Gold Bugs Were Right – The System is “Rigged”

For years we have talked about the manipulation of precious metals prices – primarily by the big US banks. But what happens if Canadian banks get involved? Here’s our take on why gold is the ultimate survival asset.

Gold Bugs Were Right – The System is “Rigged”

The hot topic of the day is “fairness.” You can see this theme emerge in many different places. In a way, it has become a “cause célèbre.” A rallying cry for splinter groups of every ilk.

Remember when some of the loudest cries of disdain about fairness came from the gold community? There were siren calls of manipulation. Many in the mining industry could not bring themselves to believe that this was true. 

And if it turned out to be true, then certainly the Canadian banks could not possibly be involved.  

And yet…From Bloomberg on August 19, 2020:

Scotiabank to pay US$127.5M fine for metals market manipulation

Now we are seeing an even larger, more prevalent and potentially far more damaging outcome from a “rigged system.” Regardless of our vastly different political viewpoints, safety and security are universal. 

Now it is not.  

In the past few weeks, it has become very clear that even in one’s own home, it may not be safe. This is a rather startling revelation when taken seriously.  

Although we are not there yet, if personal safety and security are compromised, then what about financial security?

Do you see where this is going? I do. 

It is leading in the straightest line possible directly to gold. Gold is a “survival asset.” It has proven itself through time to be the “one sure thing”…the one thing that survives all others.

Now the recent past is starting to come into a much sharper focus. You remember that in the past few years, several billionaires have taken an interest in gold. Mostly by privately purchasing their own gold mines. This piqued our interest then, and it is even more interesting now.

We have a clear choice. When social unrest turns violent, it becomes something else. One consequence of turning on the TV every night to “see what is happening in the world” is a distraction. Maybe this was the point. When economic issues take a back seat to social ones, it is easy to lose sight of what is happening. 

We all have heard the catchphrase “boiling a frog.” It refers to accepting a series of small, seemingly unimportant changes until it is too late. Have we become the “frog”?

Let’s all acknowledge that Baby Boomers have become accustomed to slowly incurring larger and larger debts, even as they face retirement squarely in the eye. 

Some of this debt is because they “drank the educational cool-aid.” After all, doesn’t everyone need a college education to compete in the modern world? 

Well, some Baby Boomer parents are now waking up to the fact that, despite shelling out $200k for each child to “thrive and grow” by their college “experience,” a big surprise awaits them. What is this mystery? How about having their children move back home – jobless! That sure didn’t go as planned.

So what do we have to look forward to? Peace and prosperity or more riots and unrest? 

That depends on your point of view. 

And, your point of view is being shaped by a media that has become less and less concerned with reporting the news. Rather, it wants to “shape” the news.

The widespread destruction of the truth by the mainstream media will have its consequences. They will not be good ones. The truth cannot be replaced by a lie, no matter how many times it gets repeated by mainstream media that has gradually become a serious propaganda tool for special interest groups.

In the meantime, while there is a great level of global distraction, gold has rather quietly broken out to test new highs. Now it is trying to form a new base above the $1800 level before launching an assault towards $2500 and beyond.

Gold got a bit of deserved recognition when the world’s most widely acclaimed value investor, Berkshire Hathaway, disclosed that it had bought a stake in Barrick Gold. 

The amount of gold exposure is dwarfed by other holdings, but it is significant that the gold mining business, as a business, can compete with other sectors of the economy for investment by generalist funds.

This should give great confidence to gold investors everywhere. Non-gold investors can see a long term future for gold and a reason to own gold mining companies.

Summary & Wrap-up

Regardless of whether you view gold as a “survival asset” or look at the gold business as a good place for long term growth, it doesn’t matter: Gold wins; Gold companies win.

One final thought worth noting. There is a new trend emerging in the crowded gold royalty space. We have seen a number of prospect generators grow into fledgling gold royalty companies as some of their long-held assets finally start to produce gold. These companies will not last – they will consolidate with others of similar size or be bought out by the mid-cap gold royalty companies.

-John Top

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