Alasdair Macleod: The Fed’s Priorities are Changing in Golds Favor

Tom welcomes back Alasdair Macleod to the show. Alasdair notes that gold prices rose significantly last week, but the miners did not hedge their positions. He belives this is because mining boards have come to realize that it is the weakening US dollar, not gold, that is the cause of the price increase. As a result, they have decided to hold off on hedging their positions. However, energy costs are still a concern as they can rise unpredictably.

The commitment of traders report shows that many derivative markets are held by bullion banks in short positions. The open interest on COMEX is currently high, and Alasdair believes it could increase further. He sees COMEX as a key indicator for the gold market and believes that the bullion banks are facing a challenging situation with significant short positions.

The reverse repos facility provided by the Federal Reserve has seen a decline in usage as money market funds have shifted to investing in Treasury bills, which offer better interest rates. Despite the rising government debt, funding frustrations have been avoided as money market funds find alternatives. However, this could put pressure on the bullion banking community if liquidity dries up and makes it difficult to fund government debt.

There is speculation that a significant amount of gold, half of the world's total reserves, may no longer exist due to leasing and potential disappearance from the New York Fed. The Fed's announcement of a dovish pivot has caused the US dollar index to drop, leading to a decline in the yen carry trade. Investors are seeking alternative investments like gold.

The Middle East conflict, particularly due to Houthi-Iranian aggression, could introduce further instability to the credit market. The Federal Reserve's priorities are shifting to focus on job creation for the upcoming presidential election. This shift has resulted in a fall in profits for the carry trade and a decline in the US dollar's trade weighted index.

Central banks, including the Federal Reserve, have become more focused on funding governments rather than protecting the public from inflation and devaluation. The banking system, particularly in Europe, is highly leveraged and vulnerable to rising interest rates. The return of free banking is advocated by many, where banks are responsible for their own problems.

The LBMA is experiencing a decrease in market share due to the popularity of places like Dubai, where gold is sold based solely on weight at the gold souk. The LBMA's efforts to gain preferential treatment from the Bank of International Settlements have been unsuccessful.

Gold's value has been denied and downplayed by the US government, as a rise in gold prices would not be geopolitically beneficial. The situation in Argentina, with its President Milei is worth watching. Escalating tensions in the Middle East and Ukraine are also impacting energy prices and geopolitical dynamics.

Time Stamp References:0:00 - Introduction0:32 - Gold's Recent Move6:13 - Reverse REPOs10:25 - Gold & Rates in 1970s15:10 - Middle East Concerns17:20 - DXY & Yen Carry Trade24:42 - Banking Weakness30:14 - Central Bank Alternative38:34 - 2024 Outlook & the East42:55 - Gold Vs. The Dollar46:40 - Argentina Thoughts48:16 - Conflict & Tension1:00:09 - Russia/China Relations1:03:27 - Wrap Up

Talking Points From This Episode

* Governments have used central banks to influence markets and manipulate interest rates, leading to decreased services for small and medium-sized businesses.

* Central banks have become predatory institutions when dealing with the private sector, controlling the money supply and leading to an increase in governme...