The Last Time Gold Moved Like This Was 1929

Guest Post by Peter Reagan

Gold is flashing signals we haven’t seen since 1929, and central banks keep piling on. From growing global gold stashes to platinum’s surprise surge, this week’s stories reveal why owning real metal – not paper promises – matters more than ever…

Your News to Know rounds up the most important stories about precious metals and the overall economy. This week, we’ll cover:

• Expert draws comparisons with 1929…
• …and says physical gold (not U.S. debt or dollars) is the asset to own
• Turkish citizens privately hold $311 billion in gold, but why?
• Platinum price action: Some forecast $4,000 prices (before gold gets there)
• And don’t forget! Today Phillip and I leave for Brazil for our live Rio Reset coverage

Alasdair Macleod: Gold is what you needed in 1929, and it’s what you want now

Speaking on the Money Sense podcast, Alasdair Macleod chimed in on why he believes we are in an environment similar to 1929, or the start of the Great Depression.

In recent times, we have seen things compared often to infamous economic downturns, like the inflation and recession of the 1970s. We have also seen invocations of the Great Depression when the lockdowns happened, and gold accordingly leapt in massive bounds back then.

But these days, the price of gold is nearly doubled since the start of the lockdowns, so there might very well be something to MacLeod’s idea. Rather than buying into the narrative that reopenings prevented a 1929-style economic environment, Macleod thinks we are merely in the opening acts of a new global economic depression.

Macleod calls it the U.S. debt trap, mentioning how gold might have already overtaken U.S. dollars in terms of central bank reserves. As I’ve mentioned frequently since 2022, appetite for long-term U.S. government debt is hitting historical lows. Very few entities are willing to wager that the U.S. dollar, in 20-30 years, will still be a desirable asset.

The economy isn’t growing anymore (and there are questions of whether it can), and an annual budget deficit of 6%+ means stagnation is a serious concern.

Somewhat touching upon our own idea of a disassociation between gold and armed conflict, Macleod says that U.S. dollar and debt are actually the preferred safe haven during such times. This, in turn, makes the U.S. economy even more vulnerable if or when the threat of that military conflict subsides, as investors then start moving out of U.S. assets.

Looking back on it now, Macleod believes that the narrative of China dedollarizing to boost the yuan was just a way of making the dollar look better in comparison. We are seeing that unfold month after month, as a recent report detailed how 32% of central banks are expected to buy gold just in the short-term.

As both the report and Macleod note, the situation is so bad that central banks are even taking on other currencies as reserves, so long as it means less exposure to the dollar.

Besides being under-owned, Macleod’s analysis of COMEX open interest suggests that gold might still be underbought, making the climb to $3,500 all the more remarkable. This is the first time since 1977 that U.S. assets have all broadly fallen in conjunction while gold has gone up, but, as said, 1929 might be a closer comparison.

Central banks are buying gold because they have a vision of the future, and this vision doesn’t appear to involve the currencies they print having any real money.

Macleod is also one of the many analysts convinced that China’s gold heap exceeds 30,000 tons, and he also says that silver is not to be overlooked here.

He says that informed accusations of silver price suppression go back more than two decades, with JPMorgan being consistently listed as a key culprit.

The idea, he notes, is to artificially deflate silver’s spot price to sell massive amounts of the physical variety. But to whom? China is again pointed to, with Macleod saying that China’s silver reserves might be even more stupefying than their gold stockpile.

He reminds us that the Shanghai Gold Exchange is wholly owned by the PBoC and appears to exist primarily as an instrument for the state to acquire more bullion while suppressing reports of purchases.

Although he says gold might be starting its summer doldrums, it’s interesting to note that it’s double the price of its summer doldrums from two years back.

Not much has changed in terms of fundamentals since then, so we have to ask what investors can expect over the next two years.

And, if we are indeed in a not-so-hidden 1929-style environment, what can gold investors in turn expect over the coming decade?

Despite access to dollar and premiums, Turks are sitting on $331 billion of household gold

“The distinct Turkish tradition of “saving under the pillow” – a term referring to keeping valuables like gold at home – often comes into play during times of economic crisis, when the government calls on citizens to spend their savings to help revive the economy.”

The opening part of a recent report highlighting how Turkey’s 4,500 tons of physical gold bullion are mostly domestically-held is curious, and also telling.

