Gold & Silver - Risk or Opportunity? Plus Stablecoin Impact on Metals Info!

Hello everyone, welcome to Bald Guy Money and we start this one off with something I shared on X earlier in the week which may be a harsh truth for some to accept but it is a truth nonetheless and that is as the mainstream financial media trumpets a continuation of the bull market in stocks, the fact is that a weaker US dollar is masking real weakness in the stock market because when we measure the S&P 500 in other currencies what you can see here is that instead of making new real all-time highs the S&P 500 is falling down 7.7% in euros from the February 19th high and down more than 8% when measured in Swiss francs. Now this is what some people call a stealth bear market, a market that is in decline but for various reasons it goes unnoticed in this case due to dollar weakness but when we price the S&P 500 in gold what we see is that in terms of real money which is what I think gold is the S&P 500 didn't top out back in February of this year in fact it actually topped out back in December 2021 and is down 27% when priced in gold, down 3% when priced in silver since then despite the index being up 34% when measured in US dollars and it's precisely this topic that we're going to explore in this video starting with other cases of stealth bear markets for US stocks. We're going to talk about if it's ever happened like this before including when it's happened and why and we are going to be connecting two different periods to tell a greater story so make sure you watch the entirety of that segment. Once that's covered we are going to look back at those periods to determine the impact they had on precious metals prices to get an idea of what we may expect for gold and silver this time around and we're going to finish this video on the topic of CBDCs so Central Bank Digital Currencies as well as stable coins covering what their rollout and legitimization means for precious metals including some big big news on this topic that you will not want to miss. Now just before we dive in please remember to check out summitmetals.com if you want to buy gold and silver at a great price from a including five ounces of silver at spot when you use code new customer at checkout link to this deal is in the video description below. So jumping right into it I want to start by saying this is not the first time we've seen a stealth bear market in US stocks and although I will admit it's rare it's happened a couple times before most notably between 1985 and 1987 and then again during the crash and subsequent market recovery between 2000 and 2007 which of course included elements of a real bear market in it but also provides unique lessons about stocks and precious metals in this type of situation. Now to illustrate what a stealth bear market looks like I will be pricing the S&P 500 in both US dollars and Swiss francs and the reason is because the Swiss franc has been the most stable major currency since the US dollar went off the gold standard in 1971 resulting in an 82% decline in the value of the US dollar versus the Swiss franc over that period making the franc by far the cleanest shirt in the dirty clothes hamper despite that title often being mistakenly applied to the US dollar. So now that we have that established we start in 1985 and that was a very important year for the US dollar because it was the year the plaza accord was signed and I am sure many of you are watching this video asking yourselves what the heck is a plaza accord well in a nutshell inflation was out of control in the United States the CPI even got to 14.6 percent in early 1980 and along came a guy named Paul Volcker who was going to be the adult and do the hard thing by raising interest rates significantly to tame inflation and I am sure most of you have heard the story before but the part of the story that doesn't get talked about very often or at least enough in my opinion is the fact that because of extremely high US interest rates lots of foreign capital so available money that foreigners had to invest came flowing into the United States to take advantage of the high interest rates that spiked the dollar way up making US exports extremely expensive for foreigners causing the US trade deficit which was something that actually kind of mattered back in the 1980s to explode as Americans bought tons of products from Japan because it was relatively cheap for them with the dollar being so strong and funnily enough this situation also contributed to the central bank shift away from gold and towards US dollar reserves as rate hikes early in Paul Volcker's term coincided with the largest central bank gold sales since the United States went off the gold standard in 1971. So with all this happening the Plaza Accord was agreed on in early 1985 at the Plaza Hotel which Donald Trump coincidentally purchased in 1988 and this deal would allow a central bank to intervene in the foreign exchange markets if their currency became too strong and disrupted the balance of trade and what followed was a rapid devaluation of the US dollar relative to other currencies with the index going from 160 all the way down to 86 in a matter of three years with the S&P 500 rocketing up 48% over that same time period as US exports became attractive again and interest rates started to come down and just to put this into context for all of you the S&P 500 gained more during that three-year period despite the pullback you see at the end of 1987 than it has gained since the December 2021 high till today. But thanks to a weak US dollar which is what we are seeing today what would have been a 48% gain on the S&P 500 over that period actually became a 28% loss when measured in Swiss francs and despite