A Conversation with Bron Suchecki of The Perth Mint

71
Tue, Dec 17, 2013 - 4:44am

A few days ago I recorded a conversation with Bron Suchecki of The Perth Mint, Australia. Bron is Head of Research and Strategy at Perth Mint which can be found here: https://www.perthmint.com.au/

Bron contributes to several internet fora, including an occasional contribution of his 2 cents at TFMR. Some of his more interesting posts in the mix of fora and blogs, he adds to his personal blog here: https://www.goldchat.blogspot.ie/

Our conversation was planned to be about 20 minutes in length, but we got talking about some pretty interesting angles of the pricing of gold, and it went a little over 40 minutes in what seemed no time at all.

One of the things we talked about is the trading strategies of large financial entities, like banks and hedge funds, who manage a multi currency exposure. The interest rates of each currency, as received when their bonds are bought, is the yield of that currency in the funds' or banks' eyes, and gold is another currency to them. But gold yields no interest rate (unless you lease it away), and therefore gold is a de-facto zero coupon bond in it's own currency. Zero coupon (zero interest rate ) bonds have no yield, but their value increases from a discount at the start to full value at maturity, so their "interest yield" is included in their price, and varies as time passes. So if gold is looked at by the asset allocation team of a bond fund, these are things they pay great attention to when they compare gold with eg the JGB, TBond, or any sovereign bond. Now since bond yields (interest rates for each currency) have been traded, and/or massaged to historic low levels, this also feeds into the value of zero coupon bonds in those currencies, and into the value of gold which is a zero interest rate bond in gold.

This particular angle of the price of gold gets neglected in the PM blogosphere, who tend to regard gold much more as a high value commodity, and gold is that too. But carry cost vs yield is highly significant when it comes to who is buying and selling gold spot, or at a future delivery date. For instance, if interest rates are high, then a bank could sell gold spot (depressing the price now) and on full settlement in 2 days turn around and buy the future (raising the price later) for which a margin, not full payment is required. Then they can invest the cash raised in a higher yielding bond in some currency. This is called a carry trade. At maturity, they can roll it over, selling spot and buying future, or unwind it.

We went into this aspect of the price of gold in some depth, and also talked about several other matters too, like the Perth Mints own allocated and unallocated clients, and how their inventory is managed, the gold refining business, refining LBMA bars into Metric bars for Asia, and about the fast growing Asian exchanges' business, India and China gold.

I hope you find this video interesting and worth watching.

The video conversation with Bron can be accessed by clicking here: https://www.greenhobbymodel.com/sdcharts/AM-Bron-Suchecki-Interview-final.mp4

Resources and Links

For readers who would like to explore the interaction between currency values (including gold) and their interest rate (bond yield in those currencies) I enclose some links which provide explanation about forward contracts and spot-to-futures arbitrage here:

https://www.babypips.com/school/undergraduate/freshman-year/carry-trade/what-is-carry-trade.html

https://en.wikipedia.org/wiki/Forward_contract

https://www.sharemarketschool.com/futures-arbitrage-its-meaning/

https://www.stlouisfed.org/publications/re/articles/?id=448

Argentus Maximus

The author posts daily commentary on the gold and silver markets in the TFMR forum: The Setup For The Big Trade. More information about the author & his work can be found here: RhythmNPrice.

About the Author

  71 Comments

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ag1969
Dec 18, 2013 - 8:14am

Following the money backwards

Following the money backwards leads to President Reagan, Russian rubles and Ambassador Leo Wanta

Ambassador Leo Wanta is the lawful “principle” and “trustor” of funds stashed in accounts all over the world.

