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June 8, 2024 | Gold Hit With One-Two Punch

John Rubino is a former Wall Street financial analyst and author or co-author of five books, including The Money Bubble: What to Do Before It Pops and Clean Money: Picking Winners in the Green-Tech Boom. He founded the popular financial website in 2004, sold it in 2022, and now publishes John Rubino’s Substack newsletter.

On Friday, two announcements combined to hit gold and silver about as hard as they’ve ever been hit.

First, the US jobs report, as usual, came in far hotter than expected, which led credulous headline readers to conclude that the economy is booming and interest rates will have to stay higher for longer. If true, that’s bad for gold and silver, which don’t do well in a high-real-interest-rate environment.

But it’s not true. The US government is all about narrative management, especially in an election year. And the jobs report is where it runs its biggest scam.

Zero Hedge does a public service by dissecting each monthly jobs report to show, basically, the following: The number of full-time jobs is shrinking and all net jobs growth is in part-time work. And the number of jobs held by workers born in the US is shrinking while net new jobs are going to people who were born elsewhere. These are not signs of a healthy economy and definitely don’t point towards monetary tightening. Read the full analysis here: Inside The Most Ridiculous Jobs Report In Years.

The other announcement was that China’s central bank, the biggest buyer of gold for the past few years, didn’t buy any in May.

Gold Price Sinks to 1-Month Low as China Stops Buying

(BullionVault) – Gold prices sank in all major currencies on Friday, dropping $80 an ounce in 6 hours on the news that the People’s Bank of China didn’t buy any bullion for its official reserves last month.

That snapped 18 months of continuous gold buying by Beijing as May set a new record-high gold price for the 3rd month running in US Dollar terms.

Now For The Good News

China scaling back its gold buying is an issue if it’s the start of a trend. But much more likely, it’s just the PBOC trying to engineer a slightly cheaper price before resuming purchases.

Meanwhile, another trend that’s gaining steam and might be huge going forward is retail gold buying. Costco selling $200 million of gold bars per month got a lot of recent press here and elsewhere. But aggressive retail buying isn’t limited to just one store chain in one country. Demand is suddenly booming in a lot of places, including Korea and Vietnam:

Gold bars are selling like hot cakes in Korea’s convenience stores and vending machines

(CNBC) – Aside from ramen and sausages, South Korea’s convenience stores have a new popular item on the menu — gold bars.

The country’s largest convenience store chain, CU, has been collaborating with the Korea Minting and Security Printing Corporation (KOMSCO) to offer customers mini gold bars — and they’re selling like hot cakes.

Priced at 113,000 won each, 1 gram bars were sold out within two days, according to local news reports. The bars come with congratulatory messages, birthday wishes and even designs for personality types.

People in their 30s were most active in purchasing these gold bars, accounting for over 41% of the total sales since their launch, according to CU’s commerce phone app Pocket CU. Those in their 40s make up 35.2% of the sales, followed by people in their 50s at 15.6%.

Demand for bars and coins in South Korea rose 27% year on year to 5 tons in the first quarter of this year amid rising prices of the yellow metal, the World Gold Council said in a recent report.

In Vietnam, meanwhile, the central bank had to sell some of its gold to cool off the retail buying frenzy:

Vietnamese investors rush to buy gold

(FX Street) – Vietnamese banks reported long lines as customers queued up to take advantage of lower gold prices thanks to a government scheme to push domestic gold prices lower. Vietcombank reported as many as 50 customers lined up at one time.

The State Bank of Vietnam (SBV) sold gold bars directly to four state-owned commercial banks at 78.98 million dong (Vietnam’s currency đ worth around $3,107.00 USD) per tael (37.5 grams). The banks then made the gold bars available to the public for no more than 79.98 million dong.

The State Bank of Vietnam is trying to drive down local gold prices that have soared in recent months. The price of gold in dong terms is up over 11 percent through the first four months of the year and has pushed significantly above the global price.

Bull Markets Have Big Corrections

The bigger and longer the bull market, the bigger and scarier the corrections. So use these events to add cautiously — via low-ball offers, dollar cost averaging, and put writing — to the stocks listed in our Portfolio. The next leg up is coming.

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June 8th, 2024

Posted In: John Rubino Substack

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