World Economic Forum Illustrates the Rise of Chinese Power while President Elect Trump Turns to Britain
The world entered an unprecedented era of a new global order this past week with the arrival of the Chinese at Davos' World Economic Forum conference. Gold markets have taken notice of the increasingly changing world and vaulted back over the $1,200 per ounce price threshold. President-Elect Trump has waded into the Britain versus European Union Brexit fiasco by offering the British a more advantageous trade deal than President Obama would. The Vatican has issued a report calling for a literal new world economic order that includes a single governing economic authority. With all the various geopolitical events and continuing instability rocking the globe, it is only further evidence for why gold makes sense in an IRA.
Davos World Economic Forum Confronts the Ascension of Chinese Power
The annual World Economic Forum conference meeting of the financial masters of the universe at Davos has seen a first-ever event this year which presents a game changing reality. Not only has the Chinese head of state attended the WEF, but this same President Xi opened the event as the featured speaker. This has sparked a range of stunned reactions at what it represents. Senior Advisor Mark Malloch-Brown at Eurasia stated, “The story of 2017 is going to be China's growing influence and ascension of its power.”
Blackstone's Studzinski similarly opined, “The fact that President Xi is opening Davos is a strong statement that China sees himself as front and center on the world stage today.” What is as notable as the arrival of the Chinese is the conspicuously missing presence of the United States. President Elect Donald Trump elected to not attend nor send any representatives of his own to the event. This is telling of his opinion of the meeting and its relative importance as he is first and foremost an international businessmen, the exact demographic that frequents these annual meetings of the minds. It also represents another episode of the shift away from American hegemony in the world towards Chinese global leadership.
It comes at exactly the time when the leadership of the United States is most sorely needed in the world. While the U.S. is expected to take on a less internationally involved and more protectionist role in global geopolitics and trade, the Chinese are conversely building their influence. Evidences of this abound. Trump has pledged to pull out of the Trans Pacific Partnership treaty on day one, which is only creating a greater amount of uncertainty for the myriads of companies looking to build up more business with those Asian countries.
European businesses are similarly struggling with their partnerships with firms in the United Kingdom because of Brexit, as British companies are trying to figure out how their relationships with European countries and companies will look going forward. This could become more of a problem because of the uncertainty surrounding potentially populist revolution elections in some of the European countries the Netherlands, Italy, France, and Germany this year. There may even be additional elections called throughout the EU in 2017. This is why Eurasia's Mark Malloch-Brown has named this chaotic global world we live in the new world “disorder.”
Gold Breaks Above $1,200 In Reaction to Scary World
All of these potentially negative trade issues and confrontations along with rising global tensions are having a noticeable impact on gold markets. The February gold futures briefly broke over the $1,200 an ounce threshold last week. This represented a continuation of the move up that began back on December 15th.
Gold has found plenty of reasons to thrust past this important psychological barrier, which it is managing to hold as of time of publication at nearly $1,215 per ounce. The world looks a little scarier with all of the random black swan events potentially in play. Besides conceivable trade wars, the nationalist parties across Europe are likely to gain still more influence, if not outright control, in such key countries as the Netherlands and France. While Marine Le Pen is not counted as a favorite to win the French election this year, she does have a small lead in recent polls. Marine has promised to hold an in or out referendum on the continued use of the Euro in France if she wins. The chart below illustrates the recent strength and runup in gold since mid December:
Chief Commodities Analyst James Steel of HSBC weighed in with, “We think there's sufficient geopolitical risk and some of the more traditional reasons — tightening money supply, relatively low recycling levels. We have elections in Germany and France, so the geopolitical risk elements would not necessarily be just U.S.-centric. Also we're coming off a year, last year when emerging market physical demand was rather poor. Any kind of recovery from last year is going to be good news.”
Trump Offers Britain Fast and Fair Trade Deal
Prime Minister Theresa May has been struggling to convince skeptics throughout the country that Britain will be able to forge new and better trade ties with countries outside the European Union than they presently have. She finally received a huge vote of confidence in this argument on Monday as incoming American President Donald Trump extended his helping hand of friendship by offering her both a fast and fair trade deal.
This represents a significant break from outgoing President Barack Obama's stance. He had warned Britain if they voted for Brexit that they would move to the “back of the queue.” Trump has once again reversed his predecessor's untraditional American positions regarding the nation's best and longest standing allies. He said to The Times, “We're gonna work very hard to get it done quickly and done properly. Good for both sides. Brexit is going to end up being a great thing.”
Besides telling Prime Minister May and the British that he will negotiate a good trade deal as soon as they finish their withdrawal from the EU, he has predicted that other nations will decide to leave the European Union in following Britain's courageous example to reclaim their national sovereignty. May is planning to begin the two years of Brexit negotiations no later than the conclusion of March. She has given a speech to this effect today, trying to depict Great Britain as the free trade loving country which will be open to the whole world all the while it severs some of its four decades old ties with its closest partners. President-to-be Trump's powerful gesture and olive branch he has extended to the British has only served to make the idea of withdrawing from the EU customs union still more appealing. Now May can argue she has important and meaningful trading offers outside of and independently from the European Union.
Vatican Calling for a New Global Economic Authority
Amid all of the noise created by this past week's Davos WEP conference and Brexit announcements, one important piece of news that has been largely overlooked is the new report and call from the Vatican for the creation of a “global public authority” as well as a “central world bank.” The pope and Catholic state are appealing for these two world groups to be set up as organizations which would overrule those financial institutions which they believe are ineffective in quickly and fairly handling crises as well as old and outdated.
This report entitled “Toward Reforming the International Financial and Monetary Systems in the Context of a Global Public Authority” is a specific financial document that is outlining taxes on global financial transactions. The report condemned such capitalist ideals as runaway free markets and “neo-liberal thinking.”
“In fact, the crisis has revealed behaviors like selfishness, collective greed, and hoarding of goods on a great scale,” it claims. Whatever your stand on the moral inequalities in the capitalist global economy, this report and reactions to it bear watching. The move towards a one world economic order have just received a major boost. Do not let anyone talk you out of your IRA approved gold retirement holdings.