Gold Rally Stalls While Fiat Defence Force Cries ‘Scam!’

In today’s Money Morning…the gold rally had to pump the brakes at some point…Warren and Trump both use ‘scam’ when discussing bitcoin…back to power once more…and more…

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The gold price took a tumble over the last few days, now sitting at around US$1,860.

To be fair, the gold rally had to pump the brakes at some point after bouncing strongly off the late March lows when it ran into support around the US$1,680 mark:


Tradingview

Source: Tradingview.com

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In the short term, there’s a chance that it breaks down further to say, US$1,800, after the gold price tacked on 14% in the space of two months between the start of April and late June.

This is what’s happening to the other way of exiting the fiat dumpster fire too (chart of the Bitcoin [BTC] price):


Tradingview

Source: Tradingview.com

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It looks as if it’s bounced off support at US$33,000 and hit resistance at US$40,000.

By the way, these are two key lines that Ryan Dinse identified when we last spoke about bitcoin.

So, the bitcoin price may stay rangebound for a period as the increasingly coordinated FUD (fear, uncertainty, doubt) attack plays out.

And by FUD attack, I mean that politicians across the political spectrum are starting to talk the same way.

Warren and Trump both use ‘scam’ when discussing bitcoin

At a recent Senate Banking Committee hearing, Senator Elizabeth Warren trotted out the bitcoin is a ‘scam’ trope once more.

She said:

Cryptocurrencies have created opportunities to scam investors, assist criminals, and worsen the climate crisis.’

When Trump and Warren agree on something, you know something fishy is up.

It’s interesting to see the coordinated use of similar language across ideologies — why are the left and right suddenly reading from the same script?

Imagine if they started talking about gold like this?

Shiny thing fine but fake internet money bad, say the septuagenarian ‘Fiat Defence Force’.

Remembering that a key appeal of both gold and bitcoin is their finite nature, I could imagine a scenario where the fiat warriors also turn on precious metals.

Let’s take a look at the definition of ‘scam’ a bit closer to see what’s really at stake though.

As per the Cambridge English Dictionary:

A dishonest or illegal plan or activity, esp. one for making money.’

Just like the recent article by a former Dutch tax minister, we can use a box-ticking formula to assess whether bitcoin meets the criteria for being a scam with the following three components:

  1. Dishonest or illegal
  2. A plan or activity
  3. Focus on making money

What about component #1?

Dishonest doesn’t quite work in my eyes, if anything bitcoin is quite open and upfront about the rules of the system — it’s all in the white paper.

And illegal? Yes, some countries are moving against crypto. Currently, though, the US and Australia treat crypto as an asset which is taxable should you make a capital gain on it. This gives it legitimacy. Gold is the same too. Houses as well.

Point is, it’s only illegal unless the powers that be say so, and this varies from jurisdiction to jurisdiction.

In El Salvador, it’s now actually very legal, legal tender in fact.

We’ll get back to this point in a bit.

What about #2?

A plan implies a bit of coordination and activity implies doing a thing. Yes, Satoshi was likely planning a reworking of the monetary order, but the uptake of bitcoin is organic. No one is forcing you to buy bitcoin. Whereas you are definitely forced to use fiat. While bitcoin sort of ‘just is’, fiat is far more coordinated, process-driven, and involves ‘the doing of things’. This doing is called ‘monetary policy’.

Finally, #3?

A focus on making money is definitely what motivates a lot of investors in cryptocurrency. Some, however, just want money to keep its value as central banks torch fiat. Actually, lighting fiat on fire would probably increase its value, but you get the point (very illegal by the way). I’d classify bitcoin as more engaged in ‘remaking’ money more than actually making it. And on top of that, nothing is really made or enters the world except new blocks.

All of this adds up to the ‘scam’ claim being pretty flimsy.

Let’s flip the script, though, what if fiat is a bit of a scam itself?

Back to power once more

Say you go into your local bank as a kid around 1985, you get your first savings account, and the branch manager gives you a pat on the head saying, ‘Be sure to save!’

Then the central bank (the Fed) does this:


Trading Economics

Source: Tradingeconomics.com

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Not only were you lied to about the benefit of savings, they now want to go to negative rates.

Sorry about your savings, kid, you’ll have to pay to keep your money with us now.

Probably the biggest scam ever against savers, perpetrated over the last 40 years.

But don’t worry, it’s not illegal. And herein lies the problem, we’re back to square one — power.

If Trump and Warren are singing from the same hymnbook, you better believe something massive is afoot.

Once upon a time, the US confiscated gold — will a similar thing play out for BTC?

Unlikely, as it’s hard to turn off the Internet, but try they may.

Both bitcoin and gold operate on the same underlying ethos — something I discussed with Brian Chu in last week’s episode of The Money Morning Podcast.

Which is why I can relate to this guy:


Reddit

Source: Reddit

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BTC and gold as the saviours of savers? That’s something that could well happen if the ‘Fiat Defence Force’ tries anymore dishonest tactics.

I’ll be back to talk with Brian Chu about silver in the next episode of The Money Morning Podcast in tomorrow’s edition.

Regards,


Lachlann Tierney Signature

Lachlann Tierney,
For Money Morning


Lachlann is also the Editorial Analyst at Exponential Stock Investor, a stock tipping newsletter that hunts for promising small-cap stocks. For information on how to subscribe and see what Lachy’s telling subscribers right now, please click here.


Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Lachlann is involved in two publications:


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