Gold’s Exponential Direction In Simple Speak Vs. Fed-Speak

Matthew Piepenburg, Partner at VON GREYERZ, sits down with Charlotte Macleod of InvestingNews at the recent Rule Precious Metal Symposium in Florida to unpack the core themes and drivers in the current and unfolding gold market.

The last time Piepenburg met with Charlotte was in Vancouver in January of this year. At that time, gold was breaking record highs, and the mood was almost too euphoric. Since then, gold has corrected significantly, and Piepenburg places the recent price moves in perspective with a rational understanding of the inevitable direction of gold in a financial system marked by now undeniable debt pressures and hence fated currency debasement.

The interim price declines are explained by three major forces, namely:

1) forced sales from sovereigns seeking liquidity in a time of war as well as

2) the algo-signals hitting the hedge fund and ETF space following

3) the COMEX’s open (and shameless) price manipulations on “Silver Friday” of late January.

Piepenburg also de-mystifies the current argument that rising and positive yields are a headwind for “yield-less” pet rocks. As he carefully explains, yields today are in fact negative rather than positive when measured against honest rather than “official” inflation metrics, which are an open lie, particularly within the once-sacred U.S. bond market. Such desperate acts of misinformation have led many investors to be shaken out of gold at precisely the wrong time. 

Piepenburg recognizes that bond markets may seem “boring,” but they are nevertheless essential. As yields rise, the cost of sovereign debt expenses becomes increasingly unpayable unless currencies are debased to settle debt costs. This debasement, woefully desperate, is a much longer-term and obvious case for anti-fiat stores of value like gold, whose price direction rewards patient investors who understand wealth preservation over short-term price action and speculation.

Piepenburg further reminds that falling trust in Uncle Sam’s 10-Year UST has massive implications. The UST is being openly replaced by gold as the new and more trusted global collateral, a fact which Piepenburg evidences with data rather than hyperbole. This reality makes gold less of a “debated asset” and far more of an essential asset in what he describes as a “sea change” in the global monetary and trade systems. Piepenburg gives particular attention to China’s June-July announcement to create a new clearing and settlement system (with the help of Hong Kong) to price gold on physical rather than paper forces of supply & demand. This, along with the other forces Piepenburg references, are screaming signals of fairer and higher price discovery in precious metals in the years to come.

Piepenburg ends this critical discussion bluntly, unmasking the dove behind Warsh’s “hawkish mask” while de-mystifying his almost comical and public pronouncements on inflation forces and the Fed’s so-called “solutions.” Piepenburg then closes the conversation with a clear perspective on silver’s recent pains and future progression.