Zero Hour

  • Central Bank of Russia: “All good here”
  • Addison Wiggin’s “Zero Hour” prediction…
  • … Revisited exactly four years later
  • Gold prices and super-spikes
  • Major (misleading) economic numbers
  • Federal Reserve and FIMA (not a typo)
  • Telecommuting in the buff? 
  • A reader regrets participation in this 1980 trend.

No April foolin’ here: As of today, the Central Bank of Russia is done with its years-long effort to accumulate gold.

As we’ve chronicled for a long time now, Russia’s gold accumulation has been relentless. In terms of the number of ounces, Russia’s gold stash is now the fifth largest in the world. But as a percentage of its annual economic output — well over 5% — no one else comes close.

In recent months, we’d noticed the pace of accumulation had been slowing. Now the Russians are saying, “We’re good here.”

We're Good Here

The announcement came on Monday. With no explanation. “Analysts say Russia already has a lot of gold stashed in reserves and likely doesn’t need more,” was the best that Bloomberg News could venture.


“See, they’re smarter than the average bear here, folks,” explains our old friend Chuck Butler, still writing the venerable Daily Pfennig e-letter.

“They see the huge premiums that are being charged for physical gold, and they’ve decided to sit on the sidelines until this all changes.”

Exactly. In recent days, we’ve discussed the building stresses in the gold market amid the coronavirus pandemic — most recently yesterday. Mines are shutting down to prevent the virus’s spread. Metal refineries are likewise suspending operations. Global air traffic has nearly ground to a halt, so it’s hard to move existing supply from one place to another.

Result? Gold futures trade at $1,579 this morning — the “paper price” took a beating yesterday — while if it’s real physical metal you want, you’re looking at close to $1,700. And that’s if you’re a bulk buyer like Russia. If it’s just one or two U.S. Gold Eagles you want, many dealers’ stocks have been cleaned out. (Read on to learn how you can still get yours…)

In short, we’ve nearly arrived at “Zero Hour.”

“Zero Hour” is the name our executive publisher Addison Wiggin gave to the moment when demand for physical metal far outstrips the market in gold futures and the price of real metal in your hand far outstrips the price you see on CNBC’s ticker.

Addison began musing about this future event with a small group of readers in early 2013. Later that year, an article he wrote went viral — at least among doom enthusiasts.

At a now-defunct site called The Doom Collective, where you were encouraged to “get your doom on,” Zero Hour headlines appeared alongside “PLANET X NIBIRU MARS DESTROYED.”

At the still-extant Godlike Productions, Zero Hour was right up there with “Welcome to 1984: New Xbox Forces Users to Stay Online for 24 Hours or It Disables Their Xbox.”

It was great fun back then. But by 2016, our firm’s thinking had become more somber. We’d brought aboard Jim Rickards as our macroeconomic maven. He’d been thinking about Zero Hour scenarios for years, and how they might come about.

“The super-spike in gold prices will not come from any of the obvious sources but from an unexpected source,” Jim said here in The 5 — exactly four years ago today.

Your editor went on to paraphrase some of the possibilities he was entertaining: “It could be the bankruptcy of a medium-size gold dealer. It could be lawmakers in Washington talking about new reporting requirements for gold dealers. Or it could have nothing to do with gold: It could be a war or a pandemic that frightens people into safeguarding wealth.”

No April foolin’ here either.

Importantly, Zero Hour and the super-spike has not arrived — yet.

Yes, the premium for real gold is much higher than normal. But it hasn’t broken away from the “paper price” for good. At least not right now.

Zero Hour arrives when a very large futures trader “stands for delivery.” That is, they want to take delivery of physical metal when their futures contract expires — instead of rolling over the contract or taking a cash settlement.

Right now, that’s still not feasible. The Comex, where gold futures are traded, has rules aimed at preventing that. In addition, the federal legal code is shot through with anti-fraud and anti-manipulation rules carrying jail time — rules that could be easily applied to a large gold trader who stands for delivery.

But in a moment of total market panic brought on by an “exogenous shock”… the rules won’t matter.

