Show Notes
This is a free preview of a paid episode. To hear more, visit www.theflyingfrisby.com
The yields on 10-year US treasuries are rising. They’ve hit their highest level in nearly 20 years. What does that even mean? And more importantly what are the implications? A lot of people are getting their knickers in a twist. And why has gold’s promising little rally hit a wall? And what about UK gilts, they’ve rocketed slap bang in the middle of the Labour Party conference, when they’re all promising more spending. Make it make sense. If you live in a third world country such as the UK, I urge you to own gold or silver. The pound will be further devalued, as will the euro and dollar. The bullion dealer I use and recommend is The Pure Gold Company. They deliver to the UK, the US, Canada and Europe. More here.
US Treasury yields are not just a US problem. They put upward pressure on the entire developed-world bond market, and the UK is particularly exposed because its own fiscal position is already so precarious. Today, the yield on a US 10-year Treasury is around 5.25%, the UK 10-year gilt hit 5.44% on Monday, its highest level since 2007. At Tuesday’s auction, the government paid an average yield of 5.38% to borrow for ten years, the highest yield at a UK 10-year gilt auction since 1999. Even a small increase in the cost of borrowing puts governments in trouble. Where are they going to find the money to pay the interest? They’ve either got to raise taxes, cut spending, let the deficit grow, pray for growth or all four – and in the case of the UK in time for the Healey budget on October 28. As US rates rise sterling comes under pressure against the dollar – it will no longer be propped up by the relatively high rates we have been offering - hence sterling’s recent declines. So we get higher inflation, especially energy, because of increased import costs. Investors around the world need a reason to hold a UK 10-year gilt. Previously the higher rates we were offering were a reason. If a US 10-year Treasury offers, say, 5.25%, why hold gilts and carry the sterling risk without a much higher rate to compensate? The US Treasury market effectively sets a large part of the global opportunity cost of capital. Higher US rates thus put upward pressure on UK interest rates. So debt gets even more expensive. Our fiscal position deteriorates. Higher rates hurt remortgaging, housing affordability, commercial property, corporate borrowing, infrastructure financing, private equity and so on. Another point to note: the UK 10-year gilt is now yielding 5.4%, despite the Bank Rate being only 3.75%. That gap is telling you that the bond market is pricing a considerably higher long-term cost of capital than the overnight policy rate alone would suggest. The really worrying configuration for Britain would be US real yields rising, US inflation expectations rising, sterling falling and UK gilt yields rising faster than Treasuries. How will all this impact Gold and bitcoin?
More from The Flying Frisby - money, markets and more
Something a little different this week. On Monday I gave a talk for UK Finance called Making Sense of It All, about the multiple contradictions at work int he economy: rising bond yields yet equity markets grinding higher, huge investment in AI despite limited profit, and the growing squeeze on the materials needed to build AI infrastructure. (Many thanks to Duncan and Rhiannon for inviting me to speak). I’ve taken the deck and put together an online version - the first time I’ve ever attempted such a thing - I hope you will find it useful. The transcript is available above. Until next time, Dominic If you live in a third world country such as the UK, I urge you to own gold or silver. The pound will be further devalued, as will the euro and dollar. The bullion dealer I use and recommend is The Pure Gold Company. They deliver to the UK, the US, Canada and Europe. More here.
After an extraordinary run which started in 2022 below US$20/oz and ended in January this year at US$122, silver has been working its way downwards. We have had a correction of almost 50%. Today we’re at $58/oz having been as low as $55 in July. We are almost certainly going to go back and retest that low, I would say, and silver is very much in a downtrend. $50 has been a huge line in the sand that goes all the way back to 1980 and for decades silver could not get above that number. Then, late last year, it cut through it like butter. What was resistance becomes support is one of the technical analysts’ guiding mantras, and there is every chance $50 will do just that. However, if there is one thing I have learnt about silver over the years it is that has an unrivalled propensity to let you down, which is I suppose my way of saying it could quite easily go a lot lower. It’s silver after all. However, the fundamentals favour silver. The market remains in deficit. The Silver Institute’s latest World Silver Survey forecasts a 46.3 million ounce deficit in 2026, which would be the sixth consecutive annual deficit. Never mind jewellery and investment demand, silver finds an enormous amount of industrial demand (~60% of annual demand), especially in electronics, because it is such a good conductor of electricity. The sudden increase from solar panel demand a few years back is thought to have triggered the recent run, although manufacturers are reducing the amount of silver used in each panel. Bear markets are a time to build. As an investor, you research the companies you might want to buy - there is no need necessarily to rush out and buy them - start building positions when nobody else wants them, make the purchases on your own terms. There is no need to rush. With that in mind, I am going to tell you about my largest silver position today. I even have an interview with the boss. It was a big winner for readers in the last cycle going from below 30c north of C$3, rising more than 1,000%. With the falls in the silver price it has now come back more than 50%, and I think it is worth taking a look. Its CEO is both young and competent and he is growing the company in an admirable way so that in 3 to 5 years time you are going to see something much bigger.
It’s my pleasure to sit down with with the man who “gold pilled” me back in the day with his book, The Collapse of the Dollar. James Turk, founder of GoldMoney, has spent five decades working in banking, finance and investments, making the case that gold is not an investment or another commodity, but money in its purest form. We discuss why he believes the US can no longer repeat the Volcker rescue of the 1980s, the relationship between sound money and liberty, and why he expects gold eventually to return to the centre of global commerce as technology changes the way money moves. James’ latest book is Money and Liberty and you can find his IEA paper here. This interview was brought to you by The Pure Gold Company If you live in a third world country such as the UK, I urge you to own gold or silver. The pound will be further devalued, as will the euro and dollar. The bullion dealer I use and recommend is The Pure Gold Company. They deliver to the UK, the US, Canada and Europe. More here.
Good Sunday to you, We have a fantastic interview for you today. I sit down with legendary Canadian investor Frank Giustra to discuss gold, government debt and why he believes the world is entering the most dangerous geopolitical period of our lifetime. You can either watch the video or listen as a podcast via Spotify et al.Frank made his fortune in mining and natural resources, before founding Lionsgate Films, the world’s biggest independent film studio. His track record as a businessman and investor is superlative. We discuss why he believes this is no ordinary metals bull market, the accelerating shift by central banks from government debt into physical gold, the risk that another round of quantitative easing could trigger a dollar crisis, and whether gold may ultimately need to be revalued higher, dramaticically higher. We also touch on China, financial repression, critical minerals and why, of everything Frank owns today, gold remains the asset he is most excited about. Money Markets & More is the interview series from Dominic Frisby, exploring money, markets, gold, economics and the ideas shaping the world.🥇 The programme is brought to you by The Pure Gold Company If you live in a third world country such as the UK, I urge you to own gold or silver. The pound will be further devalued, as will the euro and dollar. The bullion dealer I use and recommend is The Pure Gold Company. They deliver to the UK, the US, Canada and Europe. More here.
This is a free preview of a paid episode. To hear more, visit www.theflyingfrisby.com