DMR–Gold refuses to succumb to oil’s bruising fall yesterday – the ‘worst day of an awful year’ for financial markets

DAILY MARKET REPORT

Gold refused to succumb to pressure from a drop in commodities’ markets yesterday, particularly crude oil which dropped a bruising 6% in yesterday’s trading.  Oil has recovered a bit this morning – up almost 2% in early trading.  Gold, in fact, is up $5 on the day at $1227.  Silver is up 13¢ on the day at $14.49. Yesterday was not a particularly good day for financial markets across the boards.  Bloomberg labeled it “the worst day of an awful year” that left “no corner of the market unscathed.” Though few, at least publicly, are prepared to press the panic button on stocks, one would have to say that the worrying trends are beginning to look somewhat entrenched. Gold is trying to rise above it all.  This will be the last report until Monday. . . Have a Happy Thanksgiving!

Quote of the Day
“If we don’t quite know what the future holds, there is little point in getting carried away by very fancy mathematical calculations of optimal portfolios. Don’t rely on past data to be a good guide. Try to think through what mix of assets gives you the best chance of surviving some big event. That must mean including assets that are negatively correlated or uncorrelated in your portfolio. And I am very struck by the fact that over many many years, central banks, governments and individuals have always, despite the protestations of economists, held some gold in their portfolio. Obviously, there is no high running return, but when unexpected things happen, particularly when governments rise and fall, then gold is a means of payment that everyone is always prepared to accept. And I think that’s why even central banks have always had a role in their portfolios for gold.” – Mervyn King, former Governor, the Bank of England

Chart of the Day

Chart note: The United States dollar has lost more than 96% of its purchasing power from 1913 to present – a 105 year period. The 2018 dollar is now worth 3.8% the 1913 dollar. Put another way, what the consumer could buy with $1 in 1913, it takes $26 today.

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There’s a $9 trillion corporate debt bomb ‘bubbling’ in the US economy

CNBC/Jeff Cox/11-21-2018

“At first glance, it looks like a $9 trillion time bomb ready to detonate, a corporate debt load that has continued to escalate thanks to easy borrowing terms and a seemingly endless thirst from investors. On Wall Street, though, hopes are fairly high that it’s a problem, but a manageable one, at least for the next year or two.”

USAGOLD note:  As Warren Buffett famously said: “You only find out who is swimming naked when the tide goes out.”  And the tide going out almost always coincides with rising interest rates.

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A potential powder keg for the gold price

Seeking Alpha/Cliff Droke/11-19-2018

“In today’s report we’ll examine the latest factors which can benefit gold’s intermediate-term prospects. I’ll argue here that rising short interest, coupled with additional dollar weakness, will help keep gold above its August lows and could even serve as a powder keg for a short-covering rally in the coming weeks.”

USAGOLD note:  An update from tech analyst Cliff Droke on the record COMEX gold short position and prospects for the future. . . . . .

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London gold market comes clean: It’s not as big as thought

Bloomberg/Eddie van der Walt, Rupert Rowling and Anna Edwards/11-20-2018

“London’s gold market owned up to the biggest secret in bullion: it’s not as big as some thought and, for last week at least, smaller than New York’s. An average of $36.9 billion of gold and $5.2 billion of silver changed hands each day in the city’s over-the-counter market, including metal for delivery in Zurich, according to figures released for the first time on Tuesday by the London Bullion Market Association. Previous World Gold Council estimates, based on 2016 data, were between three and six times higher.

USAGOLD note:  Whoops.  More on a situation we gave brief mention yesterday.  The $36.9 billion average is still a big number in our estimation.  By way of comparison, the average daily group dollar volume at the New York Stock Exchange runs right around $40 billion per day.

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Tech stock rout wipes out Nasdaq’s 2018 gain

Financial Times/Camilla Hodgson, Michael Hunter, Peter Wells and Nicole Bullock/11-20-2018

“US technology stocks have tumbled sharply for a second day running, lifting the losses of the big five “Faang” stocks from their recent highs to more than $1tn, wiping out the last of the Nasdaq’s gains for 2018 and rattling global markets.”

