There are some striking stories this week, all concerning Gold or touching on it’s magnificence and timeless value. The biggest story this week is…
Firstly, a South Korean salvage team have discovered the wreck of a Russian warship that was sunk in a naval battle 113 years ago and is believed to still contain 200 tons of gold bullion worth £100 billion.
The Russian Imperial Navy cruiser Dmitrii Donskoi was discovered at a depth of more than 1,400 feet about one mile off the South Korean island of Ulleungdo. A joint team made up of experts from South Korea, Britain and Canada discovered the wreck on Sunday. (Let’s take a moment over our British tea to revel in that excellence of the ship’s name, it could roll off the tongue in any James Bond movie over a martini anyday). There are reports that the Dmitrii Donskoi was carrying the fleet’s funds and went down with 5,500 boxes of Gold bars and coins still in its hold to stop the Japanese seizing it. The South Korean Shinil Group estimates the Gold would have a value today of £101.3 billion.
“Before we extrapolate that this exciting development may cause World War III, Russia and South Korea have come to an arrangement, even including North Korea in the process. I have to admit we have to keep adjusting our concept of who is at odds with whom in these slightly strange times. “The company says it is aiming to raise the ship in October or November. Half of any treasure found aboard the vessel would be handed over to the Russian government, the company said, while 10 percent of the remainder will be invested in tourism projects, including a museum dedicated to the vessel. A portion of the rest of the treasure will be donated to joint projects to promote development in north-east Asia, the company said, such as a railway line from Russia to South Korea through North Korea,” (The Telegraph).
Firstly, this is fascinating in and of itself. Secondly, it blows previous estimates of how much Gold is on the seabed out of the water (excuse the pun). Rob Goodier of Popular Mechanics wrote back in 2012 that marine biologists put the estimate at $60 billions:
“Don’t be fooled by the flashy dollar figures, Mitchell-Cook argues – we can’t know how much wealth is at the bottom of the sea, but it’s not enough to make it worth your time.” So, if nothing elses, this shows how big a deal the above salvage operation in South Korean waters really is. The original crew fought hard not to let the ship be boarded by the Japanese. And when this was unsuccessful, they allegedly sank the ship in South Korean waters to stop the gold bullion falling into Japanese hands. It would make a good movie plot, with some moving sub texts of lost love and heroism added in would it not.
To show the evolution of global fears and politics, this week Japan has signed a major trade deal with the E.U. The health of the E.U. is highly related to the trustworthiness of our old historic friend physical Gold.
The UK Business Insider reported yesterday that The European Union and Japan reached a major free trade deal on Tuesday. The European Council President Donald Tusk said the deal showed that the EU and Japan “stand together against protectionism.”
A unbias observer would be forgiven for thinking this sounds remarkably like bruised EU ego code for “we need the money.” The facts show that globally, the EU and Japan hold the weakest economies:
Japan’s public debt last year in relation to its gross domestic product stands at a mind-boggling 240%. This is the highest debt to GDP ratio in the world. Japan’s economy is the tallest house of cards on the planet. In second place with a debt to GDP ratio of 180% is… Greece, the economic quicksand of the eurozone. Fourth place goes to Italy at 133%. Like the frog in the slow boiling water, we almost become immune to the size of this ill health in modern times.
Yet, Business Insider paints the picture in a different light: “In addition to creating a free-trade zone for countries that make up around 30% of the world’s GDP, the EPA is also the latest in a series of liberalizing agreements that have been initiated or formalized by major economic powers around the world.” I suspect, as we were always taught in law school, that the truth lies somewhere in the middle.
The hint against “protectionism” – which to be fair denigrates a normally excellent word with noble roots – is a shot aimed against the strange man that is Trump.
My Aeroplane Has More Gold Than Yours
Which leads us nicely on to our next news highlight relating to Gold. The Sun newspaper ran a funny piece on a comparison between Trump’s and Putin’s presidential plane’s – “dripping with gold”, including the amount of gold used in decoration. While on the outside Putin’s looks largely the same as the basic model from the outside, inside the cabin is lavishly decorated with dripping tapestries and gold accents. Air Force One is equally bedecked with gold trim alongside classic wood panelling. It is a timeless reminder that gold represents power and wealth, even in its colour, regardless of whether it is real gold or not. This is why our coins in our pocket are still the colour of gold and silver, even though they contain not a gram of the precious metals themselves.
If you’ve been watching the price falls of the real bullion money this week, Good Returns – an Indian financial website – gives a snappy review by explaining that “Gold prices are driven by the strength of the US dollar and currently, the American currency is standing stronger after the US Federal Reserve Chairman Jerome Powell’s US economic outlook reinforces views the central bank is on track to steadily hike interest rates. When the US treasuries are stronger, it erodes the appeal of the yellow metal as a safe haven among investors and also makes it an expensive affair for buyers in currencies other than the dollar, reducing demand.”
So, in conclusion this week, shipwrecks and planes prove Gold is a timeless affair, while interest rate dances and trade deals between weak fiat economies provide the smoke and mirrors.
We hope you are all well and that loved ones and friends are also with you in your journey to wealth protection. Enjoy the continued beautiful weather forecast for many of us this weekend and call Bleyer on 01769 618618 to take advantage of continued savvy summer precious metals purchases.