The Real Reason Gold Is Surging (They Don't Want You to Know This)
Peter Reagan
 Gold has surged to $3,600, yet mainstream media still struggles to explain why. The truth is simple: Currencies are weakening worldwide. No wonder central bank gold buying is surging, and silver is stepping into the spotlight. Here’s what happens next…
Gold hits an ATH of $3,600 – why can’t mainstream media understand why?
The first thing to get out of the way is that you haven't missed the boat (yet), even if you still haven’t diversified with gold.
That’s because the price of gold just hit a new all-time high, primarily on currency depreciation. And there is plenty more of that to come.
But you aren't going to hear about it much in financial news. Even traders and analysts seem to be avoiding the issue. Like here, for example, where "persistent concerns about structural inflation" are listed as an afterthought to explain why gold hit $3,600. Even the wording there is curious, dragging out the statement as if to push inflation further down as a reason.
“Structural” inflation as opposed to which kind, exactly? Powell’s “supply chain snarls”?
While gold has quite a few fundamental price drivers, this is a simple story. Gold’s price is rising because currencies are declining. Almost no one is willing to broach this topic.
One developing story that President Trump is to blame for the U.S. dollar going down sharply, and therefore pushing gold up.
Here's the problem with that, though: Trump's devaluation of the U.S. dollar is a specific response to other nations that have devalued their currencies to gain advantages in global trade. We know this because gold has set multiple all-time highs in every single currency around the world – all while going through a much more moderate rise in dollar terms throughout the Biden presidency.
The sad reality, though, is that Trump's devaluation of the dollar probably does very little for gold further down the road. A currency’s strength has no ceiling – but there’s definitely a floor.
Today, it's worth noting that gold is now more than double where it was, about $1,650 – right as today’s run began.
Today, the official narrative is that gold leapt because of weak economic data, which is suggestive of a 25bps rate cut when the Fed meets next week. But that doesn't really tell us anything.
The markets already know massive cutting is coming. The inflationary interest rate cutting cycle isn't going to do much for the economy, because it is basically an artificial one by this point, and we aren't referring to automation.
Rather, the strength of the U.S. economy these days relies almost entirely on the tech sector, which itself relies on taking every single existing technology, slapping an "AI" tag on it and trying to resell it higher.
Not exactly optimistic.
That's not to say that there isn't anything to the link between the weak economy and the surge in gold prices.
Veteran investor Peter Grandich, whose ideas we'll cover in greater depth below, has been warning of a market crash, notingthat real jobs data is pointing to economic shrinking. This is again somewhat euphemistic, since we can't remember when was the last time the economy actually grew in a meaningful sense.
The smartphone boom? Again, wholly reliant on the tech sector, and those smartphones were manufactured in China, much to Trump's dismay.
As a gold price forecast, Grandich says $5,000 is a possibility. A “possibility,” really? I think you and I both know with absolute certainty that $5,000 gold is inevitable, it’s just a matter of time…
The main takeaway: If you listened to me and moved into gold in mid-2023, good for you, really!
If you didn’t though? You can't go wrong by diversifying with gold now. Because all of those gains over the last two years came primarily from currencies weakening.
Timing the gold market is a nice idea, but we are reaching a point where this will, for the American citizen, need to take a backseat for the mere sake of wealth preservation.
More predictions for $100 silver (and why we should pay attention to them)
Peter Grandich, the veteran investor we quoted above, recently did an interview with Kitco where he elaborated on the elaborate swindle of official economic data. Fair enough.
But he also discussed his $100 silver forecast. (He calls it triple-digit silver, suggesting that it could go much higher than that.)
What immediately stands out is that Grandich is making these forecasts while explaining how the economy is much weaker than is presented. This is important, because I’ve tried my best to decouple economic weakness from the price of silver.
In my view, there have been far too many links between silver and industrial uses recently, which are used to justify a cartoonishly low silver price. Yes, silver benefits from greater industrial strength and therefore demand. But the reality is that these are factors we should be taking into account if silver was already $100.
Silver is so undervalued relative to everything, including gold, that industrial use is practically a non-factor here. Don’t believe me? Take a look at the gold-to-silver ratio. Remember, since the end of Bretton-Woods, it’s averaged 55:1.
