Recent events have familiarized the public with shortages of basic grocery items such as milk, bread, bottled water, and of course toilet paper. What the average person may not have expected was to witness a shortage of gold bullion on dealer shelves and websites. Nevertheless, that’s exactly what’s happening on the ground in the gold market.
Online gold retailing giants such as APMEX and JM Bullion are experiencing shipping delays of at least 3 and 10 days respectively. My local gold dealer is virtually out of stock and is only offering back orders on a few specific options.
A more savvy observer might have expected a gold buy up because of gold’s reputation as a market “safe-haven”. I actually happen to agree with this assessment of gold, but as many commentators have pointed out, the price of gold has ended up virtually the same as it was a month ago. By the numbers, gold is boring. It has refused to perform the way a “safe haven” asset would normally be expected to in a time of economic crisis.
The average investor might look at the stagnant price of gold and conclude that the gold market is tepid, but considering almost everything else dropped by 30%, treading water is a monumental feat. The only problem is, the asset that gold is denominated in (US Dollars), is performing just as well if not slightly better than gold at the moment. Right now, the dollar is eating up the strength of the liquidation process. In short, the dollar is stealing gold’s thunder as a “safe haven”.
Economically speaking, when people sell their American Stocks, they’re “buying” dollars. And that is what could be shrouding the expected rise in the price of gold. The value of the dollar is being bid up inevitably through the selling of dollar-denominated assets. People need their cash to stock up on essentials, therefore dollars are in high demand. But in addition to being shoveled into the grocery industry, cash is also jettisoning itself into the gold market, and the facts on the ground support that. Commentators like Peter Schiff argue that once people realize exactly how much price inflation is coming, they’ll start flocking to gold in order to hedge the falling dollar. This combined with the impending supply shocks and dollar selloffs on the horizon, create a recipe for a complete and total collapse of the US dollar.
If that’s the case, gold, which has thus far been an economic dark horse, could be set to soar.