Jim Rickards sat with Jeremy Szafron on Kitco News and opened with the saver’s problem, not the trader’s. Washington can still spend. It cannot rebuild a weapons stockpile overnight, and a rate hike will not make a shipping lane safe. When the usual tools fail, the bill lands on the people holding cash.
“The dollar is like an ice cube that melts in your hands.”
That is the line he wants on the table. Inflation is not an accident in his map. It is how a government with a debt it cannot tax away shrinks the real burden. The people who pay are the ones trying to keep purchasing power in a bank account.
Gold’s bid, he said, has a date. From 1970 to 2010 central banks were net sellers. The United States sold about a thousand tons in the 1970s even after Nixon closed the window. Gordon Brown sold about half of Britain’s gold near $250 an ounce, the trade now called Brown’s bottom. Switzerland sold about a thousand tons. In late 2010 the IMF sold 400 tons, about half of it to India, the rest never disclosed and, in his guess, bound for China. Since 2010 the official sector has been a net buyer.
China is the opaque chapter. The People’s Bank reports something near 3,000 tons. The State Administration of Foreign Exchange, he said, sits on warehouses nobody can see.
Rickards would not be surprised if the real hoard were DOUBLE the published figure, an extra 4,000 tons, inferred from Swiss exports and Hong Kong imports, with no clean split between the state and private buyers in silk dress shops open until midnight.
Russia is transparent and above 2,500 tons. Japan suddenly showed 300 tons it had been hiding. Iran buys because sanctions kicked it out of the dollar system. Gold, in that telling, is the money that beats a freeze.
The next leg is not another central bank. Those buyers set a floor. The buyers who show up last are institutions that still own almost none. A small allocation shift, he argued, is the asymmetric trade. Physical only.
“If you own gold futures contracts, unallocated gold contracts, shares in JPMorgan Chase, gold options, or exchange traded funds, you do not own actual gold. You own a contract.”
He was asked whether Washington could freeze that gold. The point of allocated metal outside the banking claim is that a contract can be gated and a bar in your name is harder to. Silver is the setup he is watching now, the catch up metal once the gold bid is established.
The rest of the hour is who pays before that bid. Hormuz does not need an Iranian navy to disrupt traffic. Diesel and freight are the tax. He said real oil is closer to $180 than the screen price. The economy is K shaped. A wealth tax is the warning he wants heard. On the Fed he was specific: no additional hike in October, a probable increase in December, then the older game of inflating the debt away. China selling Treasuries is not a dump of the dollar. From an economic point of view it is the same urge in reverse. Not because Beijing is getting rid of dollars, but because it wishes it had more of them. The yen carry trade is the unwind that could trigger a panic if the spread keeps closing.
He closed with the lesson he gives his own children and grandchildren. Do not hold the melting cube and call it savings. Own the metal, not the claim on the metal, because the policy that rescues the debt is the policy that charges the saver.
