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Gold is Selling for $2,800 an Ounce in India

India, Zimbabwe, and Sweden Now Going Cashless

Written by Luke Burgess
Posted November 18, 2016


Gold is selling for $2,800 an ounce in India...

Chaos has broken out.

Millions of Indian citizens are scrambling to convert their now banned 500- and 1,000-rupee notes into legal tender.

Those who are lucky enough to be able to find someone willing to sell are buying gold at an unprecedented rate, currently paying up to US$2,800 for an ounce!

That's a 125% premium over spot prices as they are reported by the CME Group.

I first wrote to you about the cash ban last week, saying...

At the height of the election drama Tuesday night, the Reserve Bank of India issued a surprise order that demonetized 500- and 1,000-rupee notes — making the country's largest bills now virtually illegal to use. This will effectively remove 80% of the physical rupees in circulation.

Immediately following the ban were reports of hundreds standing in lines in banks and at ATMs to convert their cash into smaller denominations, with only few finding success and most only frustration.

A week later, the situation had devolved into some kind of post-Keynesian nightmare. One firsthand account details:

I went to convert my banned banknotes into new ones. The largest amount one can have converted is Rs 4,000 ($60), until further notice. There was a huge rush of people at the bank. Arguments were erupting, as people refused to stand in queues and the banks gave no explanation of what needed to be done. Fights were breaking out.

These people are going hungry, and some have begun to raid food shops. People are dying for lack of treatment at hospitals. Old people are dying in the endless queues. Some are killing themselves, as they are unable to comprehend the situation and simply don’t know what to do. There are now hundreds of such stories in the media.

Small businesses are in shambles, and many will probably never recover. The Hindu wedding season has just started and people are left with unusable banknotes. Their personal and family lives are now an utter disaster.

Indian Bank Line Nov 18 2016Indian citizens scramble to convert or deposit demonetized 500- and 1,000-rupee notes. (Photo Source: Reuters)

The same account goes on to say...

People are now converting whatever they can into gold, silver, and mostly for the first time into the US dollar and other foreign currencies as well, all of which are trading at huge premiums. Money is also moving out of the country. Gold has shot up to as much as $2,800 per ounce, if you can find it.

IF you can find it!

Now consider this for a minute...

India is already the world's #1 consumer of gold. In fact, there's even an Indian holiday where people traditionally buy gold for each other as gifts.

Estimates suggest there are some 650 million ounces of gold in Indian households and temples.

There's plenty of gold to be found in India. What's hard to find is someone in India willing to sell their gold right now. And then IF you can find that person, the going rate has a 130% premium to CME spot prices.

Think about that for a minute...

People are paying more than double the cash spot price for gold due to India's surprise demonetization scheme.

What happens if demonetization policies like this are spread around the world?

Or, rather, I should ask: what happens WHEN demonetization policies like this are spread around the world?

Several thousand miles away, another country is currently dealing with a similar and extreme currency crisis: Zimbabwe.

Zimbabwe is no stranger to currency crises. The country became sovereign in 1980 and introduced the Zimbabwe dollar to replace the Rhodesian dollar.

However, due to mismanagement and corruption, hyperinflation in Zimbabwe ultimately reduced it to one of the lowest-valued currency units in the world. It was redenominated three times — in 2006, 2008, and 2009 — with denominations going up to $100 trillion until it was finally retired in 2009.

100 Trillion Zimbabwe Note

Since that time, currencies such as the U.S. dollar, euro, rand, rupee, pound, and Australian dollars have been used for transactions. In fact, nine different currencies are considered officially “legal tender” in Zimbabwe.

But in September, the central bank of Zimbabwe announced that it would issue US$75 million worth of its own “bond” notes that would be in use throughout the country by the end of the year.

The news of the new bond notes was met with mixed reactions. But a sense of distrust in the financial system and panic to secure cash supplies has ultimately caused many to begin hoarding these notes.

And just like in India, there are currently banks and ATMs with hundreds of people waiting in line.

Zimbabwe Bank Line Nov 18 2016Zimbabweans line up at banks this week hoping to get as many new "bond" notes as possible. (Photo Source: CNN)

What's the solution?

Well, for the world's central banks, the solution is a cashless society.

For decades, there has been speculation and fears of the world moving toward a totally cashless society. But now that speculation is turning into a reality. It's being seriously discussed by financial academics and is being tested around the world.

Here's a headline from CNN this morning...

“Zimbabwe is running out of money — can a cashless society save it?”

How about some local Indian headlines from this week...

“Demonetisation: The dream of a cashless economy”The Indian Express
“Digital currency for a cashless India”India Hindu Business Line
“The young and the cashless”The Hindu‎ 

But maybe demonization and the move towards a cashless society is just happening in third-world and underdeveloped nations, right?

No. On Wednesday, Sweden’s central bank announced that it was considering the issuance of an “e-krona,” ostensibly to replace the physical currency.

See what's happening here?

We are witnessing the current fiat money system in its death throes. This will result in nothing less than trillions of dollars in wealth (stored labor) simply vanishing.

But, of course, the global banking system will try to retain its control over the world's wealth. Most likely, I expect the world's banking powers to simply attempt exchanging one fiat currency system for another. Whether or not that works out for them is left to be seen. But one thing is for sure...

In the intermediary, gold, precious metals, and other real assets are going to become extremely popular as vehicles for wealth storage as confidence in the global banking system's fiat money system diminishes.

No exaggeration, the move towards a cashless society is happening so fast that I can barely keep up with writing about all of it. And that's why I think it's so important to own gold right now.

I've recently come across a very good indicator for gold prices most people don't know about. But believe it or not, gold is often leased (at cost) between banks, producers, manufacturers, and others.

Now, the lease rate of gold changes daily. Sometimes anomalous spikes in these lease rates can signal big movements in gold.

Take a look at the big spike in gold lease rates right before the yellow metal took off back in January...

Now take a look at what happened following that spike in the lease rates...

Gold Nov 18 2016

Today's lease rates are also signaling a buy in gold prices. Take some time to check out my video. At the end, I'm going to ask you to join my newsletter service, which I truly hope you do. But either way, take some time to check out the information on this gold leasing market. It could be an easy way to massive gains.

Until next time,
Luke Burgess Signature
Luke Burgess

As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.

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