How Saudi Arabia Drives the Gold Price?

The wealth built on oil in Saudi Arabia is legendary. For a long time, the kingdom has been preparing for a post-oil era. There are hardly any sectors of the economy or major players in big business in which the Arabs have not been invested for a long time, constantly seeking new investments.

Officially, the kingdom ranks 15th in gold reserves with 3,231 tonnes (as of December 2023), but the official declaration of gold reserves may not be 100% reliable in all countries.

As the USA has recently refrained from disclosing its gold reserves, and external audits of US depots are often very difficult, it is quite possible that there are less than the assumed 8,133 tonnes from 2023.

It is assumed that China and Russia possess significantly more yellow metal than they officially report.

Gold remains the only money, free from debt and inflation. The old JP Morgan made this clear.

But why the thesis that the Saudis drive the gold price? After all, they do not stand out through disproportionate purchases, nor are they among the producers.

Nevertheless, they leverage the gold price by devaluing paper money, particularly the dollar and the euro, through their financial and global political activities.

One factor is the petrodollar. Over 50 years ago, the USA (after abandoning the gold price peg) and the royal house agreed to primarily settle their oil in dollars. In return, the USA promised military protection and access to technologies.

All the dollars the Saudis received for their oil were exchanged at the Fed for US bonds. They received and still receive ongoing interest and eventually the principal amount. This made them a significant financier of the USA; they were and are already a major supplier of black gold. However, they were increasingly troubled by importing inflation with the dollar. They preferred to sell off US bonds, reducing their holdings, and furthermore, to move away from the petrodollar by selling their oil in other currencies. Understandably, they were also disturbed by the fact that the USA, through sanction mechanisms, dictates to whom one may sell oil and to whom not.

The fact that they joined the BRICS alliance in 2024 is also a strong signal towards independence.

All these are not new issues, but now it gets interesting.

While the EU and the USA have been talking for some time about expropriating Russian assets, there is now a backtrack. The current discussion is about “merely” freezing the payment of interest and profits. What and who is behind this?

Russia is a significant creditor of the USA and European countries through its holdings of government bonds. They have thus provided a large sum of loans, which are nothing more than bonds. This money and the due interest are to be withheld from the Russians because they do not comply with the political demands of the debtors.

While it might be a windfall for the cash-strapped European and American treasuries, it increasingly cuts them off from the trust that underpins monetary transactions. And that worldwide. Thus, besides Russia, China and other BRICS countries, as well as England and other industrial nations and partly allies, are observed diversifying their currency reserves at the expense of the dollar and moving further away from the still-world-leading currency. While in 2010, 75% of global trade was settled in dollars, currently it is about 55%! For countries like the USA, which have more debt than GDP, this is a severe blow. Not only do they have to pay significantly higher interest rates to get fresh loans, which are then financed by new loans, but a debtor who uses his debt as leverage for compliance is also less likely to receive money from solvent actors who are unwilling to risk their political independence.

On July 8, 2024, news agencies worldwide reported that Saudi Arabia had announced it would sell off its European bonds if Russian assets were expropriated. This would particularly hit the French hard, who would lose a reliable creditor. With a national debt of over 110%, 50% above the Euro stability criteria, this is a harsh blow. The simple path of new borrowing would have to be replaced by financial restructuring, but the socialist majority in France’s political system knows as much about business economics as a donkey does about algebra.

The French cannot turn to the Russians and Chinese, and they do not trust the USA themselves.

By turning away from the Western credit and sanctions path, the Saudis ultimately promote the rise of real inflation-free exchange mediums like gold, goods, and services. The steady rise in the gold price is quite convenient for them. Because for gold, they can get anything they need worldwide.

Joining BRICS, which is known to be strategically working on a gold-backed trade currency, fuels this process and also shows the future economic orientation of the desert kings. The bulk of the world population and thus future consumption and prosperity lie neither in North America nor Europe. The action is in Asia and the Southern Hemisphere. Russia was forced onto this path and, with only 15% national debt and growing GDP with decreasing import dependency from the West, has no motivation to make a 180-degree turn. When the great partners from the West blow up their pipelines and cut them off from the payment system, they seek new horizons and have already found them with China, India, the Arabian Peninsula, Africa, South America, and many other Asian countries. With a reliable supplier, even during political conflicts like in the Cold War, who also has a full range of natural resources in abundance, one is happy to trade.

If more and more countries decouple from the credit financing system and trade with hard exchange mediums, this naturally means a significantly higher weight for gold. Credit currencies might possibly only be traded with large premiums to offset the many risks.

The military might of the USA loses its terror. Whoever presses the red button first dies second but does not survive; this rule applies in the nuclear age.

The financing of over 800 (!) military bases plus aircraft carrier fleets as visible power presence increasingly bursts the US budget, just like the proxy wars overseas.

In anticipation of a collapsing financial system, not only states but also companies and private individuals are increasingly securing their ships.

