Gold Digger: Some gains given up… but we’re heading to a ‘global gold standard’ says Forbes

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• The price of gold has dipped back below its soaring level of US$2,400+
• But a particularly bullish narrative is forming believes Forbes  
• ASX gold stocks performing over the past week include: AGC, NMR and NPM

The recent, seemingly unstoppable gold price has lost a bit of its lustre as we lurch towards the end of a macro-stained week. Thanks for ruining the party, Fed. Again.

You’ll know what’s meant by that, but here’s what we mean in a nutshell:

Stocks and generally most markets, including the commodity-tastic subject of this column, cooled off this week as the threat of interest rate hikes from the US Federal Reserve reared its ugly head again after a better-than-expected unemployment report from the US Labor Department.

The main trigger was the higher than anticipated PMI (Purchasing Managers’ Index) data. Higher bond yields has also been a factor.

“The data put the US economy back on course for another solid GDP gain in the second quarter,” said Chris Williamson at S&P Global Market Intelligence.

Meanwhile, interest rate hikes from the Fed certainly aren’t baked in, nor on the other hand are the much-hoped-for cuts, either, it seems.

On a third hand, however, Jerome Powell and co treading a conflicting line between boring investors and traders to tears while also keeping them on the edge of their seats is definitely still on the menu for the foreseeable while rates are kept on hold.

The latest gold prices, then:

After recently soaring at an all-time high above US$2,400, we’re back down to the also-not-terrible US$2,330s zone. Meanwhile in Aussie dollars gold is changing hands $3,540 at the time of writing.

There’s been a slight intraday uptick of 0.2%, so at least a bit of a bounce since this time yesterday.

But generally speaking, gold stocks were struggling today with the overall dip in bullion this week.

Time for something more bullish…

The possibility of a global gold standard looms?

Seems like an outlandish thought, that. Or does it?

Not according to Steve Forbes – chairman and editor-in-chief of Forbes Media.

“It’s hard to believe, but the world is beginning to lurch toward a gold-based monetary system,” wrote Forbes in an article published on May 21.

“This, despite the fact that the historical gold standard is held in almost universal contempt by economists and financial officials.”

The idea of a gold-based currency has plenty of critics, as Forbes notes, due to the availability and value of gold being a fluctuating beast, and therefore supposedly not possessing the sort of price stability needed to sustain a healthy economy. Imagine the inflation when gold’s mined from asteroids, etc etc.

But Forbes counters with the reminder that “the US was on a gold-based system for 180 years until the early 1970s.

“We never had inflation when the dollar’s value was tied to the yellow metal, and the US experienced the greatest long-term economic growth in human history.”

Ever since President Richard Nixon ditched the US gold standard in the 1970s, the US economy’s average growth rates have reportedly declined by around 33%.

“Median household income today would be at least $40,000 higher if our traditional pattern of growth for those 180 years had been maintained,” wrote Forbes. “Nonetheless, the contumely and scorn for a gold-based monetary system is universal.”

So what makes Forbes believe the world is possibly heading to a new global gold standard monetary system? To paraphrase a bit in bullet-point form:

• Central banks buying gold at record levels. “Buyers include China, India, Russia and a number of other nations such as Poland. These countries are reacting to growing doubts about the long-term value of the dollar, which in turn is a symptom of the perceived decline of the United States.”

• Crypto. Wait… what? Forbes sees the rise of digital money as another clear indicator of turning tides and thought in the world of finance. He describes Bitcoin and crypto as “a high-­tech cry for help in the face of increasingly unreliable fiat currencies”, adding:

“There are a handful of cryptos tethered to gold, but they haven’t yet achieved the credibility or built the mechanisms to be widely used. Nonetheless, as governments flounder in their monetary policies, that will change.”

• Spiralling debt, in the world’s biggest economy (the US), and globally, which Forbes says “will inevitably kindle crises that cannot be easily extinguished… Total debt in the world today is more than $300 trillion, an astonishing three times global GDP.”

• And BRICS nations, led by China. BRICS US de-dollarisation efforts seem to be gaining traction, believes the analyst, noting that “their monetary machinations, so far, have amounted to little, but that’s starting to shift”, pointing to India’s recent experiments with gold-backed government bonds.

And, actually, just on that… this…

The IMF is down with Zimbabwe’s gold-backed move

The International Money Fund has reportedly described Zimbabwe’s recent introduction of a gold-backed currency – ZiG – as an “important” step.

The IMF is now publicly supportive of a gold-backed currency.

Many did not have this on their bingo card.

The foundation is changing.

— Gold Telegraph ⚡ (@GoldTelegraph_) May 23, 2024

“The introduction of ZiG represents an important policy action accompanied by several complementary policy changes – including monetary, exchange rate, and fiscal policy measures,” replied a spokesperson for the Washington-based lender to Bloomberg‘s questioning.

Forbes, meanwhile, noted the insane hyperinflation and instability of the southern African country, caveating:

“Deep skepticism is warranted that this government has the discipline to make such an arrangement work. But the move is a sign of things to come.”

ASX Winners & Losers

Here’s how ASX-listed precious metals stocks are performing, circa 4pm May 24:

Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop.

Stocks missing from this list? Please email [email protected]

Notable weekly winners 

Australian Gold and Copper (ASX:AGC) +73%

Native Mineral Resources (ASX:NMR) +64%

NewPeak Metals (ASX:NPM) +48%

Koonenberry Gold (ASX:KNB) +31%

Ausgold (ASX:AUC) +29%

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