positive performance from both precious metals over that period with gold slightly outperforming the S&P 500 and silver although giving up some of its gains at the end of the year having reclaimed the $10 level during the summer of 1987 higher interest rates which remained around 7% were just too strong of a force for precious metals to do well and the Swiss franc was probably the best safe haven at that time. Now fast forward to today to the 21st century and sadly most people like Paul Volcker who were born before the second world war and understood that sometimes tough decisions had to be made for the greater good are long gone and what we have now is the ultra low interest rate environments brought to us by career politicians and their friends who have really known nothing but comfort throughout their entire lives causing massive booms and massive busts like the one we saw between 2000 and 2007 where the stock market severely crashed bottoming out in 2002 only being able to make a new high in October 2007 and for all the people who were relieved to see the market back where it was in the summer of 2000 I'm saying in October 2007 after a long but massive recovery rally following the largest market crash since 1929 dollar weakness turned a break-even celebration into a real loss again measured in Swiss francs of minus 30% but what's notable during this period and I am going to connect this back to 1985 in a moment so please be patient for that is that without high interest rates we saw a renaissance a rebirth and after a 20 maybe arguably 30 year break from respecting the authority of gold and silver as money people returned to it seeking refuge from inflation one percent interest rates which made cash savers losers and metals in real terms more than doubled now how these two periods relate to gold and silver today is simple Donald Trump who bought the Plaza Hotel in 1988 as I already mentioned is very much aware of the history associated with his former property and this week he was quoted as saying a strong dollar sounds good but you make a heck of a lot more with a weaker one and without saying it certainly the Plaza Accord has something to do with that attitude because it successfully boosted American exports and decreased the trade deficit with Japan but despite all of the benefits that come along with that weaker dollar once again what we have is another stealth bear market hiding in the shadows for stocks like the one we saw from 1985 to 1987 as well as the one that I already showed you neutralized the market recovery from 2000 to 2007 and without higher interest rates like we saw in the 1980s this time around and central banks back on board with gold as a not only do I think we're almost guaranteed gains on gold and silver in US dollar terms moving forward I think what we're going to see measured in currencies around the world due to lack of attractive interest rates moving forward is something explosive and potentially stronger over the next few years than what we saw between 2000 and 2007 now just before we get to the impact that CVDCs and stable coins are going to have on gold and silver please remember that if you want to diversify your hard asset portfolio into land visit channel partner landofland.com they have properties starting from under $1,000 for people on a budget but also have plots like this 120 acre lot in Nevada for those of you looking to get into something a bit larger as land prices like metals continue to remain strong so if you want to know more about this or anything else they have check out landofland.com or call them at the number on the screen and get something that can't be printed by the federal reserve before the federal reserve starts printing and remember to use code bald guy to get $300 off any property they have now jumping into our viewer question for this week and I think it ties in very well with the topic that we've just covered and it comes from the comments section of my last video and remember if you have a question you'd like to see me cover in a future video don't be shy drop it in the comments section below now and this one comes from Joanna Jordan hello Joanna if you're watching and Joanna asks what the impact of the genius act and stable coins will have on precious metals prices and to start I want to say that a lot of people conflate or confuse CVDCs and stable coins and it's important we understand the difference because although the value of a stable coin is directly tied to the value of the fiat currency it is issued in meaning a stable coin is no different really than a fiat currency you can't speculate on it to earn money as some people in the comments section of my videos have suggested in the past it's not like bitcoin it's not like ethereum or anything like that they remain stable relative to the fiat currency they're issued in which is most commonly the US dollar and they are issued by private companies like tether for example maybe you've heard of that one before and can be used around the world for trade between whoever is willing to use them with whoever is willing to accept them and to be perfectly transparent with you all watching this video right now I have used US dollar stable coins in the past both when I was living in Dubai and in Poland because I have found them to be just as reliable as traditional bank wires but faster cheaper and easier since you don't need a bank to facilitate the transaction so there are positives to stable coins and in a world where de-dollarization is now a part of our vocabulary I think establishing clear rules around US dollar backed stable coins is one of the best ways short of of course responsible dollar management to keep the US dollar party going as it creates massive incentives