Giant Gold Bars and Talking to Big Money – Trends in the Gold Market
I’m sitting here at the Gold and Alternative Investments Conference waiting for it to kick off.
At the same time, I’m staring at the US dollar gold price chart, looking for a signal or a hint, as to when the metal will bounce back through the US$1,500 mark.
Although I’m not actually worried about it cracking through there again.
It’s just an old trading habit to look for those signs.
Because at the end of the day, today’s gold price doesn’t matter…
A gold bar you can buy a house with
At 3:45am my alarm went off yesterday. I had a predawn flight to Sydney.
As a result, by 11am I was six coffees deep.
Fortunately, I was able to put the excessive bean juice in my system to good use.
A few delays and some Sydney traffic later, I was standing on the door steps of Pallion Group, the parent company of ABC Bullion.
I was about to get an exclusive tour of how they make their bullion bars.
And let me tell you…it was the exact opposite of what I expected.
I expected to see giant smelters and bubbling vats of metal…and instead it was a high-tech operation.
Sure, there were a couple of furnaces, the majority of their processes are much more complex than simply just melting the gold down and re-shaping it.
For starters, there’s this acid less separation machine, that uses pressure rather than chlorine and acids to separate the precious metals from the doré bars.
Not only is it a chemical-free process, it cuts processing time down by two-thirds.
And where toxic chemicals are used, they have what’s called a ‘scrubber’. Which is basically two giant silos where the fumes go into…and then get ‘scrubbed’.
Finally, I got to see the bars being made. In a room not much bigger than a kitchen, there’s a fully automated process, where refined precious metal granules go through melting, casting, stamping, and then individually number every single bar.
But perhaps the best part of all, was where they let me hold a 400 ounce gold bar…worth about $876,000.
Understanding the money flows
In between my giddy excitement of seeing how precious metals transform from a doré, I had an exclusive interview with Nick Frappell.
Now, Nick has the very polished title of Global General Manager over at ABC Bullion, but that belies his three decades worth of experience within the industry.
See, Nick cut his teeth in the gold futures and arbitrage market. And has spent his entire career dealing with institutional money that buys and sells gold bullion…
Interview with Nick Frappell from ABC Bullion
Source: Agora Financial Australia; Pallion Group
Here we are, smack bang in the middle of the ABC Bullion refinery…and in those vats you see is about four tonnes of silver.
Because of Nick’s extensive experience with the futures market, we talked about how investors can interpret that…and what investors can learn from how big money moves through bullion.
Don’t waste time thinking about 1,500
Today’s takeaway isn’t about which gold miners will track the physical price of gold.
My analysis for you this afternoon is much bigger than that.
With the Gold and Alternative Investment Conference moments away from starting, I’d thought I share some insight with a gold expert from the other side of the world…that is that today’s price of gold doesn’t matter.
And that comes from a gold expert on the other side of the world.
Tocqueville Gold Fund head John Hathaway said in a podcast from a few months ago, that what gold is going for today is irrelevant, ‘Don’t waste time thinking about 1,300.’
Even though the gold price has been above US$1,300 for a many months, his words are still relevant now.
Even today, don’t get fixated on 1,500.
There are much bigger trends happening in the gold market that investors should be paying attention to…
Hathaway cites a September 2018 interview where billionaire hedge fund manager Ray Dalio says the greenback could fall as much as 25–30%…in a couple of years from now.
A collapse in the US dollar by that amount is basically the world’s way of saying we have lost faith in the linchpin of the monetary system.
It would be a catastrophic event for markets…but an enormous boost for gold.
It would perhaps put the yellow metal on a trajectory not seen since the 1970s gold window.
The US dollar has an inverse relationship with gold. The stronger the US dollar, the weaker the price of gold. The weaker the greenback…the higher gold soars.
The big picture
This journey into understanding the gold market really began on Tuesday.
All because one reader wrote in and asked which was better: Gold exchange traded funds (ETFs) or gold miners?
But as you can see, the gold market is much more complex than deciding on one stock over another.
Don’t let complexity deter you from buying either a gold ETF or a gold mining stock, either.
The point is to pay attention to the bigger trends unfolding in the market and apply that information to your investing decisions.
Global demand for gold is increasing, and the supply of the metal isn’t. Plus, there are the complications of the US dollar and related economic policies.
These factors are very bullish for the price of gold.
This means any gold-related investment may rise significantly in the years to come.
Until next time,