We use cookies (including third-party cookies such as Google) to remember your site preferences and to help us understand how visitors use our sites so we can improve them. To learn more, please see our privacy policy and our cookie policy.

To agree to our use of cookies, click 'Accept' or choose 'Options' to set your preferences by cookie type.

Options Accept
BullionVault

CHARTS

  • English
  • Deutsch
  • Español
  • Français
  • Italiano
  • Polski
  • 日本語
  • 简体中文
  • 繁體中文
  • Daily audit
  • Help
  • Contact
  • Deposit
  • Login
  • Open account
  • ABOUT US
    • About BullionVault
    • In the press
    • Reviews
    BUY/SELL BULLION
    • Vaulted gold & silver
    • -Live order board
    • -Daily Price
    • Coins for delivery (UK)
    INVESTMENT GUIDE
    • Guide to gold
    • -How to buy gold
    • -Gold investment
    • -Gold investment plan
    • -Investment insurance
    • -Compare asset performance
    • Guide to silver
    • -How to buy silver
    • Guide to platinum
    • -How to buy platinum
    GOLD NEWS
    • Gold news front page
    • -Gold price news
    • -Opinion & analysis
    • -Market fundamentals
    • -Gold/Silver Investor Index
    • -Infographics
    CHARTS
    • Gold price
    • Silver price
    • Platinum price
    • Price alerts
  • Login
  • Open account
  • BUY/SELL BULLION
  • Vaulted gold & silver
    • ⤷
    • Live order board
    • Daily Price
  • Coins for delivery (UK)
  • INVESTMENT GUIDE
  • Guide to gold
    • ⤷
    • How to buy gold
    • Gold investment
    • Gold investment plan
    • Investment insurance
    • Compare asset performance
  • Guide to silver
    • ⤷
    • How to buy silver
  • Guide to platinum
    • ⤷
    • How to buy platinum
  • GOLD NEWS
  • Gold news front page
    • ⤷
    • Gold price news
    • Opinion & analysis
    • Market fundamentals
    • Gold/Silver Investor Index
    • Infographics
  • CHARTS
  • Gold price
  • Silver price
  • Platinum price
  • Price alerts
  • ABOUT US
  • About BullionVault
  • In the press
  • Reviews
  • Help
  • Contact
  • Daily audit
    • English
    • Deutsch
    • Español
    • Français
    • Italiano
    • Polski
    • 日本語
    • 简体中文
    • 繁體中文

Gold News

Live support

NEED HELP? ASK US NOW

Search form

Gold News front page

Gold Price News

Gold 'Shall Rise in 2021' as Yellen Vows to 'Act Big' But 'Inflation Is Dead' as Covid Crisis Worsens

More...

Gold Investing In Depth

Learn about gold bullion bars

Learn about gold bullion coins (and costs)

Gold investment: Why & how?

Gold Investment Analysis

  • Latest Gold Investor Index
  • Diversification: Gold as investment insurance
  • 40-year Asset Performance Comparison Table

Gold Articles

Opinion & Analysis

Gold Price News

Investment News

Gold in History

Gold Books

Gold Investor Index

Gold Infographics

Archive

  • January 2021 (14)
  • December 2020 (24)
  • November 2020 (23)
  • October 2020 (25)
  • September 2020 (25)
More...

List of authors

Inequality, Hong Kong and Gold

Thursday, 11/21/2019 09:01

Bullish on bullion as protests spread...

WHAT do Hong Kong, Chile, Ecuador and Lebanon all have in common with one another? asks Frank Holmes at US Global Investors.

The answer I happen to be looking for is that these countries, among others, are seeing mass protests at the moment.

Hong Kong's appears to be the longest-running at five straight months now. With so many of them happening around the world all at once, it raises the question: Are they related?

That depends on who you ask.

If you get your news from the "mainstream" media, you're probably being led to believe that the protests are all about income inequality, and that protesters are laying their grievances solely at the feet of the wealthy.

Although this may be part of it, the inequality narrative completely ignores the fact that the demonstrations are, at the end of the day, in response to government incompetence and failed socialist policies. If you look across the spectrum of global unrest, you'll find that the common denominator is not billionaires and other successful people but corrupt, power-hungry bureaucrats and politicians.

In Hong Kong, for instance, residents are demanding democratic reforms and greater autonomy. In Lebanon, it's corruption, a lack of accountability and bank secrecy laws that allow officials to steal tens of billions of Dollars in public funds. The protests in Chile were sparked by a hike in subway fare in Santiago, the nation's capital.

Sadly, but not surprisingly, all of this is downplayed in the media. Corruption and mismanagement don't get the blame for the unrest. Instead, it's the rich who are cast as the villains suppressing the masses.

Why? Because it reinforces some people's confirmation bias against millionaires and billionaires.
Without the inequality narrative, far-left lawmakers in the US have no other grounds to raise taxes and push for more government control and socialist policies – all in an effort to "solve" inequality.

But this is faulty thinking. What's more, it adds fuel to the anti-business, anti-wealth sentiment that's destroyed otherwise thriving economies such as Cuba, Venezuela and others.

In some cases, the bias only seems to be getting nastier. Last week, progressive presidential candidate Elizabeth Warren's website began selling $25 mugs that have "BILLIONAIRE TEARS" written in bold text on them.

"Savor a warm, slightly salty beverage of your choice in this union-made mug as you contemplate all the good a wealth tax could do," the website reads.

Such disdain for the most successful among us is a slippery slope that leads only to economic and financial stagnation, not to mention mediocrity.

Socialist policies that punish entrepreneurialism and innovation have created additional uncertainty for explorers and producers of metals and other materials that all of us depend on.

