Saying the Quiet Part Out Loud -

The French central bank recently sold all of the gold it had stored in New York and replaced it with higher-quality bars that will remain in France. French officials say the move was to increase the quality of its reserves and was not politically motivated. 
Mike Maharrey doesn't think that's the entire story, and in this episode of the Midweek Memo, he says the quiet part out loud. This move was almost certainly motivated in part by politics. Mike explains why France (and many other countries) want to minimize their exposure to the U.S. and the potential ramifications for the American economy. 
In this episode, he also covers last week's "blockbuster" jobs report and explains why it wasn't probably as great as the headlines indicate. (Hint – it has to do with revisions.)
<div x-data=" item_id: undefined, view: null " x-html="view || 'Product-Random-Featured'" x-init="view = await (await fetch('/shortcodes/product/random/featured?category=all')).text()">!!–Product-Random-Featured-All–!!</div>
Mike opens the show with a story about an elementary school crush. 
<blockquote>
"It was a little out of the way, but I often rode my bike past her house on my way to other places – even though her place really wasn’t 'on the way' to anyplace I needed to go. If anybody asked why I took the route past her house, I was prepared to tell them it avoided a big hill. This was true. Avoiding the hill wasn’t a dumb move. But choosing that route was still much more about the chance of seeing my crush when I rode by. What I’m getting at is that my stated reason for riding by her house wasn’t the only reason I was riding by her house, plausible though it was. It wasn’t even the main reason I was riding by her house. It was just a bonus that the route was a little easier. My true motivation was a deeply held secret."
</blockquote>
So, what does this have to do with gold or silver?
<blockquote>
"Well, the French just made a major move regarding their gold reserves. They give a perfectly valid reason for the move, but I believe there was another motive that they would prefer not to talk about."
</blockquote>
Before delving into the main topic, Mike notes that there appears to be a ceasefire in the works in Iran. That pushed gold higher early Wednesday. But he points out the difficulty of really evaluating the situation because of "regime uncertainty." The fact of the matter is that the current administration is unpredictable, and that makes evaluating policies difficult.
So, what did the French do to their gold reserves?
<blockquote>
"They sold all the gold it had stored in NY and replaced it with higher-quality gold bars that will remain in France. The move significantly upgraded the quality of the French central bank's gold reserves. More importantly, in my view, while officials won’t talk about it out loud, it also gave the U.S. a little less control over French finances."
</blockquote>
Mike explains the mechanics of the sale, explaining that the French central bank unloaded “non-standard” gold bars of varying purity and size. The central bank used the proceeds to purchase new gold bars that meet international reserve standards for weight, purity, and certification.
Mike compared it to trading "<a href="https://www.moneymetals.com/bullion/what-is-junk-silver">junk silver</a>" for .999 pure coins. 
<blockquote>
"My point is that the bars the French central bank sold weren’t reserve-grade bars, and their news bars are."
</blockquote>
Mike points out that the U.S. holds a large number of non-standard gold bars in its reserves.
French officials insist the move was not politically motivated. 
<blockquote>
"Central bank governor Francois Villeroy de Galhau said he made the decision to sell the non-standard gold held in New York to 'upgrade reserve quality' and that it was more convenient to simply sell the metal stored in New York and buy higher quality gold in Europe rather than transporting and refining the existing bars in the U.S. However, I would bet dollars to donuts that the move was at least partially motivated by politics."
</blockquote>
As Mike explains, the French have a history of moving gold for political reasons. In the 1960s, the country secretly moved 3,000 tonnes of gold out of U.S. vaults and repatriated it to France. 
<blockquote>
"The operation even had a code name – Vide-Gousset, French for 'emptying the pocket.' Many economists believe the French move was the death knell for the Bretton Woods system."
</blockquote>
Mike uses Germany as an example of a country that has worried about U.S. control over its gold reserves out loud and speculates that the French likely share German sentiments. 
