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Gold's doing pretty good without. . .
derryb
Posts: 36,265 ✭✭✭✭✭
a black swan event. What will the next black swan event be that will push gold vertical?
“The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” - Satoshi Nakamoto
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RGDS!
The whole worlds off its rocker, buy Gold™.
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Iran attacking Israel.
I'll go with the fallout of NATO absorbing Ukraine.
“The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” - Satoshi Nakamoto
I don't think that would be considered a black swan event. Given all the hostilities in the Middle East Iran attacking Israel wouldn't be totally unexpected. On the other hand Russia actually using a tactical nuclear weapon or China conducting a massive attack on Taiwan, I think those might be considered black swan events. While we know they are a possibility it would be shocking for either of them to actually happen.
Good explanation for "black swan event" - something economically shocking.
“The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” - Satoshi Nakamoto
Black Swans aren't good for gold. Once they reverse, gold would give up it's gains.
Besides, U.S. Treasurieis are the go-to investment during times of trouble.
Gold IS getting some action as a hedge on stocks given dampened volatility from the options market.
Y'all remember when Silicon Valley Bank (SVB) had their bank run and the FDIC had to step in? One of their largest customers at the time was Circle which manages the USDC stablecoin. There were fears at the time that if Circle could not access their $3.3B cash account(s) held at SVB, they might implode or otherwise be forced to sell (part of) their treasuring holdings to raise operating cash. They held ~$32B in Treasuries at the time.
Tether (USDT), a foreign domiciled stablecoin, claims to own (as of 31 December 2023) $63B in US Treasuries. For context, in the latest TIC data, Bermuda is listed as the 20th largest foreign holder of Treasuries with $86B. Tether is also in the crosshairs of the SEC (et al?). There is some risk that Tether could face an adverse outcome either via regulatory action, fraud (they only publish auditor attestations - not actual, independent audits of their reserves) or who knows what.
The point being that there are significant holdings of US Treasuries held by stablecoin managers that could one day be forced to dump their holdings on the market for one reason or another.
Yelling at clouds on pmbug.com
Which would be absorbed by the market in a week or two. For example, the treasury sold $42 billion at auction in Feb.
https://bloomberg.com/news/articles/2024-02-07/treasury-s-biggest-ever-10-year-auction-garners-solid-demand?embedded-checkout=true
But to your point, the implosion of "stablecoins" should be an expected event.
Knowledge is the enemy of fear
I would think that a a month's+ worth of dump on top of new issuance might disturb the market a bit. Especially if it comes all at once instead of spread out over a month.
Yelling at clouds on pmbug.com
Rates would go up about 15 bps then drop right back down.
Knowledge is the enemy of fear
when they hit everyone heads for the exit door. Then dealers "the big boys" start hedging.
Keep those shades on derryb.... if gold (and silver!) keep on the upward move.... you gonna need them!
Dump what -- Treasuries ? Who cares...most liquid market in the world trading $600 billion daily.
They can't impact the market and if they can, it's only for 1 day.