Precious Metal Pandemonium – Silver Spikes Limit-Up, Gold Surges As China FX Basket Hits Record Low
By Tyler Durden
Update: Silver just exploded above $21 – up almost 8% – its biggest single day surge since September 2013. Silver is limit up on SHFE as Gold is also surging back towards Brexit highs near $1360… China's CFETS Renminbi basket just hit a record low..
All of this is happening as China's currency collapses to a record low since it began being published against a broad basket of majors…
As we detailed earlier, e xtending Friday's gains, Silver futures just broke above $20 for the first time since August 2014…
And Gold topped $1350 once again…
Following silver's best week since August 2013, dramatically catching up to gold's recent performance, it appears, despite the volumeless meltup in stocks, that Brexit has sparked huge demand for the safety of precious metals.
For a second straight week, funds boosted their net-long futures and options positions in the two metals to the highest since the data begins in 2006.
Money managers have been piling in on demand for havens and speculation that interest rates will stay low as central bankers around the world struggle to contain the economic fallout from the U.K.’s vote to quit the European Union.
But what happens next?
As a reminder, on April 21st PIMCO's Harley Bassman suggested “The Fed should monetize gold”…
In “Rumpelstiltskin at the Fed“, Bassman goes down the well-trodden path of proposing Fed asset purchases as the last ditch panacea for the US economy, however instead of buying bonds, or stocks, or crude oil, Bassman has a truly original idea: “the Fed should unleash a massive Fed gold purchase program that could echo a Depression-era effort that effectively boosted the U.S. economy.“
He is of course, referring to FDR's 1933 Executive Order 6102, which made it illegal for a citizen to own gold bullion or coins. Americans promptly sold their gold to the government at the official price of $20.67, with the resulting hoard of gold was then placed in Fort Knox.
The Gold Reserve Act of 1934 raised the official price of gold to $35.00, a near 70% increase. It also resulted in an implicit devaluation of the US dollar. As Bassman points out, over the three years from January 1934 to December 1936, GDP increased by 48%, the Dow Jones stock index rose by nearly 80%, and most salient to our topic, inflation averaged a positive 2% annually, despite a national unemployment rate hovering around 18%.
In short, a brief economic nirvana which was unleashed by the devaluation of the dollar confiscation of gold. In fact, we have frequently hinted in the past that another Executive Order 6102 is inevitable for precisely these reasons. However this is the first time when we see a “respected economist” openly recommend this idea as a matter of monetary policy.
Bassman …read more
Source: Precious Metal Pandemonium – Silver Spikes Limit-Up, Gold Surges As China FX Basket Hits Record Low
