more volatile assets.
 

Moreover, the role of gold in the investment portfolio is increasingly complicated by other factors such as the rise of digital currencies. These digital currencies offer alternative investment opportunities that challenge the traditional view of gold as the ultimate safe haven. As these cryptocurrencies become more mainstream, their impact on gold and other traditional investments continues to evolve, requiring investors to stay informed about these trends.
 

Understanding these dynamics is crucial for investors moving forward. The recent spike in gold prices in U.S. dollar terms is not just a simple case of commodity appreciation but a complex interplay of currency valuation, inflation perceptions, and changing investment climates. The implications of understanding these factors are profound. They influence not just individual investment decisions, but also broader economic policies and the strategies employed by large institutional investors.
 

As the global economic landscape continues to evolve, the investment strategies must also adapt. Gold remains a critical element in diversified investment portfolios. Investors must remain vigilant, watching for both macroeconomic indicators and shifts in global market dynamics that could influence their investment choices.
 

AN UNDERVALUED INDUSTRIAL METAL

The real opportunity is in silver, and most investors do not consider the facts. The LBMA is the largest exchange, comprising 75% of silver inventories within the largest global trading venues. This peaked at 1,180 Moz in June 2021, and has since fallen some 30% to 823 Moz as of March 31, 2024. Yet, this number is 260% more than what TD securities posit as 311 Moz of “free float” – AKA the remaining LBMA silver inventories, after deducting the ~500 Moz of silver held in UK ETFs. As per these assumptions, TD Securities claims that the LBMA free float of silver would be depleted in the space of 2 years, based on the current pace of silver demand. Therefore, silver ETF buying activity – a lot of which comes from industrial players and now some standing for delivery - would not need to be huge for an already shaky liquidity situation to cause a long-awaited silver squeeze. 
 

Silver is critical to a society and in fact imperative to a technological society.  However, silver is NOT on Canada’s critical element list.  This writer interviewed Keith Neumeyer, CEO of First Majestic that spearheaded a letter to the Canadian authorities to add silver to their critical minerals list. 

As we navigate through these complex economic times, the importance of understanding the underlying factors influencing gold and silver prices cannot be overstated. For investors looking to protect and grow their wealth, staying informed about real-term valuations and being responsive to global economic signals will be key to navigating the uncertainties of the modern financial world. This deeper understanding will enable more strategic decision-making and potentially safeguard investments against the kinds of volatility and inflation currently observed in the global markets.
 

As the financial system continues to grapple with increasing levels of debt and leverage, it becomes crucial for investors to understand the key reasons for investing in gold and silver. Among these reasons, some are widely recognised within the alternative media community, while others, arguably more critical, are often overlooked.
 

The motivation behind this analysis is the rising negative sentiment towards precious metals investing, despite the significant fraud and corruption prevalent in the financial industry. Critics often target precious metals analysts and dealers as the main culprits behind misleading investment advice. However, these criticisms fail to acknowledge the larger scale of misconduct that occurs within Wall Street and central banks.
 

For instance, since the 2008 financial crisis, U.S. authorities have collected approximately $150 billion in fines from financial institutions involved in the subprime mortgage crisis, according to the Financial Times. Bank of America alone has paid out $55 billion in fines related to its mortgage sales and the activities of its subsidiaries. Furthermore, the Libor rigging scandal saw major banks paying over $2.2 billion in fines for manipulating one of the world’s most important interest rate benchmarks.
 

Contrast these figures with the precious metals market: the total value of all Gold and Silver Eagles sold from 1986 to 2017 is about $40 billion, and the global investment in silver bars and coins from 2007 to 2017 amounts to $36 billion. These numbers pale in comparison to the fines paid by banks for their part in financial frauds.
 

GUARDING AGAINST SYSTEMIC RISK

Adding to the financial deception is the U.S. shale oil industry, which has been described as a Ponzi scheme. Over the past decade, the shale industry has incurred a quarter trillion dollars more in costs than it has earned, a stark reminder of the unsustainable financial practices prevalent in today’s markets.
 

These examples highlight the two fundamental reasons to invest in gold and silver:
 

1. **Financial Insurance:** Gold and silver serve as insurance against financial meltdowns and the disintegration of fiat currency systems, similar to what has been seen in countries like Venezuela. Just as individuals purchase insurance to protect against significant personal losses, investing in precious metals can protect wealth against severe economic downturns and currency devaluation.
 

2. **Wealth Preservation:** Gold and silver are essential for preserving wealth amidst the potential collapse in the value of stocks, bonds, and real estate. When financial systems show signs of strain, as evidenced by high debt-to-GDP ratios and unsustainable economic practices, precious metals provide a haven that maintains its value over time.
 

Investors frustrated with the performance of precious metals often overlook these assets’ role in safeguarding against the broader financial system’s corruption and instability. The apparent underperformance of gold and silver compared to the inflated values of stocks, real estate, and cryptocurrencies does not diminish their importance as foundational elements of a diversified investment portfolio.
 

While precious metals may not always perform spectacularly in short-term speculative ventures, their long-term value in providing stability and security in an investor’s portfolio remains unchallenged. As financial markets continue to navigate through turbulent times, the intrinsic value of gold and silver as protections against systemic risk and financial corruption becomes even more pertinent  EG

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