Under present circumstances, that shock could be almost anything. It could be an announcement that the U.S. Mint is suspending operations to prevent the virus’s spread. It could be a major gold miner defaulting on its corporate bonds because its mines are shuttered and it can’t bring new product to market. It could even be the hijacking of a private jet ferrying gold bars from Europe to North America.

“Once the avalanche begins, there’s no stopping it,” Jim said in 2016. “At that point, the hedge funds can demand physical delivery of gold without fear of prosecution. If a hedge fund tries to start an avalanche, it’s manipulation. But if the avalanche starts from another source, then a hedge fund piling on is ‘normal’ market conduct.

“Since every gold market participant knows there’s not enough physical gold to go around, everyone will demand physical gold at once. No one wants to be left holding the bag.”

Again, that moment is not here. Yet. But we’re closer to it now than at any time since our firm posited the Zero Hour scenario seven years ago.

As noted here yesterday, most online gold dealers have no U.S. Gold Eagles available at this time. OK, there’s one where the price is north of $2,100 — a premium of more than $500 over the spot price!

And then there’s Hard Assets Alliance — where, as we write this morning, you can buy for delivery at $1,711.

“We’re delivering and taking storage orders for just about every single product,” one of the Alliance’s top people tells me. “And at much more competitive prices than most dealers. It’s where our model of having so much liquidity from our wholesale network shines.”

We won’t say much more than that; we don’t want to give away their trade secrets, after all. The point is that Hard Assets Alliance can meet your precious metals needs right now, even as the shadow of Zero Hour looms overhead.

Before that shadow grows any larger, it’s time to open an account if you don’t already have one. Here’s the signup link.

Yes, our firm bought a piece of the company last year. So yes, we’ll take a small cut once you fund your account. But we wouldn’t have become a charter member of Hard Assets Alliance back in 2012 unless we were certain they’d do right by you.

After the “worst first quarter ever for the U.S. stock market” — as the media were keen to remind us at the close yesterday — the second quarter is off to a less-than-rousing start.

At last check, the Dow has shed nearly 600 points to 21,322. The S&P 500 has taken an even bigger tumble in percentage terms and is barely holding onto the 2,500 level. The Nasdaq is holding up best, as it has throughout the turmoil of recent weeks, down “only” 2.3% at 7,522.

The media have an easy explanation for the drop — the president’s warning about a “rough two-week period” for infections, hospitalizations and deaths. Who knows, maybe the media’s explanation might be right for once.

The day’s major economic numbers? Misleading across the board.

For starters, there’s the ISM manufacturing survey. Numbers above 50 indicate growth; below 50, contraction. The March number fell only slightly from 50.1 to 49.1. Not bad under the circumstances, right?

Ah, but you have to look at the “internals” of the report. Delivery times leaped from 57.3 to 65.0. “Longer delivery times in normal times are consistent with rising demand, but not in March, as the month's delays were the result not of demand but of virus-induced supply shortages,” says a summary from Econoday. The real tell is new orders — which collapsed from 49.8 to 42.2. Employment also took a steep drop.

For whatever it’s worth, a similar measure from China’s government leaped in March from 35.7 to 52… and a private-sector Chinese figure recovered from 40.3 to 50.1.

Meanwhile, the payroll firm ADP says private U.S. employers shed 27,000 jobs in March. Again, not bad on the surface, but those figures go up only to March 12 — the day after the “9/11 moment” when the president banned incoming flights from Europe, the NBA suspended its season and Tom Hanks announced he’d tested positive, all in the space of an hour. We’ll get a better read on the job market tomorrow with the week’s first-time unemployment claims.

For the record: The Federal Reserve has added another alphabet-soup “lending facility” — the seventh so far during the corona-shock.

This one’s called FIMA, which stands for “foreign and international monetary authorities.” Basically, the Fed is allowing foreign central banks to convert their holdings of U.S. Treasuries into dollars, the better to alleviate the “dollar shortage” in developing countries.