Editor’s note: The story of how Ambassador Leo Wanta was commissioned by President Reagan to make $trillions for the American people in shrewd (but legal) currency trading that concentrated on buying Russian rubles at a discount to destabilize the Soviet economy surfaced in 1992. The Wanta story was recently revived on the Investigative Journal by Greg Syzmanski through interviews with Ambassador Wanta broadcast on the Republic Broadcast Network. As it turns out, British financial news publisher Christopher Story has published the documents in evidence giving credence to what is arguably the most important story in recent memory. As you will see, several poorly-reported incidents during the 90s helped to bury the Wanta story as a tall-tale. As events unfold and independent researchers put the pieces together, Ambassador Wanta is emerging as a real man whose activities produced $trillions that are stashed away in real banks and invested in real properties. If this story is true—and the evidence is becoming unavoidably compelling—then it will not be long before all the world will know.

https://lightworker29501.com/2012/11/01/the-story-of-the-wanta-reagan-mi...

DayStar
Dec 18, 2013 - 8:06am

RE: Bearer Bonds

Argentus, how about just, "We got your gold gold for some paper. Sorry about your luck"?

DayStar

Dec 18, 2013 - 6:57am

@JY re all those bearer bonds

Leaving aside the details of each report, any one or more of which can be nutcase, lies, misinformation, or err ... unproven (so far) conspiracy theory, and just looking at the overall form of the allegations:

The implication seems to be that covert deals were negotiated in the past whereby highly valuable assets and/or sensitive services rendered were paid for by bearer bonds with extremely high nominal values printed upon them.

And now their marker has been presented at the cashier's desk, the holders of the assets/recipients of the services rendered don't feel like paying so much. Well I guess possession provides "the whip hand" in negotiations.

But if looked at another way, this is the point at which the bearer bond as an form of money, for future business at a certain level of business, gains recognition for being a likely worthless promise.

So bearer bonds from 1900 to, shall we say about 1980, were (at the time) "as good as gold"? And from now on what is as good as gold in the eyes of those who would otherwise have been prepared to accept a nice anonymous bearer bond? Why gold of course! The physical, hard solid, no paper and signatures on it, variety of gold.

It's just another nail in the coffin of virtual assets backed by the trust and integrity of .... fill in the gap to suit your level of gullibility and geographic location.

It's a rejection by the centre to honour a fringe variety of bond. Even if fiction and unproven, the dirt will stick and render these instruments of payment unacceptable for the future. One more paper promise type gone.

Another small milestone - one of the many required - to provide confirmation of the beginning of a multi decade bond bear market .

ivars
Dec 18, 2013 - 6:10am

With this bond purchase share

With this bond purchase share BOJ and Japan is very close to government money printing. They are moving from debt based money to government printed, in fact. That means yields can stay low as they pay off all new debt, but currency issuance is so fast that it has less then 10 years left to evaporate..Yen is going to move UP faster and faster over time. 300USD JPY target of Bass is not an exaggeration.

Quote: While no decision will be made until the central bank has more time to assess price trends, the current pace of asset purchases -- equivalent to 70 percent of new government-debt issuance -- isn’t a limit for many officials, according to the people, who asked not to be named as the talks are private. Some officials highlight the size of the market offering plenty of room to buy more, according to the people. The BOJ in September reported that it held 15.4 percent of the 969 trillion yen ($9.4 trillion) of government bonds outstanding.
Citizen DoctorKcap
Dec 18, 2013 - 5:09am

4-leaf clover

Kcap: At least a 4-leaf clover is a something.

What is a 4-leaf clover, really? It is just an arrangement of energy fields, which on a small enough scale have no substance, i.e. it is not really a "thing", it is no-thing. Some physicists believe that information might be more fundamentally real than either matter or energy. It's the arrangement, the configuration, that has value and meaning.

This is one arrangement of 300x300 pixels:

This is another arrangement:

Both images are nothing more than bits of information, an arrangement of pixels on a video screen. The value and meaning of each is in the eye of the beholder.

A BitCoin is a collection of bits, in a very special arrangement. To the eye of Kcap, a Bitcoin has as much value as the upper picture. To some others, it has great value, perhaps ultimately even more than the lower image, in terms of its potential impact on humanity. Those who value BitCoins spend $21 million per day in electricity costs to preserve and protect them, and to create a limited amount of new ones. That amount probably rivals the annual security budget of The Louvre.