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USAGOLD – Quality service and pricing since 1973

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USAGOLD ranks among the most reputable gold companies in the United States with several thousand clients and multi-millions in annual revenue. Founded in the 1970s and still family-owned, we are one of the oldest and most respected names in the gold industry. Our unblemished, zero-complaints record and solid reviews with the Better Business Bureau testify to the exceptional customer service and professional excellence which sets us apart from the competition.

USAGOLD specializes in gold and silver coins and bullion delivered to our client’s safekeeping. For over 45 years, we have resolutely advocated owning precious metals for asset preservation purposes rather than speculation. Admittedly, this philosophy does not resonate with all prospective gold and silver owners, but if it does with you, we think you will find our firm a kindred spirit.

When it comes time to pursue your first (or next) purchase, we invite you to learn first-hand why so many have chosen USAGOLD as their precious metals firm.

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DMR-Gold inches higher as stock sell-off becomes more entrenched

DAILY MARKET REPORT

Gold inched higher in quiet pre-Thanksgiving trading – up $1 on the day at $1225.  Silver is down 2¢ at $14.43.  Gold is attempting an interim base in an around the $1220 mark and searching for a good reason to bolt higher.  Stocks are the big story this morning with the DJIA set to open 400 points lower.  The NASDAQ, led lower by Apple, looks to open almost 2.5% lower.

Gold continues to gather support the result of dovish Fed rumblings, concerns about the dispute between China and the U.S.  and weakness in equity markets –  weakness that seemingly becomes more entrenched with each passing day. Goldman Sachs surprised market participants prior to today’s open by advising its clients to get defensive and move a portion of their portfolios to cash because it now offers positive inflation-adjusted returns. “Cash,” says Goldman, “will represent a competitive asset class to stocks for the first time in many years.”  We have not seen a recommendation based on that particular rationale in a very long time.

Quote of the Day
“At the quarter-century mark of 1925, the great bull market was under way, and Graham*, then 31, developed what he later described as a ‘bad case of hubris.’ During an early-1929 conversation with business associate Bernard Baruch (about whom he disparagingly observed, ‘He had the vanity that attenuates the greatness of some men’), both agreed that the market had advanced to ‘inordinate heights, that the speculators had gone crazy, that respected investment bankers were indulging in inexcusable high jinks, and that the whole thing would have to end up one day in a major crash.’ Several years later he lamented, ‘What seems really strange now is that I could make a prediction of that kind in all seriousness, yet not have the sense to realize the dangers to which I continued to subject the Account’s4 capital.’ In mid-1929, the equity in the ‘Account’ was a proud $2,500,000; by the end of 1932, it had shrunk to a mere $375,000.” – Frank K. Martin, A Decade of Delusions

* Benjamin Grahm, “The father of value investing”, 1894-1976, Security Analysis (1934) with David Dodd, and The Intelligent Investor (1949).

Chart of the Day

Chart courtesy of OPTIONAlpha

Chart note: We guesstimate that we are somewhere between “Euphoria” and “Anxiety” on stocks and “depression” and “hope” on gold and silver. In short, the time might be right for starting to leg-out of stocks and ladder-into gold. The last time we featured this chart in late September, we put stock market sentiment at somewhere between “Thrill” and “Euphoria” and gold somewhere between “Despondency” and “Depression.”
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Gold worth $37 billion traded in London each day, new data shows

Reuters/Peter Hobson/11-20-2018

“Members of the London Bullion Market Association (LBMA) traded at least 30.2 million ounces of gold worth $36.9 billion (28.7 billion pounds) each day last week, the LBMA said on Tuesday, presenting new data that gives the most accurate picture yet of the London market.”

USAGOLD note:  Investors are often surprised at the level of trade in the barbarous relic through the banking houses and institutions that comprise the London Bullion Market Association – most of it on paper.  And the $36.9 billion might be a low as this Reuters report points out.

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Dalio: America’s worst nightmare

Bloomberg/Brian Chappatta/11-19-2018

“His concern — shared by BlackRock Inc.’s Larry Fink, among others — is that swelling U.S. budget deficits will eventually irk big buyers overseas. Dalio said two months ago that ‘You easily could have a 30 percent depreciation in the dollar’ as the Fed has little choice but to monetize the national debt.”

