“Similarly, I ponder how Beijing feels about January’s booming Credit data – Aggregate Financing up $685 billion in a month. Do officials appreciate that they are completely held captive by history’s greatest Credit Bubble? I have argued that Bubbles have become a fundamental geopolitical device – a stratagem. The situation has regressed to a veritable global Financial Arms Race. As China/U.S. trade negotiations seemingly head down the homestretch, each side must believe that rallying domestic markets beget negotiating power. Meanwhile, emboldened global markets behave as if they have attained power surpassing mighty militaries and even nuclear arsenals.”
USAGOLD note: Highly recommended Sunday reading. . . .
“‘Great news’ as it should ease fears over who is going to finance the budget deficits,’ says Stephen Gallagher of Societe Generale. . .’Switching from shrinking its Treasury holdings by roughly $200 billion per year to being a net buyer of nearly the same amount could significantly support the Treasury financing trillion-dollar deficits and a weakening economy,’ he said.”
USAGOLD note: Wondering how the U.S. is going to finance those $1 trillion plus deficits over the next year? Here’s the answer. Just have the Fed print up a mountain of money and buy Treasuries. What could be simpler?
How to choose a gold firm
A quick guideline for beginning investors
It is surprising how many prospective investors simply dive into gold and silver investing without much in the way of a consumer inquiry. That lack of simple due diligence has ended up costing a good many investors thousands of dollars, and sometimes even hundreds of thousands, before the damage is detected.
It might be the most important decision you will make on the road to becoming a gold and silver owner.
To end right, start right.
Choose the right portfolio mix with the right firm at the right price.
Choose USAGOLD – reliably serving physical gold and silver investors since 1973.
Worry about the return ‘of’ your money,
not just the return ‘on’ it
“To be fair, the fiscal side of our current system has been nonexistent. We’re not all dead, but Keynes certainly is. Until governments can spend money and replace the animal spirits lacking in the private sector, then the Monopoly board and meager credit growth shrinks as a future deflationary weapon. But investors should not hope unrealistically for deficit spending any time soon. To me, that means at best, a ceiling on risk asset prices (stocks, high yield bonds, private equity, real estate) and at worst, minus signs at year’s end that force investors to abandon hope for future returns compared to historic examples. Worry for now about the return ‘of’ your money, not the return ‘on’ it. Our Monopoly-based economy requires credit creation and if it stays low, the future losers will grow in number.”
Bond-fund guru Bill Gross posted that piece of advice in his Investment Outlook column back in 2016. It still applies today – maybe even more so now than it did then. In the wealth game, emphasize defense when you need to, offense when it makes sense. At all times, remain diversified. And by that, we mean real diversification in the form of physical gold and silver coins and/or bullion outside the current fiat money system. There is nothing wrong with owning stocks and bonds. Realize though that these assets are denominated in the domestic currency. If it erodes in value, the underlying value of those assets erodes along with it. A proper diversification addresses that problem now and in the future. Bill Gross, by the way, has recommended buying gold on a number of occasions over the years.
“Not even the 70% marginal income tax on the super wealthy recently floated by Rep. Alexandria Ocasio-Cortez can save the day, Prince said. Followers of recent commentary from Ray Dalio— Prince’s co-CIO — should already be well familiar with Bridgewater’s view that divisive politics will make the next downturn that much more painful.”
USAGOLD note: The “new normal” goes long term with a twist – divisive politics that go beyond the atypical Washington gridlock.
Repost from 1-29-2019
“In a sworn affidavit with the Nova Scotia Supreme Court, widow Jennifer Robertson said that QuadrigaCX owes its customers some $190 million in both cryptocurrency and fiat money. QuadrigaCX has filed for creditor protection because it says it cannot access the funds stored in ‘cold storage,’ just the comparatively smaller amount in a ‘hot wallet’ used for transfers. . .”
USAGOLD note: The mysterious circumstances surrounding this lock-down of customer bitcoin assets speak volumes about the risks involved in crypto-currency ownership – still touted in some quarters as a replacement for gold. I will just say that you do not need a password to open a tube of gold British sovereigns or silver American Eagles. Some 115,000 Quadriga customers are affected.
Repost from 2-7-2019
“‘The market on a risk reward basis is dangerous,’ he said. ‘We do feel as if individuals ought to cut back their equity exposure. Instead, Tice recommends buying gold, an asset he holds. ‘I’m a believer that gold represents true money. We are in a fiat money world, and it’s dangerous not to have some gold in your portfolio,’ Tice said.”
