Tim Murphy
Precious Metals Advisor
Tim Murphy is a Precious Metals Advisor with over 15 years of experience. He started on the New York Commodity Exchange floor before founding his own brokerage firm. Tim joined Scottsdale Bullion & Coin to leverage the small-company feel with national exposure, focusing on personalized, client-first service and fostering long-term relationships.
Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay
Much has been discussed this year on Basel III and what its affect will be on gold and silver prices.
As you most likely know by now, one of the key regulations will penalize any banks holding “unallocated” gold and favor any banks holding allocated gold. Unallocated gold allows the banks to sell the same gold many times over, and in the process suppress the paper gold and silver prices. The compliance deadlines commence on June 28 for the European banks and July 1 for the US banks. Compliance for the London banks, which is a larger percentage of those banks manipulating the prices, is January 1, 2022. Estimates on when and how much gold and silver prices will be affected by Basel III vary quite a bit. From all the intel gathered over the past several months, a best guess has the bullion banks currently getting the paper prices down as much as possible in order to cover their paper short position. So, for anyone waiting to make their first purchase of physical or get fully committed, the recent price dips might be your last real good opportunity.
Maybe no one understands the implications of Basel III better than Alasdair Macleod, who writes out of London for GoldMoney. Macleod has extensive experience in banking, as well as analyzing markets, and over the weekend was interviewed by King World News. The following are quotes/excerpts from the KWN interview …
There has been occasional speculation about what happens to asset values in a hyperinflationary collapse. The basis of the question has recently become suddenly relevant, because consumption in America and Britain has been stimulated with unprecedented monetary inflation aimed at consumers, and been met with limited supply, leading to strongly rising prices across the board.
In short, unless urgent action is taken, the possibility of a hyperinflationary outcome has become a possibility. The only alternative is to stop monetary inflation and thereby deliberately crash the global economy.
Along with other central banks, the Fed is trapped. We will assume that rather than face this reality, governments and central banks will continue with their money printing until both their fiat currencies and financial systems face collapse.
Basel III WILL have an effect on gold (and silver) prices. But, more importantly it is the combination of Basel III and Central Banks, including the Fed and the Bank of England, which are accelerating their money printing to an extraordinary degree which can only result in one thing and that is to create a huge scarcity of physical metal, because people will want it. It is as simple as that. The combination of these two things happening together will cause sharply higher gold and silver prices.
Do not expect an immediate bang, but rather what is going to happen over a not very long period is market liquidity will be withdrawn, causing prices to rise. But keep in mind that higher prices initially is almost secondary to a more serious issue. And that is what is happening to money.
Central Banks have insured financial markets are in a bubble by way of printing 120 billion dollars a month via buying US Treasury debt AND basically telling the pension funds and insurance companies: Here’s the cash. Go invest in riskier corporate debt and/or equities.
Investors as a whole have currently borrowed 900 billion dollars to play the market and this is the sentiment one finds at tops – what Charles Mackey calls the “madness of crowds”. (Mackay was a Scottish journalist who did early studies on crowd psychology).
If you print fiat currency in order to support a market, then sooner or later that scheme of arrangement is going to collapse, destroying the currency in the process. We are on that course and this is something that is going to happen quite quickly.
People are now waking up to the fact that there is not the supply of product to satisfy all the consumption which is being financed out of thin air by the government. Money helicoptered to individuals, increased unemployment benefits, etc …. All this consumer money has nowhere to go because of continued supply disruptions AND people don’t want to work (resulting in less being produced).
We could have a dollar crisis by late summer. Why? Because interest rates have to go up. You cannot sustain the dollar at zero interest rates and expect 31 trillion in foreign dollar holdings to not be dumped in earnest. The collapse of the currency threatens to be total.
Money is becoming worthless. Those relying on the likes of paper wealth in equities (and real estate to some extent) must begin to comprehend what lies ahead.