Gold Telegraph Weekly Rundown: January 17, 2021

This week has certainly tested many people’s emotional strength with regards to sticking to the gold and silver story. It is crucial to remember the importance of following the fundamentals and not giving into the price’s day-to-day volatility.

Treasury yields and the dollar crept up, which was the primary driver of the downward pressure this week. However, we feel this will be short lived.

Central banks will need to have prolonged negative real rates to keep this debt infused world going.

If rates creep up too much, debt service costs would be merely unsustainable.

Central banks will continue to keep a tight lid on the yield curve throughout 2021 by printing money to artificially suppress yields to help governments support local economies but, most importantly, begin a deleveraging process through the art of financial repression.

Global corporate debt has more than doubled over the last ten years, swelling by $37 trillion to just under $70 trillion, or 92% of global GDP, and global debt has now reached 320%.

History has always showcased how these types of debt booms always end, and simply it’s through the destruction of fiat currencies.

The market is already pricing this through the extensive narrative around central bank digital currencies and the potential for a monetary reset.

Here are some of the big headlines this week we thought to get on your radar:

 

China’s Blockchain-based Service Network (BSN) outlined an audacious plan for a global network that will support future CENTRAL BANK digital currencies (CBDC) from multiple countries…

China’s Blockchain Service Network (BSN) has big plans for 2021.  The Beijing backed project made its debut in 2019 and announced this week that their 2021 roadmap includes the beta version of a universal digital payment network (UDPN) that incorporates Central Bank Digital Currencies (CBDC) from around the world.  Recognizing CBDCs rise in popularity as a government-backed, liquid payment method, the BSN plans to capitalize with a standardized digital currency transfer method and payment procedure.  The announcement stated “CBDCs will completely change the current payment and circulation methods of traditional currencies, consistently build payment systems’ resilience, and significantly increase the global circulation of commodities and cross-currency settlement.”

The BSN aims is to utilize APIs to provide a scalable global payment solution that spans across banking, insurance, mobile app technology and enterprise resource planning.

Their 2021 and beyond roadmap also plans to take part in the Chinese government’s rollout of the digital yuan. The introduction of the digital yuan was part of the larger CBDC initiative where the digital yuan far eclipsed the efforts of the European Central Bank in both scale and scope.

 

ECB’s Lagarde calls for regulating Bitcoin’s “funny business”

This week European Central Bank President, Christine Lagarde, called for global regulation of Bitcoin. She recognized the positive emergence of global Anti-Money Laundering regulation but called out the shortcomings when it comes to the crypto currency.   Lagarde seeks to bring together global regulatory resources to close all loopholes still allowing money laundering to take place with the inherently anonymous currency.

“There has to be regulation. This has to be applied and agreed upon … at a global level because if there is an escape that escape will be used,” Lagarde said.

 

Russia for First Time Holds More Gold Than U.S. Dollars in $583 Billion Reserves

Putin’s plan to “de-dollarize” the Russian economy saw its first real milestone this week as their gold reserves surpassed dollar reserves for the first time since records have been kept. Gold now holds the #2 spot, making up 23% of the Russia’s assets, just passing the reserve currency, which sits at 22%, down from 40% in 2018.  The Euro remains strong at number one, making up approximately a third of the country’s reserves.  De-dollarization aims to mitigate vulnerability and instability with US sanctions and deteriorating relationships between Russia and Washington.

The Federation has been the biggest gold buyer in the world since 2015, spending more than $40 Billion on the yellow metal.  $4.3 Billion coming between June 2019 and June 2020 when gold prices surged by 26%. 

 

Former SEC, Fed Officials Considered by Biden for Treasury Posts

As inauguration day quickly approaches, President-Elect Biden is expected to announce his cabinet and other senior officials imminently.  This inner circle will be the key players in shaping the next four years. According to those privy to these exclusive conversations, Biden is considering former Federal Reserve official Nellie Liang and ex-Securities and Exchange Commission member Robert Jackson for key economic-policy positions. 

Liang, who worked at the Fed with then-central bank chief Janet Yellen, is a leading expert on financial stability.  Insiders have labeled her as Biden’s choice for Treasury secretary and say she could join the department as a counselor or an undersecretary.

Jackson, a current New York University Law Professor and former SEC leader, is a political independent who is also being vetted to run the SEC.   He is known from his time governing Wall Street for pushing stricter conduct standards and enforcement actions.  

On paper, either candidate should bring strict oversight into a volatile economy.  

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