Gold Strategies: China vs. USA—Which Approach is More Feasible for Boosting Gold Prices?

Op-Ed by Jon Forrest Little

Dec 17, 2024

The drop in the GCNY10YR index from 2.65 to 1.7 over the past year represents a significant decline in Chinese 10-year government bond yields. This dynamic typically indicates increased demand for bonds, driving prices up and yields down.

Gold prices tend to rise when bond yields fall due to their inverse relationship.

As yields decrease, the opportunity cost of holding non-yielding assets like gold diminishes, making it more attractive to investors.

.Additionally, lower yields often signal economic uncertainty or monetary easing, which can boost gold's appeal as a safe-haven asset.

China's intentional deflationary policies and increased demand for their bonds have contributed to this yield decline. When China implements massive stimulus packages, as suggested, it could lead to a surge in gold and silver demand from their population.

This potential increase in precious metals buying, coupled with China's reported reduction of U.S. Treasury holdings, could further support gold prices.

The combination of these factors - falling yields, potential stimulus, and shifts in reserve assets - creates a complex environment that could significantly impact gold markets.

Meanwhile in the USA

On this Fox business segment the show host states that Judy Shelton is proposing a radical solution to solve inflation.

Judy Shelton responds “I like the word radical it comes from the Latin going to the root and the root of the problem is we haven’t had sound finances and sound money from our government”

play this video (is less than 2 minutes)

Judy Shelton's proposal for a 50-year Treasury bond convertible into gold, potentially issued on July 4, 2026, and maturing on July 4, 2076, is an innovative approach to reintroduce a gold standard for the US dollar.

The feasibility of this monetary product lies in its potential to address current monetary system shortcomings while utilizing US gold reserves more effectively.

By offering gold redeemability at maturity, it could allow for lower interest rates on long-dated debt and provide a mechanism for discovering the appropriate gold convertibility price.

However, the success of this proposal would depend on the government's commitment to fiscal and monetary rectitude, as well as market acceptance of such a novel financial instrument

China vs USA

Here are my thoughts comparing these two strategies

China's strategy to boost gold prices is already in motion, while the US proposal is a hypothetical future plan. The Chinese approach leverages current market dynamics, including falling bond yields and potential stimulus measures, to drive gold demand. In contrast, the US strategy, proposed by Judy Shelton, involves a long-term, 50-year Treasury bond convertible to gold, with a potential start date of July 4, 2026, and maturity on July 4, 2076.

The Chinese method is immediate and multifaceted. It combines intentional deflationary policies, increased bond demand, and potential stimulus packages to create an environment favorable for gold. This approach is already showing effects, with gold prices rising 6% since November and reaching $2,700 per troy ounce.

China's central bank has also resumed gold purchases, further supporting prices.

On the other hand, the US proposal is forward-looking and speculative. It aims to reintroduce a form of gold standard through a novel financial instrument. While potentially addressing current monetary system issues, its success would depend on long-term government commitment and market acceptance.

The contrasting timelines of these strategies raise questions about their feasibility and impact. China's approach is responsive to current economic conditions and can be adjusted as needed. The US proposal, with its 50-year maturity, assumes a level of stability and predictability that may be unrealistic given current global challenges.

Given the pressing issues facing the world, including environmental degradation, geopolitical tensions, and economic uncertainties, the viability of a 52-year financial instrument is questionable. The Chinese strategy, focusing on immediate action and adaptability, may be more suited to addressing current and near-future economic challenges.

Both approaches aim to leverage gold's status as a safe-haven asset, but through vastly different mechanisms and timeframes. While China's strategy is already influencing global gold prices, the US proposal remains theoretical, its potential impact on gold markets uncertain and distant

Why I worry about the USA

The current market cap of FART COIN (FRTC) stands at approximately $840 Million Dollars.

This significant discrepancy highlights the volatility and speculative nature of cryptocurrencies, particularly those with little backing or utility. In comparison

GR Silver Mining has a market cap of C$75.83 million.
Western Alaska Minerals has a market cap of C$26 million.
Defiance Silver has a market cap of C$135.07 million.
Dolly Varden Silver has a market cap of C$341.79 million
AbraSilver Resource has a market cap of C$307.23 million

These five companies alone have a combined market cap of approximately C$885.92 million. When you compare the Fartcoin market cap at $840 Million and these 5 silver miners at Canadian $886 Million , it’s totally absurd.

This is why I worry about USA.

The allure of cryptocurrencies like FART COIN often distracts from more stable asset classes, especially in a landscape where technological failures can render digital currencies worthless.

The reliance on digital assets raises questions about their long-term viability, especially when they lack intrinsic value or tangible backing.

Moreover, the current political climate in the USA adds to the uncertainty. With leaders often criticized for a lack of transparency regarding critical issues—such as drone operations, the origins of COVID-19, and even historical events like 9/11—public trust is waning.

The refusal to address these significant concerns only amplifies skepticism about the future direction of both financial markets and governance.

In this context, while FART COIN may capture attention, it is essential to consider the broader implications of investing in such assets versus established commodities like silver, which offer more stability and historical value amid ongoing global challenges.

end of OP-ED

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