USAGOLD note:  The highly-respected Mr. Dalio has made several statements over the past several weeks along these lines.  His firm, Bridgewater Associates, is the world’s largest hedge fund.  Dalio often speaks to the merits of gold ownership in these times.

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Why didn’t quantitative easing lead to hyperinflation?

Investopedia/Adam Hayes/10-14-2018

“So where did all the M0 money go if it wasn’t multiplied through the credit system? The answer is that banks and financial institutions hoarded the money in order to shore up their own balance sheets and regain profitability.”

USAGOLD note:  The banks deposited those funds at the Federal Reserve in the form of excess reserves delaying the inflationary effects.  Now the banks have begun drawing down those reserves with added incentives to do so built into Fed rate policies. Whether or not the reserve repatriation will now ignite inflation remains to be seen, but last month’s .6% producer price index jump could have been an early indicator. The draw-down has gathered pace over the past year as shown in the accompanying chart.  By closing the gap between the rate on excess reserves and the Fed funds rate, the Fed has sped up the process.

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Goldman turns bullish on yen, sees gradual gains in next year

NewsMaxFinance/11-19-2018

“A more challenging global risk environment argues for a more constructive view in 2019,’ they wrote. ‘We have found that lower U.S. growth and higher market volatility tend to benefit the yen, even when the Federal Reserve raises rates faster than expected.'”

USAGOLD note:  This might turn out to be good news for gold in 2019 if Goldman is right.  The yen and gold have been traveling partners over the past several months.

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We couldn’t agree with Grant Williams more.  Here at USAGOLD, we have always geared our content to what we believe our clientele would like to know or learn. Not the general public. Not Wall Street. Not the search engines. Not our colleagues in the field.  But our clientele.  The centerpiece to that endeavor is the page you are now reading.

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DMR

No DMR today.  Please check back though.  We will post an update if anything of interest surfaces.

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Gold price could drive higher after dovish remarks from Fed officials

Investing.com/Peter Hanks/11-17-2018

“Gold etched out some gains this week in an attempt to undo the damage dealt in the first week of November. . . Dovish comments from Fed Chairman Jerome Powell and Atlanta Fed President Raphael Bostic could hint at a shift in monetary policy and subsequently bolster gold’s position.”

USAGOLD note:  An analyst after our own heart.  His comments are in concert with our own in recent DMRs. The shift in rhetoric at the Fed is unmistakable.

Related:  Please see The Fed’s mood music is mellowing / Bloomberg / Daniel Moss /11-16-2018

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The politics of inflation

The Weekly Standard/Irwin M. Seltzer/11-17-2018

“Even without more spending, the deficits and the resulting mountain of government IOUs are almost certain to tempt politicians to take the easy way out, and let inflation solve the problem they are creating for the economy.”

USAGOLD note:  Important, candid look at the politics of inflation. We highly recommend this article.

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Gold ETF buyers return to market

Scrap Register/11-16-2018

“Both central banks and ETF investors tend to be ‘resilient holders’ of gold, Standard says.”

USAGOLD  note:  ETF inflows are an indication of fund and institution buying.

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How the bubbles in stocks and corporate bonds will burst

Real Investment Advice/Jesse Colombo/11-16-2018

“GE’s terrifying recent credit meltdown may be the initial pinprick for the corporate debt bubble, but make no mistake – it is not an isolated incident. GE may be the equivalent to Bear Stearns in 2007 and 2008 – just one of the first of many casualties.”

USAGOLD note:  Similarly, Credit  Bubble Bulletin‘s Doug Noland warns this past weekend that General Electric might be the canary in the credit market’s coal mine.

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It won’t be because of politics, but more wealthy investors see the end of bull market coming

CNBC/Eric Rosenbaum/11-18-2018

“The markets suffered another bumpy week in the post-midterm election period, with steep losses suffered by stocks. But if political headlines weighed on investors, it was more likely that the unresolved trade war with China was the reason rather than the reshuffling of House seats in favor of the Democrats.”