At today’s gold price of $3,650 we need to see a $66 silver price to get back to the status quo. That’s necessary before any kind of discussion on industrial demand is meaningful. On top of that, we can’t forget that silver recently clocked in yet another annual supply deficit of about 200 million ounces. That’s the seventh consecutive annual deficit! No wonder the administration has declared silver a critical mineral…
This deficit oscillates year-to-year, but even in a massive economic downturn, it is expected to remain around 50 million ounces in the negative.
So with a worst-case scenario of an annual deficit of 50 million ounces, we're supposed to believe that silver's fundamentals are weakening the price? Nonsense!
Grandich says just that, saying that silver's inflation-adjusted price is closer to $200, which feels more accurate than $100 since silver was $50 in the 1980s. Either way, silver being below $40 definitely feels wrong.
Indeed, the correction we mentioned is simply an inflation adjustment that, for some reason, seems to be missing from the market. Only after that has happened should one speculate about silver's drivers.
Is Poland's growing gold hoard a sign of a brewing eurozone crisis?
When Poland's gold reserves were 15% of national reserves, it wanted them to be 20%.
Now that they're 20%, it wants them to be 30%. We can assume that this will happen in the near future, since what Poland wants, Poland gets insofar as gold goes.
But why? Why is this relatively small nation and relatively small economy in a relatively stable economic area buying so much gold?
Why is its gold stockpile, now exceeding 315 tons, larger than that of the European Central Bank?
Poland's officials say it's because gold is good and gives the nation stability, but something tells us that's not where the story ends.
Let's start off with a tie-in from a Bulgarian outlet, which informs us that Bulgaria's gold reserves will remain intact as the country finally assumes the euro. Last we checked, Bulgaria, alongside Hungary, is the last country to have a dual currency system with the euro, or rather the last member of the Euro Zone to retain its own currency to some degree. All other countries in the European Union have had the euro shoved down their throats despite overwhelming public disapproval.
We imagine that this disapproval is especially bad in Bulgaria, as even though it's the weakest EU nation economically, its currency is exceptionally strong.
One Bulgarian leva is around 0.5 of a euro, which is a standout. As a relevant comparison, one euro equals 393 Hungarian forint.
So Bulgarians don't have a junk currency, but rather a strong and stable one that is nonetheless being deleted because Ursula von der Leyen says so.
Poland sees this, which gets us off on why it might be buying as much gold as it is.
We've been covering Jan Nieuwenhuijs's in-depth analyses for a while, and we specifically covered Dutch National Bank statements how "if" there is a financial crisis, gold can be used to underpin a new gold standard.
But this still isn't making any sense. If there is a financial crisis in the eurozone, it will involve the euro, which isn't being issued by the DNB or any other sovereign central bank.
The ECB, with its 315 tons of gold, is as unlikely as anyone ever to try and stabilize the euro with gold.
The DNB can't do it either, since euro management is fully out of their hands and in the hands of the ECB.
So what can the DNB, Poland's central bank and all other EU member nation central banks do?
One thing that aggravates nobody that they can do is buy heaps of gold, which protects the nation in the case of a eurozone crisis. It takes a very rosy view of things to not believe that this is what Poland is preparing for.
The next step, one that wouldn't go so well with the ECB or any other warm, fuzzy global monetary authority, is to reinstitute national currencies and tether them to gold.
While Jan seems fully subscribed to the idea of a euro gold standard, we find this unlikely because the global monetary system would never allow it.
Poland or the Netherlands trying to escape a financial crisis by distancing from the EU and having their own gold-tethered currency would be a big no-no and likely require Venezuela-style sanctions.
However, the people can still hope, and that is what these nations seem to be banking on entirely.
Even though they'll probably never get permission, they're signaling to the generally anti-euro populace that they haven't forgotten real value.
By flaunting gold, they're reminding citizens that the nation won't perish because of too much faith in the EU.
And they're also giving a subtle, or not-so-subtle piece of investment advice to citizens to drop their euros for gold whenever possible.
In an era of centralized global monetary mismanagement, that's as far as any individual nation can go, but it's still something.
Peter Reagan is a financial market strategist at Birch Gold Group. As the Precious Metal IRA Specialists, Birch Gold helps Americans protect their retirement savings with physical gold and silver.
www.birchgold.com
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