By Guest Contributor
Fatalities in Africa’s gold mines have always been a problem. This is troubling but common news, with around 100 -120 casualties being reported every year. As for AngloGold Ashanti (NYSE: AU), 16 fatalities in 2009 happened in their mines in South Africa.
Since 2007, AngloGold Ashanti was able to reduce their operational casualties by around 70%, thanks to the efforts of a safety program spearheaded by the company’s very own CEO Mark Cutifani. With its new technology called Reef Boring, the company might even reduce its casualty to nothing in years ahead.
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They discuss the US and global stock markets, the US dollar, and the outlook for gold.
The Russian government has been buying a lot of physical gold in recent years, instead of buying more US dollars to hold as foreign exchange reserves.
It’s probably why president Putin is getting bolder and more confident in his foreign policy, as it means his government is less exposed to US financial sanctions. Remember, the US government seized the Gaddafi regime’s US held financial assets when they launched war on his government. The West cut Iranian banks and as a consequence, government and companies out of global financial transactions when the Belgium based SWIFT cut them out of the global payments system.
The more gold Russia holds, the less exposed it is to this type of financial warfare.
The South African government is oblivious to this, and has not been adding more than a few ounces per month to its gold holdings in the last few years. Although it is diversifying away from the US dollar by buying Aussie dollars and Chinese renminbi, they don’t seem to recognize the strategic importance of physical gold.
I cannot recommend this video highly enough. It is extremely powerful as it explains step-by-step the machinations of the modern monetary system. Mike Maloney is absolutely spot on about this: the system impoverishes the working class every single day. This is why the majority of the working class in South Africa will become poorer and poorer with time, and their anger and resentment toward the ‘wealthy’ and ‘capitalists’ and ‘whites’ will grow as well. In a day, the video has already received nearly 400,000 views (and counting).
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Gold shares surged 12% on the day yesterday.
However, the gold index is still down 60% from late 2011, even after yesterday’s big rally.
Reuters reports that
China consumed 706.36 tonnes of gold in the first half of 2013, up 54% from the year-ago period, the China Gold Association (CGA) said in a statement on its website on Monday…
“China’s demand in April and May was unmatched,” said one Shanghai-based trader. “They bought more than anyone and were consistent buyers even after prices recovered a little.”
China’s gold demand could hit a record 1,000 tonnes this year and will overtake India, the World Gold Council said last month.
This is despite all indicators showing Chinese economic growth is slowing down.
I speculated in April that “Physical gold continues to be taken out of the market as individuals in the know use current low prices to stockpile. All the while hedge funds and speculators – and possibly even central banks – are driving the price lower. This is a great opportunity to accumulate physical gold as one day when the currency and banking crisis hits one of the major economies (Germany/UK/US/Japan/etc), there won’t be any physical gold available for sale. This is Gresham’s Law in action. Bad, overvalued, paper money is driving out good, undervalued, gold money. Once the general public catches on to what’s going on here even a marginal increase in physical gold demand will cause shortages to develop and this will cause the gold price to climb much sharper than it has in any point in the past decade.”
I also pointed out a week later that the US Mint ran out of American Eagle gold coin supplies, and that demand for Krugerrands had skyrocketed at FNB Share Investing following the dip in the gold price. This video of Rick Harrison saying he can’t get hold of physical gold in the US tells the same story.
One needs to understand that gold is an alternative currency in competition with the rand and dollar that cannot be printed at will by the billions by central banks. In the current world of severe monetary instability, it is a prudent strategy to continue to accumulate a portion of one’s savings in physical gold. One day there will be no physical gold available for sale at any price, and this is going to force the hedge fund and other speculative community to become major buyers, and will launch the gold price into the stratosphere. Make sure you get your share of gold before we get to that point. The current gold price decline is a huge gift to those who understand what lies ahead for the gold market.
The following chart is from Ronald-Peter Stoeferle of Incrementum Advisor’s “In Gold We Trust 2013” report.
As Peter Schiff pointed out about the current gold correction:
The New York Times had the definitive take on the vicious sell off in gold. To summarize one of their articles:
“Two years ago gold bugs ran wild as the price of gold rose nearly six times. But since cresting two years ago it has steadily declined, almost by half, putting the gold bugs in flight. The most recent advisory from a leading Wall Street firm suggests that the price will continue to drift downward, and may ultimately settle 40% below current levels.
The rout says a lot about consumer confidence in the worldwide recovery. The sharply reduced rates of inflation combined with resurgence of other, more economically productive investments, such as stocks, real estate, and bank savings have combined to eliminate gold’s allure.
Although the American economy has reduced its rapid rate of recovery, it is still on a firm expansionary course. The fear that dominated two years ago has largely vanished, replaced by a recovery that has turned the gold speculators’ dreams into a nightmare.”
This analysis provides a good representation of the current conventional wisdom. The only twist here is that the article from which this summary is derived appeared in the August 29, 1976 edition of The New York Times. At that time gold was preparing to embark on an historic rally that would push it up more than 700% a little over three years later. Is it possible that the history is about to repeat itself?
