Veteran financial analyst and former bank director Alasdair Macleod has issued a stark warning about the gold market, suggesting that its liquidity is far more constrained than official figures indicate. In a recent interview on Liberty and Finance, the precious metals expert delved into the intricacies of global financial markets, the flawed foundations of Keynesian economics, and the increasing significance of gold in a precarious economic environment.
Macleod, known for his decades of experience in banking and his deep understanding of precious metals, provided a compelling analysis of current market dynamics. He emphasized the persistent demand for physical gold from China and other East Asian nations, stating that they are absorbing "virtually every ton of gold that becomes available." This relentless demand, he argues, is exacerbating an already tight liquidity situation in the gold market.
The interview also saw Macleod reiterate his long-standing critique of Keynesian economics, contrasting it with the often-overlooked Say's Law. He argued that the prevailing macroeconomic theories have paved the way for excessive government intervention, leading to economic distortions and hindering natural market corrections.
Macleod also addressed the recent volatility in gold and silver prices, particularly the sharp intraday swings observed during Shanghai trading hours. He suggested that these movements, often occurring on low volume, could be indicative of a "squeeze on the swaps" in the futures market, where bullion banks with short positions are facing pressure. "This sort of thing... on not much volume... is indicative of a squeeze on the swaps. I think they are being very, very badly squeezed."
Turning to the broader financial landscape, Macleod expressed significant concerns about the burgeoning US national debt and the trajectory of interest rates. He referenced comments from Scott Bessant, who reportedly aims to keep the US 10-year Treasury yield below 4.5%, a threshold that has already been breached.
Macleod believes that foreign investors, who collectively hold a staggering $40 trillion in US currency and debt, are increasingly wary of the mounting deficits and the long-term economic prospects of the United States. This hesitancy to buy more US Treasuries is putting upward pressure on bond yields.
"What the bond markets are telling us is that … rates are going higher. I mean hellip; foreigners own something like 40 trillion dollars of currency and debt. 40 trillion. That compares with … a nominal GDP of less than 30 trillion. They are overweight in dollars."
Drawing a historical parallel, Macleod pointed to the UK in the late 1970s, when government bonds (gilts) had yields as high as 15%, suggesting that similar levels could be seen in US dollar yields if the debt situation is not addressed.
When asked about the endgame for gold and silver as they reach all-time highs, Macleod explained that holding precious metals is essentially a move away from increasingly devalued credit. He anticipates that gold will play a crucial role in preserving wealth during economic turmoil.
"My objective is to try and help people understand these enormously important issues and to work out how to protect themselves from, if you like, what is happening." Macleod's latest interview on Liberty and Finance provides a sobering yet insightful perspective on the confluence of economic theories, market dynamics, and the enduring role of gold in an uncertain global financial system.