USAGOLD note: Tice adds his name to the long list of fund managers hedging their exposure to stocks with an investment in gold.
Repost from 2-8-2018
(USAGOLD – February 14, 2019) – Gold climbed overnight in Asia, leveled out in European trading and remained firm into the New York open. Gold is now trading in the $1320 range and up $8 on the day. Silver is up 7¢ at $15.69. By way of summary, gold is up 4.75% on the year and up 12.4% since its August 2018 lows. Silver is roughly level for 2019, but up 11.8% since reaching its interim low in September. The consensus opinion on gold today seems to be that it is gaining strength on hopeful signs that China and the United States are moving toward a trade agreement. Yesterday’s drop in retail sales is also helping gold in that it provides incentive for the Fed to stay the course on its recent tilt to the dovish side of the monetary ledger.
Quote of the Day
“So, we were just chatting away there in friendly conversation and then Volcker walks in, you can’t miss him because I think he’s about six-and-a-half feet tall. So, he walks in and I thought, ‘well I have to shake his hand and say hello.’ He didn’t even look at me. He didn’t come to me. He went straight to his staff and he said, ‘what’s the price of gold?’ So, I thought, ‘gold is important to him’ and I still think it’s every bit as important to Fed people now because it is the ultimate measurement of the dollar. They can rig it and monkey around with it and play games, but ultimately, the market will have its say.” – Ron Paul from a Mises Institute Interview with Jeff Deist
Chart of the Day
Chart note: This chart shows the change in U.S. debt held by foreigners and international investors in billions of dollars from 1970 to present. The level of ownership grew proportionately over time in concert with the overall issuance of U.S. debt until 2015, when it began to fall off. The problem is not just that foreign investment in U.S. Treasuries is on the wane. It is that the retreat has come at a time when U.S. borrowing needs are expected to consistently exceed $1 trillion per year. The question becomes, “How is the U.S. federal debt going to get financed?” (For more detail, please see The $12 trillion federal debt bombshell – A NEWS & VIEWS SPECIAL REPORT, February 2019)
” There is one other destination you might consider, if only because others are starting to think the same way. And that is gold.”
USAGOLD note: Deductive logic, game theory point to gold . . . A well-written thinking man or woman’s approach to the financial markets and gold.
USAGOLD note: Here is the retail sales chart as of December 2018 showing the largest monthly drop since the financial crisis. Some say the data was inaccurate because of the government shutdown.
Chart Courtesy of TradingEconomics.com
“U.S. consumer prices were unchanged in January on the headline level, but looking under the hood, some of the most basic consumption including rent, food and medical care are all getting more expensive.”
USAGOLD note: There’s government numbers and then there’s life in the city.
“But, as the old joke has it, even if you are paranoid, it still might be that everyone is out to get you. As the Financial Times’ Debt Machine series has shown, worries that there are new dangers building in the credit markets cannot be dismissed as mere fear-mongering.”
USAGOLD note: The news this past week (see post immediately below) that 7 million Americans are behind on their auto loan payments is a case in point. It is not simply the number of borrowers involved, but how quickly it happened. As Ben Bernanke told us back in June, the tax cut stimulus will carry us for a while longer but “in 2020 Wile E. Coyote is going to go off the cliff.”
“The fact that a record number of Americans aren’t making those payments is ‘usually a sign of significant duress among low-income and working-class Americans,’ Long wrote.”
USAGOLD note: That’s a pretty big number and a big red flag that this economy might not be what many think it is.
“You might wonder what early uses did they have for gold when they first discovered it. Unfortunately, we don’t know either. But since 3,000 BC gold played an important role with the Egyptians. It was used to decorate their temples, weapons, ornaments, and jewelry. To the ancient Egyptians, gold was so important to them that even the capstones in the great pyramid of Giza were made out of gold.”
USAGOLD note: An interesting short-history on the ancient uses of gold . . . .
Image by Emadshenouda [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], from Wikimedia Commons [Edited]
Repost from 10-22-2018
“The changing demand dynamic, and a flight to safety by skittish investors has changed the prospects for gold and it could perform much better in 2019. ‘This could be gold’s year,’ said Suki Cooper, precious metals at Standard Chartered Bank. Since mid-November, when gold was at $1,200, it has gained about 9 percent.”
USAGOLD note: And gold is up about 2.2% since the start of the year.
Repost from 1-30-2019
“No one has a view, and everyone is positioned accordingly.”