USAGOLD note:  Along these lines, VP Pence’s most recent public comments on the relationship with China and banner headlines at Bloomberg about a new Cold War are bound to raise concerns about the economic effects.

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Gold-Silver COT reports – Friday release

GoldSeek/11-16-2018

[Last week’s report]

[This week’s full report]

USAGOLD note: Given the strong interest in the record COT short positions in gold and silver, we plan to make these GoldSeek reports a regular Friday feature. So please check back on Friday afternoons for the latest reports. We will make a comment or two when warranted.

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Gold in the Attic

Every once in a while we rummage around USAGOLD’s creaky old attic and dust-off a golden vignette from our storied past. Here is a short vignette on software-driven trading in financial markets that originally appeared in the May 2012 edition of NEWS & VIEWS.  It speaks to the issue in a way you might not have anticipated. I hope you enjoy reading it as much as I enjoyed writing it. – MK

Computer software gone mad

“With respect to the growing dominance of machines on Wall Street, I recall the old Star Trek episode that involves a visit to a planet where the inhabitants seem to be living in a state of perfect bliss. Captain Kirk knows that this cannot be right. There is no such thing as perfect happiness. As it turns out, the population is controlled not by a loathsome dictator who has drugged the population into compliance, but by a computer that has evolved sufficiently to somehow gain control of their minds. Something must be done, concludes Kirk, to break its hold. Spock comes up with the solution by instructing the computer ‘to resolve the value of pi’ – an impossibility because its resolution, as we all remember from high school math class, is infinite. The computer spends all of its time and devotes all of its resources trying to achieve the impossible and the dictatorial hold it has on the population is released – a trick we might want to keep in mind for the day computers complete their mastery of Wall Street.”

In the February, 2017 issue of NEWS & VIEWS, we reposted that piece with the following added note:

“Similarly, in early 2017 Financial Times told the story of the textbook, The Making of a Fly: The Genetics of Animal Design. It started out selling for $113 per copy at Amazon – that is until the governing algorithm misfired between two third-party sellers. The price then skyrocketed to $23 million before someone took note and fixed the problem. We forget that computer software, and this applies to Wall Street’s trading apparatus as readily as it does the Amazon pricing platform, is only as reliable and intelligent as the code by which it is instructed to operate. The practical equivalent to Mr. Spock’s solution in the financial realm is to store significant capital in the form of gold and silver coins detached from potentially rebellious electronic circuitry.”


Original publication date: May 2012; February 2017

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Federal Reserve to review strategies on monetary policy in 2019

Financial Times/Mamta Badkar, Joe Rennison and James Politi/11-15-2018

“In a statement on Thursday, the Fed said it would review the ‘strategies, tools and communication practices’ it uses to convey monetary policy.”

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The November issue of our newsletter

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NEWS &VIEWS
Forecasts, Commentary & Analysis
on the Economy and Precious Metals

NOVEMBER, 2018

This month’s edition of NEWS & VIEWS leads off with an overview of the surprising jump in global private investor and central bank gold demand. From there we delve into a wide-range of topics in short form that we think you will appreciate including speculation on whether or not inflation has returned to the U.S. economy, some insight on who owns the national debt, how Asian investors prefer to own gold, and much more.


In conjunction with our regular newsletter, we released a new SPECIAL REPORT-CLIENT ALERT, which is also now available in the clear:

Historic World Gold Coins
One of the great, largely untouched and potentially lucrative
opportunities in the field of gold investing today


If you would like to sign-up to receive our e-mail release notifications for the monthly newsletter and all SPECIAL REPORTS, you can sign-up here.  Subscriptions are free of charge and are handled discreetly. We do not spam or share our email list.

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DMR-Gold surges $11 at COMEX open on Brexit, Powell comments

DAILY MARKET REPORT

Gold surged at the COMEX open this morning – up $11 at $1225.  Silver is up 10¢ at $14.40.  We detect two principal factors driving today’s trading.  One is ominous and clear-cut – UK’s Brexit woes.  The other is less concrete but probably more influential in the marketplace – guarded comments from Fed chairman Powell that came off as an early warning that a change of direction might be brewing at the Fed on interest rates. Suddenly the possibility of a “pause” has entered market thinking. Adding to the “pause” argument, CNBC ran a blazing headline this morning: “Cramer says CEOs are telling him off the record the economy has quickly cooled.” Such anecdotal evidence might be what was behind Powell’s remarks two days ago.