Why should Turks oblige its government and spend what little wealth they are likely to have, the latter point being so because the government has destroyed the currency? It is quite brazen that a government infamous for monetary mismanagement would tell its citizens, who are far more capable of managing finances, on what to do with the very money that the central bank is destroying.

Perhaps it is the full awareness of how careless and hazardous the central bank is that has caused Turks to accumulate $331 billion of household gold.

Bars, coins, jewelry: whatever can be bought is stored away as Turks wait to see how much further the lira can crumble, having hit an inflation rate of 85.51% in October 2022.

The government obviously sees this as a problem, constantly trying to associate gold with tax evasion and money laundering.

Because why else would someone buy gold, right?

It has increased the sales tax on gold purchases and likely played some part in banks having huge differences in buy/sell prices, driving the gold trade underground. Any jewelry purchase over $5,000 must be reported thoroughly, as if anyone buying a nice ring could be funding terrorism, and sales of uncertified cut gold bars were banned in 2024.

Despite this obvious clampdown, and despite relatively easy access to U.S. dollars and euros, Turks are still mostly opting for the comparatively inconvenient option of holding physical gold.

The article purports that this is because of cultural tradition, but it’s very likely that Turkey’s citizens recognize free-floating paper for what it is.

Why escape from one inflationary asset into another?

Amusingly enough, a prominent Turkish economist notes that it’s these very reserves that the government is hounding that provide stability during times of crisis, which seem to be ongoing these days.

When economic stress hits, liquidating some of their gold to rebuy it when things stabilize is how Turks keep things moving.

Without this, the economy might altogether crumble.

The drive to move gold out of households and into questionable governing hands goes back to 1980s. Turks were meant to get interest from depositing their gold in banks, but the initiative mostly went nowhere.

Here’s why:

…concerns soon emerged about liquidity risks. Policymakers feared a potential crisis if all depositors demanded physical gold at once, particularly if the collected gold had already been sold abroad to obtain foreign currency.

Sort of like the COMEX-London-Basel III situation, isn’t it? With obvious admissions such as these, it’s no wonder Turks only trust gold that they can hold and store themselves.

Erdogan’s 2016 appeal to patriotism morphed into the Gold Conversion System in 2022, which was about as alluring as it sounds. Strangely, the article says that these and similar efforts didn’t take off because of “cultural norms, practical concerns, and structural economic uncertainties.”

It seems that the answer lies elsewhere and is much more straightforward.

Trust is mostly necessarily earned, and the government of Turkey has done little but betray it over the last few decades. On the other hand, gold has upheld it and then some.

Platinum to hit $4,000 before gold – absurd or plausible?

It is a strange thing to consider that not that long ago, platinum was more valuable than gold.

With the metal hovering around $1,000 and seemingly unable to breakout for years, the idea that it could climb to $4,000, let alone before gold, seems entirely far-fetched.

Or is it?

The use case for platinum has always been in place. What it may lack in terms of history as a form of money, it makes up for in exceptional rarity, outstripping both gold and silver in that regard, as well as uniquely attractive physical properties.

Some of these properties have caused it to become a key ingredient of certain types of automotive manufacture (somewhat ironically causing its downfall). Governments developed a distaste for engines containing platinum, and prices plummeted like never before.

But we might be seeing a turnaround, one that is largely going unnoticed… Industrial trends are shifting in favor of platinum again, and the metal has surged by 50% year-to-date.

More than just industrial preference, any instance of heightened silver demand highlights the metal’s incredible supply deficit, awful production picture and overall scarcity. This has caused platinum to hit a 10-year high with very little fanfare, likely because gold has captured most of the headlines.

GSC Commodity Intelligence is very bullish on platinum, noting that the world is realizing internal combustion engines aren’t easily replaced. The drop in prices happened not much more than 10 years ago, seemingly suggesting we might indeed be seeing something.

Gold is always a buy, but there are times when other hedges against inflation are a bargain by comparison. Silver is one right now, and platinum is unquestionably another. Being 18 times rarer than gold, extremely undersupplied, and facing a possible big resurgence in demand, a $4,000 platinum price forecast is bold, but very much in line with historical norm.

“Whichever way you look at it, the most asymmetric opportunity in the precious metals complex is here – and it’s platinum,” said Phil Carr, GSC’s Head of Trading.

Remember, folks, diversifying your savings with physical precious metals is a smart move. Diversifying within physical precious metals, owning not just gold but also some silver and some platinum, well, that looks like an even smarter move right now.

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