“This may seem strange. After all, global equities have just notched up their best month in more than three years, as the panic that gripped investors in December has dissipated. The bond market has also clawed back most of the losses it suffered last year, helped by the US Federal Reserve’s abrupt decision to pause interest rate increases and willingness to re-examine how quickly it will sell its bond holdings.”
USAGOLD note: We highly recommend this Robin Wigglesworth article for a more in-depth look at the financial market introspection to which we alluded briefly in yesterday’s (2-3-2019) Daily Market Report.
Repost from 2-5-2019
Bloomberg/Matthew Townsend, Steve Matthews and Matthew Boesler/2-14-2019
“So much for a merry Christmas. That is, if you trust the numbers. Figures released Thursday by the Commerce Department show U.S. retail sales fell 1.2 percent in December from the previous month in the biggest drop since 2009, rather than the slight increase economists had been expecting. Even more confusing: There was a pullback in a measure based largely on internet sales, which had been expected to be the U.S. retailing industry’s saving grace this holiday season.”
USAGOLD note: We referred to the generally anemic report numbers in today’s DMR. Some apparently think that there is a problem with the data gathering traced back to the government shutdown. One would think that those charged with gathering these numbers would have double-checked before the release particularly when they saw a retail sales drop not seen since the 2008 financial crisis.
(USAGOLD – February 14, 2019) – Gold pushed higher at the New York open to trade at $1310.50 and up $3 on the day. Silver is level on the day at $15.52. Overnight gold once again dropped near the $1300 mark before finding support at the $1303 level then bolting $8 higher in early New York trading.
A run of somewhat anemic reports – unemployment, retail sales and producer prices – looked responsible for the quick jump at the COMEX open, but as of this writing that momentum appears to have been lost. If anything could be said of today’s reports, they give the appearance of the same stubborn disinflationary mode that has dominated this economy for over a decade. Disinflationary thinking, in turn, translates to concerns about systemic risk and elevates the safe-haven trade particularly among funds and institutions with a longer-term, capital preservation outlook.
Quote of the Day
Money, again, has often been a cause of the delusion of multitudes. Sober nations have all at once become desperate gamblers, and risked almost their existence upon the turn of a piece of paper. To trace the history of the most prominent of these delusions is the object of the present pages. Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.” – Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds (1841)
Chart of the Day
Chart note: This quarterly chart zeroes in on why the national debt matters to ordinary Americans. Rising interest rates and massive growth in the aggregate debt will push these numbers much higher – so much so that it will exceed in the near future what the nation spends on national defense. One would think that like Italy or Greece, at some point, the level of debt and interest payments will affect the national credit rating. Last, please note the acceleration in debt payments over the last twelve months (the last bar represents Q3-2018).
“The breadth and diversity of central banks that have recently purchased gold are matched by an equally broad and diverse set of reasons for these purchases. Traditionally, central bank reserve managers prioritise safety and liquidity when investing, which is why gold, the ultimate safe-haven asset, has long been a mainstay for central bank reserve investment.”
USAGOLD note: The World Gold Council’s Ezehcial Copic explores some of the primary motivations for the structural shift to gold among the world’s central banks – the investment of kings and the king of investments.
“When you’ve got Fed banks publicly praising negative interest rates, get ready… because it means they’re considering bringing negative rates to the US. And that’s incredibly bullish for gold. We’re not the only ones who think so…”
USAGOLD note: How quickly things can change. . .As if things aren’t bad enough for savers around the globe.
“It’s always perilous trying to interpret the actions of China and its central bank, but it’s hard not to come away thinking that the sudden affection for gold has something to do with the souring global economic outlook, which in many ways is centered around China. Just this week, Bloomberg News reported that two large Chinese borrowers missed recent payment deadlines, suggesting that government efforts to smooth over cracks in the $11 trillion bond market aren’t benefiting all firms.”
USAGOLD note: Burgess provides an interesting overview of where we are now emphasizing that the bond market might be a better indicator investor sentiment and where the economy might be headed.
“The Italian government has no intention of selling the Bank of Italy’s gold reserves to plug budget holes, a prominent lawmaker of the ruling League party said on Wednesday. ‘We do not want to sell a gram (of gold),’ Claudio Borghi, chairman of the lower-house budget committee and the League’s economics spokesman, said in a interview with state-owned television RAI.”
