– Rickards- Greek crisis was necessary step towards fiscal unity in Europe
- “Euro creators want to force common fiscal control
– Eurobonds”- Currency wars between U.S. and China may resume next year
- Rickards emphasises importance of holding physical gold
- Eschews “paper gold” in the form of ETFs, futures or unallocated storage- Gold insurance against “catastrophic event” … “on the horizon”
In an interview with Henry Bonner at SprottGlobal.com, ahead of the Sprott-Stansberry Vancouver Natural Resource Symposium taking place this week, Rickards said this subject would form part of his talk at the conference.
We have frequently covered the risks posed by cyber warfare and cyber terrorism to markets, investments and deposits, and these risks remain, as yet, widely underappreciated in the mainstream media and the wider world.
For example, the Stuxnet virus believed to have been deployed by the U.S. and Israel in cyber war against Iranian nuclear reactors almost caused a major environmental disaster in 2010. Dormant malware – believed to be of Russian origin – was found hidden and awaiting activation in the software that runs the Nasdaq exchange.
Moscow-based Kaspersky Lab showed earlier this year that an international team of hackers gained access to bank’s customer accounts – with the ability to alter account balances without the banks even being aware of their presence.
These examples show the highly vulnerable nature of the interconnected systems upon which people in the west have come to rely.
As Rickards astutely points out,
“Physical gold is a non-digital asset. You can’t attack it with cyber warfare, so I think it has another insurance function for investors there.”
He believes that the Greek crisis was a foreseeable step in the centralisation of power in Europe. In 1992 when it was agreed to launch a single currency there was an appetite for a common currency but a strong aversion to fiscal and political union.
The architects of the euro knew that the single currency could not exist indefinitely in the absence of fiscal union and so the project was launched in full anticipation of a crisis which could then be used as a “forcing strategy” to achieve fiscal union.
“We’re getting closer to that now,” he says. “Greece now has to run its government according to German dictates. Greece has already outsourced its monetary policy to the European Central Bank, and now it’s sort of outsourced its fiscal policy to the German finance ministry.”
“So you’re on a path to unified fiscal policy and ultimately the Eurobonds – bonds backed by full strength and credit of not just any one country but the entire Eurozone.”
He believes that there has been a lull in the currency wars between China and the U.S. but that it will likely resume next year if China manages to get the yuan included in the currency basket that makes up the SDRs at the IMF.
He says the U.S. is the gatekeeper of the IMF and so China is on its “best behaviour”. He says the Chinese are resisting the temptation to depreciate their currency despite a sluggish economy with this goal in mind but that once the objective has been achieved it will go back to currency manipulation.
He points out that the Chinese continue to accumulate large volumes of gold and that China’s stated gold reserves are an understatement.
“I believe that the numbers they have shown are significant but not nearly as high as what they actually have.”
When asked whether now is a good time to hold gold, he replied,
“I think it’s always very important to own gold. I’ve recommended that investors have about 10% of their portfolio in the yellow metal.”
He believes that such a proportion will not hurt investors too much even if the price continues its decline but that,
“If I’m right and some catastrophic event is on the horizon, then that 10% would be your portfolio insurance.”
He emphasises, however, the importance of holding physical gold as opposed to digital or paper gold.
“These products allow the counterparties to terminate the agreement by giving the investor a dollar value of their gains. But that would deprive you of any future gains. You might get cashed out just as the crisis was beginning and not be able to participate in the upside as the crises worsened.”
Rickards is correct in these warnings. If you cannot visit, hold and easily take delivery of your gold in the event of a “catastrophic event” then you do not own gold – rather you are speculating on the gold price.
All financial service and investment providers and indeed gold brokers are at the mercy of and dependent on technology today. However, if you only have one point of contact with your gold – a website – and you cannot buy, sell or take delivery of your gold then you do not own gold as financial insurance and a safe haven asset.
Henry Bonner’s interview with Jim Rickards can be listened to here
Learn the importance of owning allocated, segregated gold that you can take delivery of here
MARKET UPDATE
Today’s AM LBMA Gold Prices were USD 1,085.65, EUR 989.74 and GBP 695.36 per ounce.
Yesterday’s AM LBMA Gold Prices were 1,096.75, EUR 991.01 and GBP 701.65 per ounce.
Gold in USD – 10 Years
Gold and silver on the COMEX again both rose marginally yesterday – to $1,097.20/oz and $14.82/oz.
At the close of trade in Asia, gold fell $9 in less than a minute. Again, there was heavy selling on the COMEX in the December futures contract. More than 750,000 ounces worth of futures contracts were sold in less than 20 minutes. Once again the heavy selling came at an unusual, less liquid time of day which suggests another bear raid by institutions unknown.
Gold is down nearly 0.8% this morning after the sharp selling – snapping two days of slim gains. Gold is on track for a sixth week of losses and is down more than 1% on the week – its longest such run lower in 15 years according to Reuters.
Silver‘s also down a bit, while platinum and palladium are climbing. Platinum’s on track to snap three weeks of losses, though with a rise of just 0.5% so far on a weekly basis
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