People Still Choose Greenbacks Over Gold…but for How Much Longer?

People Still Choose Greenbacks Over Gold…but for How Much Longer?

I’ve spent the last couple of weeks watching live online presentations from gold explorers from the comfort of my couch.

The puppy with an appetite of a small horse accepted her place on the floor.

Given that I’ve spent more time on the conference circuit then I’d like to admit, it’s been an interesting experience.

For starters, I’ve been extremely comfortable. Daggy Ugg boots and cardigan to match. Tucked up on the couch with a laptop and a coffee is definitely a plus…

…as is having the time to immediately put my notes and thoughts into a more substantial format, rather than having to rush off to talk to someone.

It may be a hard sell to get me back on the floor of these shindigs…

Or will it?

Probably not.

Simply put, especially at the industry conferences, it’s the off-the-cuff comments that are so important. Most companies tend to give to the same presentations around the world. Nothing really changes.

But it’s the one-on-one time with CEOs, geos, and money men that counts.

That’s where the guard is dropped, and a natural conversation can reveal small details.

The kind of info that isn’t important enough for a presentation, but can lead to a deeper understanding of the company and their projects.

You just can’t get this online.

Already I’ve had three conferences scratched from my list.

What was meant to be a year of travel madness, trying to get to five events in three months, has turned into a year of staying at home, with very little to do but read a book or watch Netflix.

Of course, we may be shuttered indoors, but the markets haven’t stopped.

Especially gold…

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No replacement for the US dollar — yet

Here’s a scary thought for you.

The past couple of months of unprecedented times have seen people flock to the US dollar…

Which is partly why the US dollar gold price has struggled to stay above US$1,700. That and as I explained over here, low oil prices stifle gold gains.

The oil rebound has no doubt helped the gold price get back over this important physiological point.

Although it’s worth remembering every time the price of gold dips and dives, the price movements are reflecting the market volatility…even if the price isn’t reflecting the inordinate central bank response we are witnessing.

This is especially important.

Physical gold demand is soaring.

Bullion dealers for months were struggling to keep up with orders. The Perth Mint stopped taking orders for cast bars and minted bars back in March. Our other LBMA refinery ABC Bullion advised that wait times were up to six weeks or longer at the time.

This trend played out in gold-backed exchange traded funds (ETFs). The amount increasing tonnage increased to a record high in April this year.

Yet we now live in the world of ‘QE infinity’, which still hasn’t lit a rocket under the gold price.

Or looked at another way, the Federal Reserve Bank added more ‘assets’ to its balance sheet in the past month than they did in the past 100 years.

Yet gold is still stuck in second gear…

However, that shouldn’t surprise you.

If we look back to when the Fed did this over 2008–14, the gold price tended to lag the Fed’s money printing moves, or not move with it at all…

Gold price lags Fed balance sheet

Port Phillip Publishing

Source: Tech Spot

[Click to open in a new window]

But it’s more than just the money printing and the connection to gold.

And this is real the kicker here.

It is the US dollar’s ability to weather this monetary storm.

Unlimited money printing isn’t hurting faith in the US dollar right now.

Rightly or wrongly, investors still have faith in the US dollar.

That the Fed has this ‘thing’ under control. That running the printing press at full steam ahead won’t hurt the US, the history says persistent currency debasement will…

The reality is that the US dollar doesn’t have a genuine competitor right now.

There’s some in the shadows waiting. Gold, crypto…International Monetary Fund (IMF) special drawing rights morphing into some sort of world currency lynch pin.

But absolutely none of them are ready to form the basis of the monetary system…yet.

We witnessed this US dollar dominance a mere eight weeks ago. People dumped gold for greenbacks.

Put another way, in an utter moment of panic, people still wanted what the Fed was printing over a shiny rock with a volatile value.

The fact is, when people panic and dump anything in exchange for greenbacks, that tells us that the perceived safety of the US isn’t lost.

Faith in US currency and the ability of the Fed to maintain the value of said currency still exists.

Once more investors start opting out, then we’ll see the gold price maintain a much higher price point.

Just because gold isn’t soaring today on the back of market instability, doesn’t mean it won’t at all. In fact, you don’t need to take my word for it.

Until next time,

Shae Russell Signature

Shae Russell,
Editor, The Daily Reckoning Australia

PS:  Jim Rickards warns that a total financial collapse is imminent. Learn how to protect your savings and investments…before it’s too late. Click here now.