Central banks

The trillions of U.S. dollars created out of thin air in 2020, as well as the trillions which preceded this printing-frenzy between 2009-2014 (QE1-QE4), have dire consequences on the purchasing power of America’s once sacred but now totally inflated, and hence debased, currency.

It seems that the decline in bond yields allowed gold to catch its breath, and that the macroeconomic outlook – including the credit spreads, interest rates, inflation, monetary policy and fiscal policy – will remain the key driver of gold prices throughout the year.

China has given domestic and international banks permission to import large amounts of gold into the country.

Derivatives can only be netted down on the basis that counterparties pay up. But in a real systemic crisis, counterparties will disappear and gross exposure will remain gross.

The increase in expected and actual inflation rates combined with the Fed’s dovish stance could create downward pressure on the real interest rates and the U.S. dollar, thus supporting gold prices. The yellow metal could also benefit from the elevated demand for inflation hedges in an environment of stronger upward pressure on prices.

Gold is today at a price that still does not take into account what has happened these last months and what will happen with respect to the coming avalanche of Treasury auctions to come.

Banks, and hence banking risk, come in a wide variety of flavors, largely because bank mismanagement and short-sighted absurdity comes with equal frequency. As such, a fuller discussion on banking risk would necessitate hundreds of pages and hundreds of examples.

Inflation is coming. Gold may benefit from it, especially if inflation turns out to be more long-lasting than central bankers and markets believe.

Warren Buffett called derivatives financial weapons of mass destruction and he is absolutely right. Greedy bankers have now built derivatives to a self-destructive nuclear weapon. Archegos shows the world that an unknown smaller hedge fund can get credit lines of $30 billion or more that quickly leads to contagion and uncontrollable losses.

The National Bank of Hungary has tripled the country's gold reserves, it said in a statement. MNB took the decision to raise the gold reserves "taking into account the country's long-term national and economic policy strategy objectives".