So that you are not left in the rain when it crashes, continuously stock up on gold and silver; this has financially secured people well for thousands of years, today and especially in the future.

A New Euro Crisis on the Horizon?

No, there is no new Euro crisis, just another hotspot in the Euro crisis that has been ongoing for more than a decade.

Flashback

Fifteen years ago, Greece was openly financially bankrupt; the national debt could no longer be serviced. Do you remember what Mrs. Merkel exclaimed in the Bundestag? In essence: If Greece falls, the Euro falls; if the Euro falls, Europe falls.

As always, regardless of who, when, or what mistakes were made, it doesn’t matter now—we must save Greece. This was deemed ALTERNATIVELESS!

The ominous word, the evil spirit, was out of the bottle. The ax at the root of democracy is the abolition of discourse, the declaration of inevitability, and the elevation of oneself above democratic processes at both the national and European levels.

But it wasn’t about saving Greece, which should never have been admitted to the currency union or should have been expelled long ago according to Euro criteria.

Several large banks, especially the proud Deutsche Bank, which later had to beg for state money, would have fallen with Greece. Not least because of unsecured loans for Greek national defense. With loans from Deutsche Bank, primarily German armaments were then purchased. A win-win situation, because the risk was neatly and reliably transferred to the European taxpayer, though potential profits were not.

Reliable and absolutely predictable, then ECB chief Mario Draghi, a man of money who previously served at Goldman Sachs, solved the problem with even more problems.

A rescue package became over ten. How much money was sunk in total… people don’t like to talk about it. Continuity was then ensured by Mrs. Lagarde, a woman convicted in France of bribery and breach of trust involving over 40 million euros, yet unpunished, who France received as compensation for Mrs. von der Leyen as chief. Merkel killed two birds with one stone: Ursula was removed as a competitor for the next chancellor candidacy and was also removed as a festering wound through corrupt incompetence in the Ministry of Defense.

The ECB bought and continues to buy bonds of European states and companies unrestrainedly, thus doing exactly what it is not allowed to do—financing!

Where there is no plaintiff, there is no judge; the good stands above the law. It’s just a pity that gangrene can’t be cured with a band-aid, even if you hide the patient.

Mrs. von der Leyen was just handpicked for the continuation of her presidency, so prosecutorial investigations for corruption were only a nuisance, thus promptly suspended until December 6, 2024. Ursula promises, as we know, everything to everyone who elects her, only to do what those who pay the most want.

Now, however, trouble is brewing in the second-largest Eurozone country. Thanks to expensive voter buying, France is indebted up to its hair, 113% of GDP. According to European stability criteria, this should never have happened, but the Frenchwoman at the helm of the ECB could not tackle the ruling powers in Paris out of sheer gratitude for her position.

When asked how she could retain her high EU position with her lousy election result, K. Bahley (SPD) said in essence: It doesn’t matter, different laws apply in Brussels… than the pesky democracy? Exactly.

Experts say the debt issue with France is difficult because France is too big to be saved. Macron may have already made his exit, perhaps returning to Goldman Sachs?

Too big to save? Not in Europe! Because remember: if France falls, the Euro falls; if the Euro falls, Europe falls. The European peace and prosperity project.

In my opinion, it will turn out as it always has. France will be saved, make a few reforms, the consequences of which will, of course, be blamed on the possible new President Le Pen, thus having the “right-wing populist” cornered as well, perfect.

The Euro will become even sloppier, good for the weak dollar, a win-win.

And gold? It will retain its value, even if more and more colorfully printed paper has to be shelled out for it. As the only sustainable store of value, it cannot be expropriated with dirty tricks, unlike securities, real estate, or bank deposits.

Therefore, stay alert and do the right thing for yourselves!

www.goldinvest-edelmetalle.de/en

Digital or physical, how would you like it?

There has recently been real hype regarding cryptos on social media and the financial press.

The crypto world can be roughly divided into three areas:

  1. Currencies that are intended or are being developed as means of payment
  2. Network solutions for crypto transfer or as an interface to the classic currency world
  3. Meme coins (gamer coins with no practical use)

The fact is that any decentralized money such as crypto, goods or precious metals attacks the foundations of the classic banking model of creating, distributing and lending money as a medium of exchange. It also takes away some of the power from governments that can and is exercised through traditional payment transactions. The increasing move away from the US dollar as a trading currency by many countries is causing problems for the USA. A good part of American prosperity has to do with the US dollar as a world trade and reserve currency. The fact that this currency is also used politically to sanction and even expropriate politically undesirable users is like letting a wolf into a flock of sheep and locking a dog and a shepherd in a cage.

A global movement away from the US$ and its bonds (loans to the USA) has been started, which is manifesting itself and seems irreversible. Even partners in the Western Hemisphere are quietly divesting from US$ bonds and diversifying, especially into gold!

China, once the largest US creditor, gratefully ceded this role to Japan, and since then the Japanese yen has been falling at a breathtaking rate, massively threatening its own economy and the prosperity of the population.

