Money Supply


This podcast is a recording of a conversation I had on July 30th with economist Keith Weiner, CEO of Monetary Metals and president of the Gold Standard Institute USA. We intended to chat for about 20 minutes, but wound up talking for almost an hour and a half! Due to the length, I’ve broken it up into two parts.

More on Podcast: Gold, Yield, and the End of the Dollar – Part 1


The International Monetary Fund created the SDR in the late 1960s to supplement the gold and other currencies held by countries as their reserves. The value of 1 SDR was initially defined as the same amount of gold as 1 USD. At the time, the USD was convertible into gold, so most countries chose to hold the bulk of their reserves in dollars instead of gold.

More on Special Drawing Rights


This week, government currencies and bonds were higher, while stocks and commodities were mixed. Long term treasuries, represented by TLT, had some of the largest gains both for the last week and the last month, but it may be time to sell – more on that later in this update. Bitcoin and the HUI gold stocks have been the weakest asset classes for the last week and the last month, with silver and platinum also hit hard. Coffee continues to be one of the strongest performers, over the last week, month and year.

More on Market Update 3 October 2014 TLT and HUI


I got a great question in my email this morning, and I'd like to share it, and my answer, with you.

Using your methods, how can one know when gold and silver are grossly overvalued? Much like the tech stocks around 2000-2001?
I don't think of it in quite those terms… I use gold as the unit of measure, and thus see it as unchanging.  The USD may rise and fall, silver may rise and fall, but gold is my constant, like cash.
If you put 1kg of gold in a safe for 10 years (or 100 years!), you will still have 1kg of gold.  No gain, no loss. Put enough $100 bills to buy 1kg of gold in the same safe, and you will probably not be able to buy anything close to the same amount of stuff with it in 10 or 100 years (if the bits of paper have any value at all!)
So taking the US Dollar first, your question would be translated as "how can one know when the dollar is grossly overvalued, much like the tech stocks in 2000-2001?"  If that time comes again, you will want to sell your dollars and go to cash (gold), just as in 2000-2001.  Conversely, we could get a bottom in the USD, as in 1980, and it might become a good long-term speculation.  I don't think that is anywhere close yet.  And there is a real possibility that the USD will continue to fall gradually for a long time, or suddenly fall a lot, or even be replaced by some other monetary unit leading to a near-zero value… so I see buying dollars as a risky speculation, but one that could be quite profitable from time to time – as indeed it has been for the last 12 months or so.
My favorite tool is the "half-life of the dollar chart".  When I see the USD moving below the half-life curve significantly, say by 10%, I start paying attention. If it starts to recover, you could be entering a period of mean reversion that would make the USD a good buy.  The main fundamental that is likely to drive the USD up would be positive and rising real rates of interest.  When the bond vigilantes ride again, it might also be time to buy USD, at least for a medium term speculation. As long as the Fed is holding interest rates low, and concern about the economy and deflation is strong, I think you are better off in cash (gold), since the Fed will be using various tricks to increase the money supply to fight these perceived threats.
Silver is a different animal; I see silver as primarily an industrial metal, with a secondary monetary appeal to smaller savers.  As such, it is quite volatile, but unlike the USD, will never be without value – and is thus a less risky speculation than the dollar.  My suspicion is that either the economy will need to improve dramatically, or the USD will need to tank, for silver to show real strength.
I hope this is helpful!
Sir Charles

More on When gold and silver are grossly overvalued?

With fiat currencies all over the world being manipulated by central banks, prices are being distorted beyond all recognition. Successful investing requires having a good idea what things cost, and what they are really worth – and using the world's oldest and most stable form of money, gold, to compare prices is one way to get that insight. Below you'll find a sample of prices measured in grams or milligrams (1/1000 of a gram) of gold.

More on The Week in Gold – Food Prices

The last time we talked about the Dow Jones Industrials "breaking through" the 11,000 level was back in April. After spending about 15 days above the 11,000 mark, the Dow sank back below 10,000 in June, and again in July, after which it began working higher, bringing us to 11,006 on Friday, a level which just barely held in Monday's trading, closing at 11,010.

More on Dow 11,000… Again?

Subscriber Kerry B wrote to me recently:

I would love to see a long running value of the U.S. M3 in gold. I've wondered if this pool equals a relatively fixed gold value while the dollar price of gold reflects mainly the fluctuation in the amount of money in the pool. Thanks.

More on Gold, Money Supply, and the End of the Dollar