All eyes are on Syria. In the past week, whether it was in Washington, at the G20 summit or on a cable news network, debate has raged over whether the United States should take military action, and if so, what exactly that action should be.
It’s a critical story to follow, one that will have massive ramifications for our nation and the rest of the world. But if/when the United States initiates action, the response from the markets is predictable… because the same things always happen in the markets when we go to war: there will be a flight from equities and into “safe haven” assets, with gold and silver being some of them.
With all eyes on Syria this past week, three critical events have flown under the radar. These demand your attention:
1. BRICS nations thumb their nose at IMF and United States
The BRICS nations (Brazil, Russia, India, China and South Africa) have announced they’ll fund a new development bank worth $100 billion, with the stated objective being to finance joint development ventures. It’s a bold and powerful move from a group that accounts for 43% of the global population and 40% of global currency reserves, and one that will certainly increase its clout on the global stage in the coming years.
This new bank is a first move by these nations’ leaders to circumvent onerous rules that has allowed the United States to wield veto power over the initiatives that they propose within the IMF. Now, with the BRICS starting to simply eliminate the United States from the picture, it’s a reason to consider America’s stature in the future as these nations continue to grow and demand more influence.
2. Yuan joins list of 10 most traded currencies
Taking the headline at face value, one wouldn’t think there’s much reason to get flustered about the yuan placing ninth on the list of most traded currencies. But if you consider that trade in the yuan has tripled in the last three years – and that despite the massive regulations that the Chinese government has placed upon the currency – the ascendancy of the yuan is nothing less than staggering.
There are few indications that the pace of the yuan’s growth on the global stage will slow. If anything, as China loosens controls on international investment, Anil Sawrup believes “companies will eventually see the renminbi on par with the euro.” Say this prediction proves true the next time this report is released in 2016, and the yuan is on par with the euro. Next stop for China’s currency after that… the dollar?
3. Poland nationalizing private pension funds
Across the world, as failing nations desperately try to remain solvent, governments are playing an increasingly dangerous game of dipping into their citizens’ savings. First Cyprus confiscated bank deposits. More recently Detroit has proposed going after the pension plans of municipal workers. And now Poland has announced that they will nationalize the private pension funds of their citizens.
It’s all in the name of reducing Poland’s public debt, which in turn will allow the nation to borrow more money. But that’s just for today. What happens in the not-too-distant future when the Polish government needs more money to reduce its debt again? It’s a dangerous and slippery slope, and when it comes on the heels of Cyprus and Detroit, the precedent is one that should send chills down the spine of citizens around the world.
The crisis in Syria certainly demands our attention, and we know that you are following events from recent weeks closely. But keep an eye on these other events too; they could have massive ramifications on our futures. And if you would like to discuss in more detail how they could affect the future of your personal savings, give us a call – we’re here to help.
Precious metals on the move
London Fix PM price at week’s end, and change over previous Friday:
- Gold: $1,387.00, down 0.6%
- Silver: $23.05, down 2.5%
- Platinum: $1,498.00, down 1.1%
- Palladium: $699.00, down 3.9%
In the news
War and the return of the gold bulls
“I own oil, I own gold, I own things like that, and if there is going to be a war, and it sounds like America is desperate to have a war, they’re gonna go much, much higher. Stocks are gonna go down, some of the markets that I’m short are already going down, commodities are gonna go up. I mean, yeah, some of the things I own all make a lot of money. I’m not particularly keen on war, I assure you, but it sounds like they want it.” – Jim Rogers (link)
China aggressively encouraging population to buy gold and silver
“I am still surprised by readers who are unaware that CCTV (China Central Television) continues to run an aggressive campaign encouraging its 1.362 billion people to add physical gold and silver to their savings. As of July 2013 the number of silver spots on CCTV have increased dramatically. Consider: Well over one billion people that boast an average savings rate of 30 to 40 percent… that represents a veritable plethora of silver buying! Clearly the people of China will succeed where the Hunt brothers failed. If two Texans could drive the price to $50 an ounce, what can millions of Chinese savers do?” – Larry Myles (link)
With ‘Trump Bubble’ over, is gold a buy?
“You could go through life buying when others are selling and selling when others are buying, and do quite well. The mechanics that drove gold up, and then drove it down, may be the same as those that have driven up stocks and bonds. The real appeal of gold as an asset is that in the past it has often tended to do well when other assets, such as stocks and bonds, have done badly. I am frankly alarmed by how many people have bet the ranch on stocks and bonds, quite oblivious to the risk that both might disappoint, and badly. Some very sensible investors believe that as a result you should generally hold 5% or so of a portfolio in bullion. This is true even for those running a simple ‘passive’ portfolio, where they set an allocation and just rebalance once or twice a year.” – Brett Arends (link)
Precious metals off to the races
“Gold stands to benefit no matter what the Fed does. If quantitative easing continues – which is where I’m placing my bets – then inflation will continue to rise and investors will need hard assets as a safe haven. Even if the Fed does taper before year-end, the ensuing carnage in the bond market will cripple the housing market and the broader economy, forcing the Fed to reverse course. An about-face on tapering will cause the Fed to lose face with the markets, as the fragility of the phony recover will finally be laid bare.” – Peter Schiff (link)
Chart of the week
Flight to safety? Gold since August 21 chemical attack in Syria