Hammer
Dec 18, 2013 - 2:40am

Just thought (with all the

Just thought (with all the hyped up bs today about what will happen as we all sit by our computers worldwide wondering what words of wisdom will be uttered today (hint double purchase tomorrow just in case ;) (if link doesn't work, copy and paste)

https://www.newyorkfed.org/markets/tot_operation_schedule.html

I present to you, tidings of good joy

Deck the Halls with Macro Follies
Key Economic Events Week of 5/10

5/11 10:00 ET JOLTS job openings
5/11 12:00 ET Goon Brainard
5/12 8:30 ET Consumer Price Index
5/12 9:00 ET Goon Chlamydia
5/12 2:00 ET Federal Budget
5/13 8:30 ET Producer Price Index
5/14 8:30 ET Retail Sales
5/14 8:30 ET Import Price Index
5/14 9:15 ET Cap Ute & Ind Prod
5/14 10:00 ET Consumer Sentiment

dgstage
Dec 17, 2013 - 11:16pm

Kcap

I hope your right, and if it goes to 150 I will buy some for a gamble.

Here is a good link for current price.

https://preev.com/

Michael Krieger is a big fan of bitcoin. He should have sold at 1200.

https://sgtreport.com/2013/12/bitcoin-for-dummies-dont-miss-this-michael-krieger-interview/

why do I even bother
Dec 17, 2013 - 11:01pm

Where have all the Gold Bars gone?

Where have all the Gold Bars gone?

Long time passing

Where have all the Gold Bars gone?

(Negative GOFO)

Where have all the Gold Bars gone?

Gone to China, every one

They never will return

When will we ever learn?

tyberious
Dec 17, 2013 - 10:55pm

bye bye bitcoin...

  Image cannot be displayed

US Treasury's Financial Crimes Enforcement Network "Reaching Out" To Bitcoin Businesses

Submitted by Tyler Durden on 12/17/2013 - 22:12

  Image cannot be displayedRecently some of the more naive, not to mention top-ticking, financial commentators assumed that just because US regulators had not snapped shut a trap surrounding Bitcoin and other digital currencies yet, that this state of blissful cohabitation would continue indefinitely. Unfortunately, as we warned back in March during the initial leg higher in BTC following the Cyprus deposit confiscations, the well-known "honeypot" strategy was meant to draw out as many digital currency fans and participants as possible - who after all were warned by none other than the ECB that the current regime will never adopt a parallel, and quite threatening monetary unit - only to see the regulatory and enforcement fist of the nation that (still) hosts the reserve currency slowly but surely start to clench around the binary currency. Because, finally, after testing the ground long enough, the fist is starting to not only close but squeeze tight. And as Reuters reports, it is the U.S. Treasury Department's anti money-laundering unit that is now warning businesses linked to Bitcoin that they "may have to comply with federal law and regulation as money transmitters, a Treasury spokesman said."

it was nice knowing you!

PS. Regardless of rather this was pump and dump, I knew TPTB would find a way to crush it!

Kcap
Dec 17, 2013 - 10:47pm

BitCoin

Is going to $150...how could ANY Gold/Silver believer EVER believe in the idea of BitCoin? Its nothing. Literally....nothing.

At least a 4-leaf clover is a something.

Kcap

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Key Economic Events Week of 5/10

5/11 10:00 ET JOLTS job openings
5/11 12:00 ET Goon Brainard
5/12 8:30 ET Consumer Price Index
5/12 9:00 ET Goon Chlamydia
5/12 2:00 ET Federal Budget
5/13 8:30 ET Producer Price Index
5/14 8:30 ET Retail Sales
5/14 8:30 ET Import Price Index
5/14 9:15 ET Cap Ute & Ind Prod
5/14 10:00 ET Consumer Sentiment

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