The role played by gold and silver in the economic field is the source of precious metals’. On August 5, 2020, gold and silver reached a new high. Gold reached a new high of US$2050 per ounce, and silver once again reached US$27 per ounce.
Regarding the reason for this surge, some people say that it is a geopolitical factor, and some people say it is the prospect of US non-agricultural data over the weekend. In our opinion, it is an afterthought. What I want to share with you today is that the role of gold and silver is the basis for storing value. The driving force behind the explosion of precious metals.
First look at the concept and function of currency.
In high school textbooks, the nature of currency is interpreted as a general equivalent, but the latest monetary theory believes that currency is a contract between property owners and the market regarding the right to exchange, and is essentially an agreement between owners. “I give what I have to the market and exchange what I need.” Currency is the agreement of this process.
Based on the above theories, monetary banking defines the functions of currency as the five functions of value scale, circulation means, storage means, payment means and world currency. However, recent research shows that in ancient World, copper coins played the role of circulation and payment, and gold and silver played the role of storage and value measurement. In international trade, the world currency has always been gold and silver!
The ancient World changed, and the systems of copper coins were different. The copper coins in the ancient World were just scrap. The best medium for asset inheritance was gold and silver, and gold and silver were rarely circulated in the market.
Therefore, gold and silver can store value, real estate and land can store value, but copper money and paper currency that play a role of circulation and payment cannot. This is the accumulation of ancient civilization in 2000, and it is not comparable to the 200-year-old US dollar.
When there is a crisis in the economic field, human instinct is saving. In the future, it is the only way for the ruler to fight against the devaluation of the saving currency. Then the Fed will continue to carry out quantitative easing. The poor without real estate and gold and silver reserves are even poorer, and they have real estate and gold and silver reserves. The rich are getting richer. In order to prevent the people from awakening, they deliberately inflate the bubble of the virtual economy. When the bubble bursts, all conspiracies are covered up by the blame for the investment field!
Statistics show that since the decoupling of the U.S. dollar from gold in 1971, the U.S. dollar has depreciated against gold by 97%, but this is not the same as the actual over-issue rate of the U.S. dollar.
The current Fed’s balance sheet scale is above 7 trillion. In 2013, the Fed’s balance sheet exceeded 3 trillion. In 2008, the Fed’s balance sheet exceeded 1 trillion. In 2002, the Fed’s balance sheet was 700 billion. The Fed’s balance sheet scale is 600 billion, and the previous figures are decreasing. The exact figure was not found in 1971. Estimated at the rate of doubling in seven years, it is estimated that the maximum is about 35 billion.
If you spend 35 billion more than 70 billion, and use 35 US dollars per ounce to compare with the current 2,040 US dollars per ounce, the price of gold should be at least 7,000 US dollars per ounce.
Even if we doubled the size of the Fed’s balance sheet in 1971 to 70 billion, the current gold price would be $3,500 per ounce if it were in the era of the gold standard.
Don’t you know, you’re shocked, and regardless of the time cost, how much wealth has the US harvested from the hegemony of the US dollar?
The economic laws cannot be suppressed for a long time, especially the global gold resources are limited. From the collection of the first golden sand to the beginning of 2019, humans have only mined 193,000 tons of gold. The mined reserves are less than 60,000 tons. The match between the price of gold and the value of gold is a matter of time, and it cannot be blocked by the mere 70-year hegemony of the dollar.