USAGOLD note: Sounds like that settles the matter. . . .at least for the time being. With much of the rest of the world in the gold acquisition and/or repatriation modes, it would be odd for Italy to head in the other direction, particularly when you consider that the current government was elected on a platform of Italian nationalism and antagonism toward the European Union.
“National debt for the first time passed $22 trillion this week — a big, scary number that really doesn’t pose much of a danger now but threatens to in the future.”
USAGOLD note: The debt to GDP ratio, which this article emphasizes, is an important concern, but just as important, if not more important, is the amount of interest the federal government pays on it and what percentage of tax receipts it consumes. And to the practically minded among us, it is an immediate problem, not something that “threatens in the future.”
DAILY MARKET REPORT
Gold appears to be gaining some momentum in early New York trading. It is up $5 on the day thus far at $1316. Silver is up 8¢ at $15.78. Commerzbank’s Eugen Weber neatly summarized the market situation for the yellow metal this morning by telling Reuters, “Overall there is healthy demand from investors for gold.” The Labor Department this morning reports consumer prices logging in at a 1.6% annualized gain for December – a number likely to reassure the Federal Reserve that it did the right thing by tilting dovish a couple of weeks ago. In general, the markets appear cautiously hopeful this morning on progress in US-China trade talks and averting another federal government shutdown. Without a lot of fanfare, the U.S. national debt went over $22 trillion yesterday.
Quote of the Day
“The world clings to its old mental picture of the stock market because it’s comforting; because it’s so hard to draw a picture of what has replaced it; and because the few people able to draw it for you have no interest in doing so.” ― Michael Lewis, Flash Boys
Chart of the Day
Chart note: The Volatility Index pushed to levels late last year and early this year not seen since the financial crisis in 2008. December 2018 was the worst month for stocks since the Great Depression. According to the Bank of America, not even the stock market rally early in the year was enough to convince investors to stay put. They were net sellers of $26 billion in U.S. stocks and $7 billion in European stocks in January. Meanwhile, gold bullion accumulation continued to advance steadily. Gold ETFs, the favored vehicle for funds and institutions, added almost 72 tonnes to their holdings in January and 185 tonnes since the beginning of October. ETF stockpiles now stand at their highest level since 2013.
“Absolutely. As long as we have a financial system, we will have financial crises. The only question is how often and how severe. Personally, I think a crisis is likely to happen sooner rather than later because of the large number of possible crisis triggers that are currently being squeezed. . . . Fortunately, because of improved capital, liquidity and risk management, the next financial crisis is unlikely to result in a banking crisis. But it could still easily result in sufficiently deep losses across a sufficiently broad range of assets to trigger an extraordinarily painful recession, or worse. The likelihood that the US has seen its last depression is about as high as the likelihood that it has seen its last war. Just saying.”
USAGOLD note: In this fascinating peak behind the curtain, Mike Silva tells the inside story of the 2008 financial crisis from the perspective of someone who, as Tim Geithner’s chief of staff at the New York Fed, was at the policy-making epicenter during the breakdown. Silva delivered his remarks in a speech before the London Bullion Marketing Association in October 2018.
Image by Benji the Pen [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], from Wikimedia Commons [Edited]
“’Emerging market central banks should hold fewer dollars and more gold as a way of diversifying their portfolio. It’s a simple question of diversification. At the moment, most emerging market central banks hold 1–2% of their reserves in gold, with 70–80% in dollars and the rest in euros and other currencies. I think a 5% allocation seems a natural position to take as part of an effective diversification policy – although it could be higher. After all, the US share of the global economy is shrinking, power is being centralised and we don’t know what the future holds,’ he says.”
USAGOLD note: Rogoff sees green cash going the way of the buggy-whip, but he sees an important new role for gold evolving in the process. He has some very interesting things to say about gold and the monetary role it will play in the society of the future at the link above.
“The reason the banks need reserves, particularly during a market decline, is to ensure there is enough liquidity to meet demands for capital. This is also suggestive of why Steve Mnuchin, the Secretary of the Treasury, decided, just prior to Christmas as the market plunged, to call all the major banks to ‘assure them that liquidity was readily available.’ Given that it is highly unusual for the Treasury Secretary to call the heads of banks AND the ‘President’s Working Group On Financial Markets,’ aka the ‘plunge protection team,’ to try assuage market fears, it raises the question of what does the Treasury know that we don’t?”
USAGOLD note: Lance Roberts questions ex-New York Fed president Bill Dudley’s claim that the Fed’s balance sheet “gets more attention than it deserves.”
. . . the federal debt goes over the $22 trillion mark.