for adoption by people around the world especially with the introduction of the genius act which gives US stable coins again like tether a clear regulatory framework stating how they need to be backed up which is either by US dollar bank deposits US bonds and treasuries or other liquid securities approved by regulators which by the way can include gold now another major benefit for the United States other than protecting the global status of the US dollar is because stable coins create demand for US debt and I talked about this on my Patreon on Friday and what I told my Patreon members was as things stand today of every dollar that is deposited in a US bank about 25 percent of those dollars maximum are parked in US debt and for large banks the Federal Reserve estimates it's actually only around 11 percent banks do this so they can earn a return on their deposits but when we compare that with the largest US dollar stable coin which is tether you can see here that about 79 percent of the money that tether has taken in to issue those digital US dollar stable coins has been parked in US debt so much higher than US banks because they are not making tether is not making other loans in the market like home loans or business loans and so on and by tying stable coins to US debt which is basically what the genius act is in part doing it allows people to exchange one dollar for one digital dollar that will still be used in the economy while simultaneously being invested in US debt filling gaps that the United States treasury has in funding the country's operations due to shakiness on the side of international US debt demand as you can see here with China and more recently Japan trimming down their US debt holdings so strategically speaking for the United States we can say so far so good but the question remains the question that Joanna asked at the start of this segment is does a reassertion of the US dollar via stable coins mean gold and silver are set to fall well I'd say the opposite is true because for every real dollar that tether receives it creates a digital dollar out of thin air as I've already stated and that digital dollar can be used in the real or digital economy and at the same time as that dollar is circulating in the economy the one that tether has issued thanks to the genius act a real dollar that was used to create the digital one is now landing in the lap of the US federal government as tether backs their stable coin with US bonds and treasuries again to the tune of about 79 percent of their backing and once that dollar lands in the lap of the US government they use that dollar in the real economy a second time so as far as I'm concerned what this does is this only multiplies at a faster rate the amount of circulating currency that is in the global economy and with the global money supply already reaching new all-time highs in fact the pace of money supply expansion around the world is gaining steam right now odds are that prices of both real physical assets so I'm talking here gold silver land real estate those kinds of things as well as some digital assets like bitcoin as much as I know some of you hate it when I even say the word the prices of these things are going to continue to rise as a result of this genius act due to the acceleration of money supply expansion now before I finish for those of you who have been celebrating the fact that the United States has seemingly abandoned its plans for a central bank digital currency let me say this when stable coins are fully backed by US bonds and treasuries and the legitimization of these stable coins relies on US regulators it means that the US government has their hooks in the stable coin issuers meaning a lot of the same restrictions and controls that we see being applied to banks and bank accounts can be rolled out to apply to stable coins at some point in the future including transaction approvals seizures account freezing and the list goes on so before you celebrate this as a win for decentralization just remember that these new laws have actually allowed the US government to assert some control over this space and none of it makes the importance of holding assets outside of the system obsolete and here I'm specifically referring to gold and silver especially when the law not only allows these companies at least in part to back their stable coins with precious metals which tether is already doing by the way at approximately 2.3 percent which is more than four billion dollars in gold that is held by the company for that reason but it also allows them to explore new ways to use gold as real circulating currency via for example the tether gold project which separate of the gold reserves that tether has to back up its US dollar stable coin they hold an additional 7.66 tons in gold just for this project alone with a real chance in my opinion since this has a digital aspect to it it's easy to use and the cost of using it is cheap has a better chance to make gold a real circulating currency over the next year than gold backs ever will and it's only a matter of time before this rolls out to silver too so watch out because this is bullish for precious metals so Joanna thank you once again for that fantastic question I really appreciate it and I appreciate everybody who made it to the very end of this video please remember to make a little bit of for the algorithm leave me a like leave a comment below maybe a question for a future video and remember to share this content with people in your life who need to hear this message and as I say at the end of all of my videos please remember to take care of yourselves that's important but more importantly remember to please take care of each other see you all in the next video goodbye