If that sounds like these foreign central banks are joining the “repo” market — which the Fed basically took over last September when it froze up — that’s exactly what’s going on. Ugh…

Now for an oddity of the sudden surge in people working from home.

“A survey of stay-at-home workers in the United States suggests 12% of workers have kept their cameras switched off during video calls due to a lack of clothing,” reports the UPI newswire. (UPI is still in business and still owned by the Moonies. Who knew?)

The survey covered 1,500 people working from home and was commissioned by an “interactive presentation tool” called Mentimeter.

“The company also said 44% of those surveyed admitted they dressed in more professional attire specifically for video meetings, while 16% said they had rearranged their homes to look more professional in the background of a video call.”

Hmmm… You’ll have a chance to see my own backdrop in a few more days. But I’ve been doing the telecommuting thing for years now, so I’ve got it down. And fully dressed, I assure you…

After our discussion of physical gold shortages yesterday, we heard from a longtime reader who sometimes injects a healthy dose of skepticism into the topics we cover…

“Any retail or for that matter wholesale dealer worth his salt would claim being sold out, holding for higher prices in this panic-driven market. It doesn't necessarily mean that the shortage is as severe as made out to be.

“I am also not convinced that it really matters, as what goes up must also come down, when the future becomes more clear. This is precisely what happened in 1980, in which I participated and got my lesson. I still have a few Krugerrands that are now worth less in purchasing power than they were at the peak then.

“If gold were to permanently go to, say, $10,000, as some predict, prices would rise commensurately, as would wages. In other words, your gains are illusory, unless you compare them with the dollars you stuffed under your mattress.”

The 5: Hey, we get it. And you’re not alone. “I like to think that I made the top in the gold market in 1980,” recalls James Grant of Grant’s Interest Rate Observer, during a recent interview on the Hidden Forces podcast.

Grant described standing in line, in “chump fashion” at the Nicholas Deak coin dealer in Lower Manhattan to buy gold. Gold peaked above $800 an ounce in January 1980 — a level not seen again until 2007!

“There are any number of possible ways to make a fool of oneself in the market,” said Grant, “but the best way, the best way, is to do what everyone else does.”

Wise words, for sure. In addition, the aforementioned Addison Wiggin made a lot of people mad a decade or so ago when he said, “Gold bugs are overjoyed to be riding the gold price all the way to $2,000, and they should be. But you can count on it, they’ll ride the price all the way down to $1,000.”

Eerie: Gold ended up peaking over $1,900 and bottoming at $1,050.

But at those peaks in early 1980 and late-summer 2011, everyone was talking about gold. It was mainstream. It was perceived as a ticket to effortless riches. It was like dot-com stocks in 1999 or housing in 2006.

Is that where gold is now? Really? Sure doesn’t seem like it…

Best regards,

David Gonigam

Dave Gonigam
The 5 Min. Forecast

P.S. “Gold once again underpinned its status as a safe haven during the current corona crisis,” says a research note from the Swiss private bank Julius Baer. “Constraints to global air travel and the closures of gold refineries are showing up in product price premiums.”

That quotation turns up in a CNBC article that reports the present gold price a few bucks below $1,600.

But again, that’s the spot price. Those premiums over the spot price will bite — if you can locate any supply at all.

That’s why we’re so pleased to be working with Hard Assets Alliance at a time like this — supplying precious metals to people like you who want to preserve their wealth. The only thing they can’t furnish right now is Canadian Maple Leafs, and that’s because the Royal Canadian Mint is in a two-week shutdown to prevent the virus’s spread.

Otherwise, they’ve got you covered — and at very reasonable premiums considering the supply squeeze. That’s the power of the wholesaler network they’ve assembled.

If your precious metals stash isn’t up to snuff yet, give Hard Assets Alliance a look.

Full disclosure: Our firm has an ownership stake in Hard Assets Alliance, so we will be compensated once you fund an account. But we wouldn’t have purchased that stake unless we already liked the way they look out for their customers. Our vote of confidence is being vindicated right now. Click here and see what they can do for you.

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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