Precious Metals and Bitcoin – Twin Destroyers of the Fiat Regime

Over the past four years, the Cartel has cast a pall over nearly every holiday “trading” session – by using ultra-thin trading conditions to push paper gold and silver prices lower, whilst 99% of Americans rest and relax. However, this weekend’s shenanigans took the cake – as at one point on Sunday night, I was steeling myself for a special “Memorial Day Massacre” Audioblog.

I mean, this weekend’s only news was the huge Yuan devaluation on Sunday night – of nearly 0.5%, to its lowest level in more than five years. And yet, not only was the usual “Sunday Night Sentiment” raid executed – the 145th of the past 151 weekends – but prices were actually attacked Monday morning and afternoon, despite the COMEX being closed! I mean, how on Earth is this possible?

Fortunately, gold held like a champ at $1,200/oz, and rebounded back to $1,210 Monday night – as clearly, Friday’s COT report, of a massive “commercial” short covering – portends the rapidly coming end of the paper deluge, with minimal technical damage, amidst the most powerful fundamental backdrop in Precious Metals history.

Those who know me, know I don’t make such seemingly inflammatory statements flippantly – as between the seasonal factors that are about to form a powerful tailwind; technical factors, like the inevitable covering of COMEX “commercials”’ largest-ever paper short positions; and explosive fundamental factors, from a collapsing global economy (I’m really looking forward to Friday’s NFP jobs report); to potentially hyperinflationary policies in Japan and China; this week’s likely “cold shower” from OPEC; the upcoming Greek and UK referendums; and of course, the potentially fateful June 15th FOMC meeting, when Whirlybird Janet will be forced to “put up” (and potentially, destroy global financial markets), or shut up, it’s difficult to make a case for anything other than a powerful PM surge in the year’s second half.

Regarding the Fed, I cannot be more emphatic about what I wrote back in September, of a rate hike being the “only financial event potentially more cataclysmic than a significant Yuan devaluation.” Back then, when a “self-cornered” Fed was dumb-enough to raise rates by a quarter point – after having held them at zero for seven years – they nearly destroyed global financial markets. Today, a mere six months later, the global economy is far weaker; and interest rates far lower, including U.S. Treasuries. In fact, most Central banks are in maximum easing mode, so another rate hike here would most likely catalyze an explosive dollar surge against other fiat toilet paper, causing a further implosion of U.S. corporate earnings, with an incumbent-killing Presidential election just five months away. And no, it’s no longer just “fringe” commentators like the Miles Franklin Blog saying so, but the Prime Minister of Japan; thousands of pension and insurance fund administrators; the Chinese government; and even head MSM lackey Yahoo Finance!

Back to China, I have spent the past six months pounding the table of how August’s 6% Yuan devaluation was merely the first salvo of the “upcoming, cataclysmic financial big bang to end all big bangs.” And now that China’s place in the IMF’s “strategic currency basket” is secure; and its export economy plunging anew; it was only a matter of time before the next deafening devaluatory blast would be heard. Well, it was certainly heard Sunday night; along with surging Bitcoin prices; which, as I have vehemently predicted for the past month, finally broke through nine-month resistance at $460, to $533 as I write.

The reason, you ask? Because, as I have been suggesting for some time now, Bitcoin is starting to take on Precious Metal-like monetary properties – sans 5,000 years of monetary history, of course. And given that we are now living in a digital age – in which gold and silvers’ allure is more powerful than ever, but the ability to store value with the click of a mouse equally irresistible, it’s difficult to believe Bitcoin won’t become the “money of choice” for tens of millions with limited means – as all one needs to own it is a bank account and a computer. Not to mention, multi-millionaires, billionaires, and institutions – particularly those in nations with existing or pending capital controls, like China. And particularly those in nations where gold, silver, and platinum purchases are not logistically possible – like, for instance, the vast majority of South America.

To that end, consider this “parallel factoid” regarding the looming new age of monetary demand. By my “guesstimate” – from my perch as Marketing Director of one of the nation’s largest bullion dealers – more than 95% of today’s Precious Metal buyers have owned gold and silver for at least five years, whilst more than 90% have owned them for at least a decade. Similarly, roughly 90% of all Bitcoin transactions take place in China; like Precious Metals, suggesting that a very, very small percentage of the global population has been responsible for its powerful bull market. In other words, just a tiny increase in the absolute number of Precious Metal and Bitcoin buyers – let alone, when institutions start to join the party en masse – will yield seismic, generational changes in prices, bid-ask spreads, and product availability.

The amazing thing about the world – and particularly the financial world I have devoted my 25-year career to – is how rapidly things change; from tastes, to technology, to overwhelming bullish supply/demand factors. In Bitcoin’s case, the changes in just the past 2½ years alone have been Earth-shattering – along with parallel, hyper-inflationary changes in Central bank monetary policy – in terms of explosive technology development, heightened price stability, and reduced “hacking risk,” yielding the emergence of Bitcoin “monetary properties” where none previously existed. To that end, read my November 2013 article “Are Bitcoins Money?”; and my February 2014 article, “Store of Value”; before considering my current view, that Bitcoins are not only gaining acceptance as money, but may well rival gold and silver in what I expect to be the biggest bull markets of all time.

And the beauty of it all is that, for the first time, I clearly see that Precious Metals and Bitcoin are not competitors in the final currency war, but powerful allies that will feed upon each other, as “twin destroyers” of the hideous, worldwide fiat currency regime that not only endangers its economy and monetary system, but geo-political and social stability. In my view, both are in the early stages of powerful bull markets that will ultimately define themselves by a lack of supply. Both will be “challenged” at every step by the dying “powers that be,” but inevitably, the forces of monetary reality – and progress – will be unstoppable.

P.S. As I was about to hit “send,” here’s what printed for the Chicago PMI Index – which again, “unexpectedly” so, plunged into recessionary territory. C’mon Janet, raise rates on June 15th, and MAKE MY DAY!