I did an exclusive interview with The Daily Bell last week that was published yesterday.
Chris Becker’s Austrian Perspective on South Africa, Gold and the Ludwig von Mises Institute
Sunday, June 23, 2013 – With Anthony Wile
Here’s a snippet.
Daily Bell: We previously interviewed South African analyst Leon Louw on South Africa, who runs the Free Market Foundation in South Africa, and we’ll ask you some of the same questions we asked him. He was remarkably positive about South Africa and its future, especially if it adopts free-market reforms. Are you similarly positive?
Chris Becker: I would be if the South African government was indeed adopting free-market reforms. But it isn’t. This government continues to introduce policies and legislation that restricts personal choice and liberty, inching the country more toward socialism than away from it. The minister of trade and industry, Rob Davies, is a sitting member of the South Africa Communist Party, while the minister of finance, Pravin Gordhan, used to be a member of the SACP. Other key ministries are littered with Communist Party members or sympathizers. The pervasive state ethos is socialist with ‘red ideals’ clearly pushing the country in that direction, which leaves me less optimistic than Mr Louw.
That said, I am positive about the fact that the ANC government is inefficient and disorganized, enabling the private sector to flourish in parallel to public utilities that can’t serve the public’s wants. We’ve seen huge growth in private education, private security and private medical industries in recent years, without which we would have seen rapidly declining living standards of South Africans. In a micro sense this inefficient and disorganized state leaves the space for quite a lot of personal liberty and allows people to get on with things outside of government control. With this strong central planning and regulatory ethos, if the government could actually follow through with its grand plans, South Africa would be a very unfree place. I call it ‘dangerous efficiency.’
We talk more about South Africa and whether we are headed toward a Zimbabwe style collapse, the long-term Africa play, a gold standard for Africa, and about the Ludwig von Mises Institute SA, among many other things.
Read the full interview here.
Nahanda Radio reports that the Zimbabwe government plans to re-launch the Zimbabwe dollar, but that to make it internationally acceptable, and to move away from the risks embedded in the US dollar and Rand, will back the new Zim dollar by gold.
Gideon Gono, the man who destroyed the Zim dollar by printing too much of it, said in June 2012 that his interventions that destroyed the Zim dollar
were exactly in the mould of bail out packages and quantitative easing measures currently instituted in the US and the EU…
With regards to the new Zim dollar and proposed gold standard, Gono said
The world needs to and will most certainly move to a gold standard and Zimbabwe must lead the way…The events of the 2008 global financial crisis demand a new approach to self-reliance and a stable mineral-backed currency, and to me gold has proven over the years that it is a stable and most desired precious metal.
Clearly he learnt something from the hyperinflation that he caused.
If the Zim government goes this route it will most likely be successful in relaunching the Zim dollar, as long as the public accept the currency in exchange. If they don’t, the plan will flop despite being backed by gold. Furthermore, a gold standard that is controlled by government is not guaranteed to bring stability for very long, because it is highly likely that the government will over issue paper money relative to the gold that is backing it. It’s very profitable to do this. This will again force the government to go off the gold standard at some point in the future, setting another hyperinflationary cycle in motion.
Bloomberg reports that since the crash of the gold price last week
Asian buyers have stepped up bullion purchases since prices fell, with imports by India, the world’s biggest consumer, expected to jump by 36 percent through June compared with a year earlier, the Bombay Bullion Association Ltd. said. Australia’s Perth Mint said April 17 that sales doubled from last week.
LRC points to an e-mail from a friend living in Hong Kong who wrote to say that
Went to Hang Seng bullion counter yesterday. The line was out the door. It took an hour wait to see a teller. When I asked if people were buying in the dip or selling in panic, she told me that they haven’t had once ounce of gold sold back to them all day. She told me they have sold more gold in 24 hrs than they normally do in 3 months. Yes, there was a lot of extra security. The guy in front of me bought over $1 million USD in gold. He paid in cash and walked out of the door with the bullion in a Nike bag.
So indications are that the physical gold market is in particularly Asia is seeing a surge in buying following the dip in the gold price.
Meanwhile, in the paper market in the world of hedge funds, Bloomberg reports that
Hedge funds have reduced bets on higher prices by 72 percent since October while Goldman Sachs Group Inc. and Societe Generale SA predicted declines.
This has been an ongoing trend for some time. Physical gold continues to be taken out of the market as individuals in the know use current low prices to stockpile. All the while hedge funds and speculators – and possibly even central banks – are driving the price lower. This is a great opportunity to accumulate physical gold as one day when the currency and banking crisis hits one of the major economies (Germany/UK/US/Japan/etc), there won’t be any physical gold available for sale. This is Gresham’s Law in action. Bad, overvalued, paper money is driving out good, undervalued, gold money. Once the general public catches on to what’s going on here even a marginal increase in physical gold demand will cause shortages to develop and this will cause the gold price to climb much sharper than it has in any point in the past decade.