As we mentioned yesterday, the unfolding Fed scenario might serve as incentive for traders to begin squaring the enormous short position at the COMEX which requires buying gold contracts as an offset.  With a shaky weekend ahead of us, the prudent course of action might be to buy today.

Quote of the Day
“I remember being told many years ago on a South African game reserve that the buffalo was the most dangerous of the big five game animals. In large part, this is because of the complacency shown towards them relative to the other, more obviously dangerous big five game animals (ie the lion, leopard, rhino and elephant). It’s also a fact that unlike the other big five, the buffalo gives no warning of an imminent charge (see link). It’s complacency that gets you killed, and the same goes for investors with the macro-risks. We all know what the big macro-imbalances are out there, caused by years of loose money, but investors continue to ignore them at their peril.” – Albert Edwards, SocGen

Chart of the Day


Chart note:  This interactive chart from the St. Louis Federal Reserve shows the average annual price of gold from 1970 through the present.  It demonstrates at a glance gold’s strong performance as a portfolio holding over the long haul and emphasizes its role as a reliable long-term portfolio safe haven.

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A $30 billion computer is about to start selling stocks

ZeroHedge/Tyler Durden/11-14-2018

“A $30 billion computer, run by UBS’ wealth management which oversees $2.4 trillion in capital and entrusted by some of the world’s richest, is poised to underweight stocks as real money and systematic investors pare risk amid flagging bull-market momentum. According to Andreas Koester, head of global asset allocation at UBS Wealth, the quantitative-investing platform is close to trimming its equity holdings to 20% from a neutral 50%, a shift that would lead to an avalanche of selling as hundreds of billions in stocks are forced to find a new home.”

USAGOLD note:  Thought-provoking.  What happens when computers start telling each other to sell – at hair-trigger speed? Someone pulls the plug?  Durden says “there will be no human intermediation to stop the algo-precipitated liquidation.”

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’28 months of work undone in hours’: The City of London reacts to the chaos of Theresa May’s crumbling Brexit deal

Business Insider/Will Martin/11-15-2018

“Dr Daniel Harenberg, senior economist with Oxford Economics, says that the only certainty right now is uncertainty, and that this is likely to cause chaos in the markets.  ‘About the only thing that seems sure now is that the next few months will see considerable political upheaval, triggering bouts of significant market volatility,’ he wrote to clients.”

USAGOLD note:  We need to remind ourselves that the City of London is still the center of the international gold trade.  We have yet to see any analysis as to how a failed Brexit agreement is likely to affect the gold trade – all those interlocking counterparty agreements between London and continental institutions.  It would be remiss to think that it would not have an effect.


Image by Diliff [GFDL (http://www.gnu.org/copyleft/fdl.html), CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/) from Wikimedia Commons [Edited]

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Old and new central bank gold buying accelerates sharply

ETF Daily News/Allen Sykora/11-4-2018

“Metals Focus is looking for global central-bank net gold purchases of up to 450 tonnes this year, which would top 390 and 375 the last two years, Liang said. If so, this would reverse a four-year gradual decline in net bullion buying since 2014, with last year’s total down by 42% from the multi-decade high of 646 tonnes in 2013, the consultancy said.”

USAGOLD note:  And there might be other purchases that no one knows anything about. . . .


Repost from 11/4/2018

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Paul Tudor Jones says we’re in a global debt bubble and headed for some ‘scary moments’

CNBC/Fred Imbert/11-15-2018

“Billionaire investor Paul Tudor Jones said Thursday that the world has loaded on too much debt which could bring trouble across asset classes. ‘From a 50,000-feet viewpoint, we’re probably in a global debt bubble,’ Jones said at the Greenwich Economic Forum in Connecticut. “Global debt to GDP is at an all-time high.’ ‘This is going to be a very challenging time for policymakers moving forward,’ he said.”

