Gold Climbs, but Not Because of Trade Wars
Gold Climbs, but Not Because of Trade Wars by Mark O’Byrne for Gold Core
Gold is moving higher and steadily so. It’s hold north of $1,400 is impressive and worrying at the same time. We have seen record flows of late, with long term safe haven demand rising a pace. It was Germany last week and China this week, the flow of disappointing indicators is now gathering pace.
China recorded the worst quarterly GDP number in 27 years. Gross Domestic Product (a poor measure of anything TBH) quarterly growth came in at just 6.2%, from 6.4% in the first quarter. German sentiment plummeted last week as inflation fears started to permeate throughout the economy.
China’s GDP growth problems are significant especially in light of the enormous debt load that has been built up there over the past 20 years. Her debt has grown to enormous proportions and all this while her economy is still heavily reliant on foreign demand. Domestic consumer demand is still languishing in the 40% of economic output range whereas more advanced economies, such as the US, have domestic demand up at 70%. This situation reminds us of that Buffet gem, “You only find out who is swimming naked when the tide goes out.”
As polarising as Trump and his trade-war with China are seen, his logic in taking China to task might actually be the US’s best move, especially if China’s ascendancy is allowed to develop unchecked, the thinking being it is better to act now while they can as opposed to later when they can’t.
But one can not help but see much of the trade-war debacle as part of a manufactured narrative to distract elements of the worlds nodding donkey like press away from the uncomfortable fact that our modern global economy is almost wholly based on a 10 -20 year old monetary experiment go awry; that is the global coordinated currency debasement by many of the worlds central banks – where interest rates are closely managed, money is freely printed and pumped, via opaque official sector operations, into debt and equity markets at record levels.