One Belt, One Road, One Direction for Precious Metals

by David Smith, Money Metals:

All great events hang by a hair. The man of ability takes advantage of everything and neglects nothing that can give him a chance of success; whilst the less able man sometimes loses everything by neglecting a single one of those chances.

~Napoleon Bonaparte

China’s launch several years ago of the One Belt, One Road Initiative is set to become the biggest commercial linking-system constructing project in world history. In the book David Morgan and I co-authored, Second Chance: How to Make and Keep Big Money from the Coming Gold and Silver Shock-Wave, we discuss the “New Silk Road” this way:

…the plan, described as an “economic partnership map with multiple rings interconnected with one another” envisions an economic land belt and a maritime road linking Beijing through Europe to the Mediterranean. This modern equivalent of the old Silk Road would weave together the economies of over half the world’s population via transit corridors of highways, high-speed rail, fiber-optic cables, pipelines, and air and seaport hubs.

OBOR – also known as the Belt and Road Initiative – is drawing supplies of commodities to it across the board, like iron filings to a magnet. Concrete, iron, zinc, copper… silver and gold. Silver, as a critical ingredient in the electronics and communication build-out; gold (+ silver) because of rising incomes for China’s middle class – larger than the population of the U.S. – which will continue the historical habit adding to its precious metal holdings.

An excellent interactive map showing the primary pathways and effects of this mammoth construction project can be found at the South China Morning Post. Elements:

• During a recent two-day visit to Beijing by U.K. Chancellor Philip Hammond, it was announced that former Prime Minister David Cameron would be taking a lead role in a US$1 billion private equity infrastructure fund directly investing in the One Belt One Road (OBOR) initiative. – Tama Churchouse
• HSBC has estimated that the expansive Belt and Road program will generate no less than an additional, game-changing US$2.5 trillion worth of new trade a year.
• It is important to remember that the “belt” in BRI is a series of corridors connecting Eastern China with oil-gas rich regions in Central Asia and the Middle East. The high-speed rail networks, or new “Silk Roads”, will simply traverse regions filled with, what else, un-mined gold. - Pepe Escobar
• An almost unnoticed (when in the West, made light of) corollary is China’s proposed “Latin Belt and Road” program, involving Brazil, Argentina and Chile. China’s Foreign Minister says, “It follows the principle of achieving shared growth through discussion and collaboration. It is nothing like a zero sum game.” - Asia Times

The meaning for gold and silver?

When most Western analysts tout the virtues of precious metals’ ownership, they focus on what Frank Holmes refers to as the “Fear Trade.” They say you should (and we agree) own gold and silver as “insurance” against rising inflation, which by the year (daily in Venezuela and Zimbabwe) reduces the purchasing power of David Morgan’s famously termed “paper promises.” These highly-liquid metals can be turned into fiat paper virtually anywhere in the world.

Silk Road Gold Demand
(Courtesy goldchartsrus.com)

Holmes also refers to the “Love Trade”, a demand factor just as important and enduring. When people’s disposable income rises, they purchase discretionary items – things not otherwise critical beyond the basics of food and shelter. This behavior, especially by Indians and Chinese (“Chindians”) has historically been a habit; almost an obsession. Graceland Updates Editor, Stewart Thomson describes the OBOR context, saying:

Gold is headed back towards slow, relentless appreciation against fiat, but it won’t be as slow as you might think… because of the exponential mathematical relationship between Indian wage increases and gold demand. The road to $15,000 will be built with one belt, one road, one price-advance brick at a time.

As citizens industrialize, they play catch up with everyone else. Because there are almost 8 times more Chindians than Americans, it’s a super-sized version of what took place in the 1880s in America. (Given) that the Chinese are the world’s biggest gamblers, and Indians are maniacally obsessed with owning all the gold there ever was, is, and will be, the bull era promises to be incredibly exciting.

“Technical proof”?

One of most overlooked tools in a technical traders trading box is the relationship between gold and global currencies. On major exchanges it’s most frequently quoted in U.S. dollars, but in a given country, gold demand is expressed in local money. When we see gold advancing in dollars, that’s important. When making new highs in other currencies, it becomes a bell-weather signal in its own right.

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