With its exponential debt policy, devastating interest rate increases and the resulting banking problems in its own country, the USA has created such monstrous bubbles that the banking crisis of 2008 could seem like a gentle breeze.

Whether Russia, China, India or Saudi Arabia – to name just the big ones – exchange goods for national currencies or gold. Major players are bringing their gold reserves home from US warehouses; they simply lack confidence in the US’s ability and willingness to deliver. There is even the question of whether the USA actually still physically stores the foreign property or whether it first has to buy the gold on the market before it can be delivered. Which of course could boost the price of gold. The USA recently did not provide any information about its own gold reserves. Is the emperor standing there without clothes? What is certain is that the funding heavyweights China and Russia have turned from exporters to importers. Since both nations are not known for being erratic but rather for taking long-term calculations, the question arises as to what the plan is behind it. A gold-backed national or trading currency, as the BRICS+ states openly declare? If raw material giants like Russia and China, or the economic power of China, gradually decouple their exports from the dollar and trade against a backed currency, the world’s financial monopoly would shift. Nothing less than that is in the room.

What I have highlighted here is just the big picture. No other important facts are mentioned here.

And this is where what is hyped by many as the salvation of humanity comes into play. Cryptocurrencies, especially Bitcoin, are currently trading at over $70K against the US$.

Here are the most important arguments for Bitcoin (BTC) in cryptospace:

  1. There are only 21 million BTC to be created, of which over 19 million have already seen the light of day. The increasing interest is met with a strictly limited offer.
  2. There is no central administrator in the form of a power or central bank, each owner of BTC is his own bank.
  3. Transactions can be carried out anonymously between owners at lightning speed and securely.
  4. The BTC is digital gold with the difference that, unlike gold, there is no unlimited new mining.

And here are the most important arguments in cryptospace against gold:

  1. Gold is very inflationary because thousands of tons are mined every year and there would be practically no upper limit as a benchmark.
  2. Gold has no practical use, is difficult to transfer, dangerous to store and can be expropriated and banned by government decree.
  3. Mining gold on other planets will create a gold glut and dramatically reduce its value.
  4. At any time, a huge comet with a high gold content could fall on Earth and lead to an oversupply.

Now money, or whatever a means of payment is called, is primarily tied to a single basic value of the user – TRUST!

If the user withdraws their trust from the money, it melts like ice in the sun. The trust of the largest currencies, the USD and the Euro, is being massively undermined by their “guardians” through the extensive printing of unbacked money. Economic, political or geopolitical problems are not even remotely solved, but are literally thrown at with fresh money. Drastic price increases, for example for energy, raw materials and food, are the natural consequence. The stock markets are turning freely in the face of artificially excessive liquidity; a few large tech stocks dominate the indices on Wall Street. Capital is marching sharply away from volatile government bonds and into real assets. And the saving star in the darkening financial sky should be BTC.

What is BTC anyway?

Bitcoin is a digital currency that features a decentralized, virtual ledger (a so-called “Blockchain”) is used to record transactions that take place on its network. Anyone can send, receive and hold Bitcoin as the network does not require permission from governments or banks to function. Users only need a wallet, a so-called digital “wallet,” to store and send cryptocurrencies, and not a bank account.

Can this work and replace our money?

Our money can probably replace it if everyone plays along. Until then, BTC will only benefit me if I can monetize it. Money is a recognized, partly physical medium of exchange. I can exchange goods/services for money and money for goods/services worldwide.

The masters of money, i.e. banks and governments, would have to recognize BTC as a parallel or replacement currency, worldwide! How likely this is can be answered by the interested reader from the following questions:

  1. Do states voluntarily give up control of their centralized, universal medium of exchange?
  2. Do states give up controlling capital flows between states, banks, businesses and consumers?
  3. Do states give up the possibility of “creating money” to finance their budgets or pay off debts?
  4. Do states give up their fiscal policy power to enforce their own interests?

There are certainly other questions, but without a clear YES to questions 1-4, a decentralized world currency that cannot be expanded at will will be possible.

It was already clear by the global financial crisis of 2008 that our monetary system had reached its limits and was in need of restructuring. Now, 16 years later, the FIAT monetary system still exists. National debt has multiplied, as has that of consumers. A wave of inflation has hit consumers. It’s still there, even if it’s no longer talked about and glossed over. In order to drown out the crunching and crashing, the music was played louder on the TITANIC. The casino runs 24/7.

The approval of exchange-traded ETFs denominated in BTC gives the appearance of the implementation of BTC into the financial system. This is a huge step towards popularizing this digital currency.

I’ll explain why this could be a Trojan horse of gigantic proportions in the next post.

For everyone who prefers physical precious metals to digital or paper currencies, all common bars and coins are available for investment in our online shop and in the counter shop in Berlin and Vienna.

www.goldinvest-edelmetalle.de/de