A couple of weeks ago, I was in Lima, Peru, attending the Mining & Investment Latin America Summit. I heard from a number of industry leaders that mining in South America has become more challenging in recent years.

One of the biggest reasons why is that the burden for taking care of local communities has, in many cases, fallen on the miners' shoulders. Venezuela's corrupt socialist President Nicolas Maduro continues to destabilize and finance radicalism throughout the continent using revenue from narcotics, and mining companies often end up having to pay the price.

Chilean lawmakers, for instance, are considering a new tax on mining and mineral extraction to address the country's social unrest I described earlier.

As you can imagine, this could discourage speculation in the junior mining area. Think of it this way: What if your gambling or lottery winnings were taxed at 50% or higher? I suspect there would be fewer people headed to Las Vegas or buying lotto tickets.

But Latin America isn't the only region causing uncertainty for miners. Late last month, British Columbia (BC) became the first Canadian province to pass legislation based on the United Nation's Declaration on the Rights of Indigenous Peoples, or UNDRIP. Intended to end "discrimination and conflict" and ensure "more economic justice and fairness," UNDRIP has some BC-based mining companies wondering if their rights to extract minerals on lands once inhabited by Native peoples could be undermined.

Be that as it may, I'm still extremely bullish on metals and minerals. Every year, some 140 million people are born, and each one of them will need a fresh supply of commodities for their homes, automobiles, appliances, smartphones and more. It's been estimated that each American requires an average 38,449 pounds of various minerals every year.

Also driving my bullishness right now is the likelihood that the global manufacturing purchasing manager's index (PMI) looks to have either stabilized (in advanced economies) or begun to recover (in emerging economies). As I've explained many times before, the PMI is a leading indicator of commodities demand from factories and manufacturers.

In a research note dated November 10, Cornerstone Macro founder and economic analyst Nancy Lazar writes that the firm's model suggests a PMI "upturn is underway, supported by lower global interest rates...and the modest improvement in China."

A sign that reports of China's slowdown have been overdone includes the news that sales of excavators by Chinese manufacturers hit a record high this year as hopes escalate that the government will stimulate the economy by boosting infrastructure spending.

According to Caixin Global, Chinese manufacturers sold 196,222 of the earth-moving machines, essential for large construction projects. Almost 90% of these excavators were purchased by domestic firms.

To Nancy's point, I might also add that progress in the US-China trade dispute has been constructive for commodities demand expectations, not to mention trade. This has helped spark a year-end stock rally as investors catch a case of "fear of missing out", or FOMO.

Fund managers' cash levels have dropped in November to their lowest since June 2013 on improved optimism. According to Bank of America Merrill Lynch's most recent survey of managers overseeing more than $500 billion in assets, cash levels fell from 5% in October to only 4.2% this month. That's the biggest one-month drop since Donald Trump was elected president.

Safe haven assets, including gold, US Treasury bonds and the Japanese yen, have normally receded in "risk-on" environments, and this cycle has been no exception. Gold prices have fallen around 6.3% from their six-year highs of more than $1,565 an ounce in early September.

Consequentially, investors have been taking money out of gold-backed ETFs at a rapid pace. In the week ended November 8, as much as $620.7 million was withdrawn from SPDR Gold Shares (GLD), the world's largest ETF backed by physical gold. That amount was the most for a single week since October 2016.

I see this decline as a healthy correction, and I urge investors to consider taking advantage of the discount. After all, we wait to buy certain items until Black Friday or Cyber Monday, when they go on sale and are more affordable. We should have the same buying habits with regard to gold and other assets.

  • Reddit logo
  • Facebook logo
  • Twitter logo
  • Google logo
  • Yahoo logo
  • LinkedIn logo
  • Digg logo
  • StumbleUpon logo
  • Technorati logo

Frank Holmes is chief executive officer and chief investment officer of US Global Investors Inc., a registered investment adviser managing approximately $4.8 billion in 13 no-load mutual funds and for other advisory clients. A Toronto native, he bought a controlling interest in US Global Investors in 1989, after an accomplished career in Canada's capital markets. His specialized knowledge gives him expertise in resource-based industries and money management.

See the full archive of Frank Holmes.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn

 

Mobile apps

 - live trading 24/7

 - buy & sell instantly

 - up-to-the-second charts

 

 

 

Daily news email
Go to 'communications settings' 

Get the latest daily gold price news free by email

Latest gold news by email

 

 

 

Gold Investor Index
5 January 2020

Gold Investor Index

Gold investing +58% in NY21

 

 

 

LBMA webinar
21 January 2021

LBMA

London gold trading

 

 

 

International
Investment

16 December 2020

Gold 2021

Gold in 2021

 

 

 

LBMA Alchemist
1 December 2020

Newton

True Gold/Silver Ratio

 

 

 

  •  Email us

Market Fundamentals

  • 'Cut Bullion Duty to Cut Smuggling': India's Gold Industry
  • Platinum Price Hits 4-Year High Even as Electric Beats Diesel Cars in Europe
  • Record Investing Pushes 'Industrial' Silver and Platinum into Deep Deficits
More...
  • Cost calculator
  • Cookies
  • Terms & conditions

©BullionVault Ltd 2005-

  • Twitter
  • Facebook
  • LinkedIn
  • YouTube

Save your cookie preferences

We use cookies to remember your site preferences, record your referrer and improve the performance of our site. For more information, see our cookie policy.

Please select an option below and 'Save' your preferences.

Save

You can update your cookie preferences at any time from the 'Cookies' link in the footer.

Secure auto-logout warning

You have not been active for some time.

For your security you will be logged out in   minutes unless you take action.