USAGOLD note:  Sounds like Jones is calling this the beginning of the end. . .that word “global” before the words “debt bubble” is a bit scary particularly coming from Paul Tudor Jones who has a reputation for consistently making the big calls.  This might be the biggest one yet. . . . .

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BlackSwansYellowGold
How gold performs during periods of deflation,
disinflation, stagflation and hyperinflation

“That men do not learn very much from the lessons of history is the most important of all the lessons of history.” – Aldous Huxley

Though Huxley’s observation is readily applied to humanity collectively, it does not apply so easily to individual investors. As justification, we offer the ongoing (and long-term) success of the USAGOLD website as well as the soaring statistics on the growth of private gold ownership over the past decade both in the United States and abroad, inspired directly by the lessons learned over the past decade of financial market upheaval. The following short essays are dedicated to the safe-haven gold investor who, like noted financial author Nicholas Taleb, believes that it is just as important to prepare for what we cannot foresee as what we can.


BlackSwansYellowGold Series

Gold as a deflation hedge

Gold as a disinflation hedge

Gold as a stagflation hedge

Gold as hyperinflation hedge

Gold as the portfolio choice for all seasons

A chronology of panics, mania, crashes and collapses
(400 BC to present)

_______________________________________________

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DMR–Gold pushes cautiously higher on Powell reference to economic ‘headwinds’ in 2019

DAILY MARKET REPORT

Gold cautiously pushed higher again today as a carryover from yesterday’s strong rise.  It is up another $3 in early trading at $1214, and up about $15 over the past two days.  Although one could point to any number of factors to explain yesterday’s sudden jump higher, the one thing that stands out is Fed chairman Jerome Powell’s remarks that the U.S. economy could face “headwinds” in 2019. In a clear break with previous public posturing, he cautioned that the Fed would be “thinking about how much further to raise rates and the pace at which we will raise rates.”

However one parses the whole of Powell’s speech and Q&A session yesterday, this revelation provides a hint as to what the Fed chairman might be thinking.  It is likely to be read as a loosening of the more hawkish rhetoric in weeks past and perhaps an early indication of a shift at the Fed.

Gold, we believe, is responding to that possibility. It, in fact, might inspire some squaring of the record short postion at the COMEX.  At the moment the dollar appears to be leaning toward an upward bias based on what is occurring in Europe (the UK and Italy) and continuing wariness on further easing in China.  That reaction might eventually take a back seat though to a softening at the Fed.  Silver is up 5¢ on the day at $14.19.

* Bloomberg: Powell says solid economy faces headwinds as Fed mulls rates

Quote of the Day
“This is a terrible fiscal situation we’ve got ourselves into. The administration is doing tax cuts and a spending decrease, but he’s doing them in the wrong order. What we need right now is to focus totally on reducing the debt. We’re in a stage where if nothing is changed, we’re about to go from stagnation to stagflation, with a significant rise in inflation and a wholly significant imbalance in the economy, which is very difficult to anticipate at this stage. But the outlook is not exactly terrific.” – Alan Greenspan, 12/2017, CNBC interview

Chart of the Day

Chart note: The St. Louis Federal Reserve recently released this new chart on tax receipts. It shows corporate tax receipts plummeting and taxes on production and imports rising. This might be a new set of circumstances brought about by the Trump administration’s tax cuts and tariff programs. In the aggregate, tax receipts represented by the thick black line are falling at a time when government debt is expected to increase – and by some accounts increase significantly. For a prescient observation as to what all of this might lead to, we refer you to the quote from Mr. Greenspan immediately above.

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Pound tumbles and gilts rally on fears for Brexit deal

Financial Times/Frederica Coco and Richard Blackden/11-15-2018

“Having been stuck in a tight range in early trading on Thursday, the pound tumbled 1.8 per cent to below the $1.28 mark after [Brexit secretary Dominic]  Raab said he could not in ‘good conscience’ support the deal. UK government bonds rallied, with the yield on the benchmark 10-year bond falling 10 basis points to 1.4 per cent.”

USAGOLD note: The euro is falling as well. . .

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