Perth Mint’s CEO says investors are flocking to gold because the debt bomb is still ticking. What does it mean for Bitcoin?

The chief executive of the WA Government’s Perth Mint Richard Hayes has taken aim at un-backed fiat currency in national broadsheet The Australian.

The Mint’s gold and precious metals holdings have surged to a record high above $4 billion by value in recent weeks.

Its gold holdings alone have increased by 20 percent in value in just 18 months.

The mint – which has experimented with a gold back cryptocurrency token – stores precious metals for 40,000 clients, half of whom are from Australia.

Debt bomb is still ticking says CEO

“Globally, government debt problems were never solved,” Hayes said.

“In fact, when Donald Trump ­assumed office US sovereign debt was $US18 trillion. Now it’s $US23 trillion.

“All this fuels concerns about printing money in the future.

“It will all come home to roost at the end of the day.”

Hayes said concerns over the worth of fiat currency has led central banks and individuals to increasingly pour money into gold.

Economics editor takes aim at fiat

Fiat currency is described by the Australian’s Economics Editor Adam Creighton as “the government and bank issued money most people use, which isn’t backed by anything.”

Gold has a $7.5 trillion market cap – and sometimes increases more in value in a day than the entire BTC market cap.

But Bitcoin and Gold have become increasingly correlated this year.

Over the three months to August Bloomberg reported that the correlation doubled to 0.837 – with a score of ‘1’ equaling perfect correlation.

Both have benefited from global uncertainty – in particular trade war fears and record low interest rates around the world that have dipped into negative territory in Europe with $15 trillion of negative yielding bonds.

The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet….. — Donald J. Trump (@realDonaldTrump) September 11, 2019

Trump’s ‘bonehead’ zero interest plan

President Donald Trump used his signature tact to yesterday call on the ‘boneheads’ at the Federal Reserve to ‘get our interest rates down to ZERO or less’.

Gold Bullion International co-founder Dan Tapiero slammed Trump’s call, noting he was the first President in history to call for negative interest rates.

But Tapierio also predicted that “gold and BTC should benefit as alternative stores of value”.

The Bitcoin ‘safe haven’ thesis remains the subject of much debate however.

First President to call for negative interest rates. Medium term this is direct call for a debasement of the US dollar in an attempt to create excess growth into 2020 election. Federal Reserve "boneheads." Gold and Btc should benefit as alternative stores of value. https://t.co/gdT0RXkn1P — Dan Tapiero (@DTAPCAP) September 11, 2019

Gold used to underpin the entire system

Gold much less so – the precious metal underpinned the global monetary system until 1971.

In 1997, the Australian Reserve Bank sold off its holdings of around 167 tonnes of gold reserves for about $400 an ounce based on the belief that gold was no longer relevant.

Gold has shot up in value this year, reaching a post GFC high of $1550 an ounce in August amidst concerns over the US China trade war.

Citi lifted its medium term gold price forecast on Thursday to US$2000 – above the 2011 record high of US$1895.

Only time will tell if the correlation between gold and Bitcoin prices is maintained.