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Alasdair Macleod: The Fed’s Priorities are Changing in Golds Favor

Tom welcomes back Alasdair Macleod to the show. Alasdair notes that gold prices rose significantly last week, but the miners did not hedge their positions. He belives this is because mining boards have come to realize that it is the weakening US dollar, not gold, that is the cause of the price increase. As a result, they have decided to hold off on hedging their positions. However, energy costs are still a concern as they can rise unpredictably.

The commitment of traders report shows that many derivative markets are held by bullion banks in short positions. The open interest on COMEX is currently high, and Alasdair believes it could increase further. He sees COMEX as a key indicator for the gold market and believes that the bullion banks are facing a challenging situation with significant short positions.

The reverse repos facility provided by the Federal Reserve has seen a decline in usage as money market funds have shifted to investing in Treasury bills, which offer better interest rates. Despite the rising government debt, funding frustrations have been avoided as money market funds find alternatives. However, this could put pressure on the bullion banking community if liquidity dries up and makes it difficult to fund government debt.

There is speculation that a significant amount of gold, half of the world’s total reserves, may no longer exist due to leasing and potential disappearance from the New York Fed. The Fed’s announcement of a dovish pivot has caused the US dollar index to drop, leading to a decline in the yen carry trade. Investors are seeking alternative investments like gold.

The Middle East conflict, particularly due to Houthi-Iranian aggression, could introduce further instability to the credit market. The Federal Reserve’s priorities are shifting to focus on job creation for the upcoming presidential election. This shift has resulted in a fall in profits for the carry trade and a decline in the US dollar’s trade weighted index.

Central banks, including the Federal Reserve, have become more focused on funding governments rather than protecting the public from inflation and devaluation. The banking system, particularly in Europe, is highly leveraged and vulnerable to rising interest rates. The return of free banking is advocated by many, where banks are responsible for their own problems.

The LBMA is experiencing a decrease in market share due to the popularity of places like Dubai, where gold is sold based solely on weight at the gold souk. The LBMA’s efforts to gain preferential treatment from the Bank of International Settlements have been unsuccessful.

Gold’s value has been denied and downplayed by the US government, as a rise in gold prices would not be geopolitically beneficial. The situation in Argentina, with its President Milei is worth watching. Escalating tensions in the Middle East and Ukraine are also impacting energy prices and geopolitical dynamics.

Time Stamp References:
0:00 – Introduction
0:32 – Gold’s Recent Move
6:13 – Reverse REPOs
10:25 – Gold & Rates in 1970s
15:10 – Middle East Concerns
17:20 – DXY & Yen Carry Trade
24:42 – Banking Weakness
30:14 – Central Bank Alternative
38:34 – 2024 Outlook & the East
42:55 – Gold Vs. The Dollar
46:40 – Argentina Thoughts
48:16 – Conflict & Tension
1:00:09 – Russia/China Relations
1:03:27 – Wrap Up

Talking Points From This Episode

  • Governments have used central banks to influence markets and manipulate interest rates, leading to decreased services for small and medium-sized businesses.
  • Central banks have become predatory institutions when dealing with the private sector, controlling the money supply and leading to an increase in government debt.
  • The attempted alliance between Russia and China, and the potential implications for geopolitics.

Guest Links:

Alasdair Macleod is Head of Research for GoldMoney. He is an educator and advocates for sound money thru demystifying finance and economics. His background includes being a stockbroker, banker, and economist.

Alasdair Macleod started his career as a stockbroker in 1970 on the London Stock Exchange. Within nine years, he had risen to become senior partner of his firm.

Subsequently, he held positions at the director level in investment management and worked as a mutual fund manager. Mr. Macleod also worked at a bank in Guernsey as an executive director.

For most of his 40 years in the finance industry, he has been demystifying macro-economic events for his investing clients. The accumulation of this experience has convinced him that unsound monetary policies are the most destructive weapon governments use against the common man. Accordingly, his mission is to educate and inform the public in layman’s terms what governments do with money and how to protect themselves from the consequences.

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