<div x-data=" item_id: undefined, view: null " x-html="view || 'Product-Random-New'" x-init="view = await (await fetch('/shortcodes/product/random/new?category=all')).text()">!!–Product-Random-New-All–!!</div>
<blockquote>
"Today, many countries are again wary of the dollar’s outsized role in global finance due to the U.S.' weaponization of the currency and America’s fiscal malfeasance. Over the last several months, a movement to repatriate Germany’s gold held in New York has sprung up…
"French officials probably don’t want to say it out loud, but they almost certainly have the same concerns as German leaders (and many others around the world). It’s easy to frame the sale as a technical move to improve reserve quality, but it undeniably solves a political problem."
</blockquote>
Mike points out that a number of other countries have repatriated their gold over the last several years and notes that a World Gold Council survey confirms a "substantial share" of central banks expressed concern about potential sanctions after the U.S. and other Western countries froze almost half of Russia’s $650 billion gold and forex reserves in the wake of its invasion of Ukraine.
Mike says the repatriation trend "underscores the importance of holding physical gold free from <a href="https://www.moneymetals.com/news/2024/02/29/buy-gold-and-silver-to-hedge-against-counterparty-risk-003015">counterparty risk</a>."
<blockquote>
"If you store your gold and silver with a third party, you could lose your metal through theft, fraud, or an act of God. Of course, you could lose silver and gold stored in your home the same way (except for fraud), so you have to weigh the risk of using third-party storage and keeping large amounts of silver and gold at home."
</blockquote>
To wrap up the show, Mike highlights the "blockbuster" March jobs data released by the Bureau of Labor Statistics last Friday.
<blockquote>
"If you ask me, there is no government report more meaningless and yet more relied upon by policymakers than the monthly non-farm payroll report released every month by the Bureau of Labor Statistics.   
"Every month, the BLS releases data. Every month, we get breathless headlines about the “strength” or “weakness” of the economy based on this data. Every month, policymakers pore over the job report as they make decisions about the trajectory of monetary policy.
"And every month, the BLS revises the previous month's data. It happened again in March."
</blockquote>
Mike breaks down the number, paying particular attention to the revisions. He then highlights the long history of BLS revisions, noting they are almost always downward. 
<blockquote>
"So, what are we to make of the March report claiming the economy added a surprising 1780,000 jobs? Absolutely nothing. Because some of these jobs will almost certainly be erased next month."
</blockquote>
Mike points out the problem with these constant data revisions — the markets react to the initial numbers and not the revisions. It therefore creates a skewed view of the economy. 
<blockquote>
"It's notable that markets only react to the initial numbers. You never see markets tank because the BLS erased a bunch of jobs from the economy with a few clicks of its calculator. The revisions happen quietly in the back alleys. Nobody pays any attention to them. That creates the illusion that the labor market is much stronger than it is."
</blockquote>
Mike says revisions wouldn't matter so much if central bankers and government officials didn’t lean so much on this data to make decisions. 
<blockquote>
"But they do. And if the data is this unreliable, what does that tell you about the decisions based on this data?"
</blockquote>
Mike emphasizes that no matter what the data indicates, the government is going ot keep devaluing our money. Even under ideal economic conditions, the plan is to steal 10 percent of your purchasing power every five years. 
<blockquote>
"That's why you want to save in real money — gold and silver."
</blockquote>
Mike wraps up the show, urging listeners to call 800-800-1865 and talk with a Money Metals Precious Metals specialist today. 
<h2>Articles Mentioned in the Show</h2>
<a href="https://www.moneymetals.com/news/2024/02/29/could-weaponization-of-the-dollar-as-a-foreign-policy-billy-club-accelerate-de-dollarization-003013">Could Weaponization of the Dollar as a Foreign Policy Billy Club Accelerate De-Dollarization?</a>
<a href="https://www.moneymetals.com/news/2024/05/31/india-brings-100-tons-of-gold-home-for-safe-keeping-003225">India Brings Home 100 Tonnes of Gold for Safekeeping</a>

Read The Original Article