Monthly Archives: March 2018

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. The following vignette first appeared in our monthly client letter in April 2015. It is titled “Caveat Venditor” (Let the seller beware) and it tells why the prudent investor might think twice about parting with his or her gold even if a small investment had grown to be worth millions. Though hyperinflation, or inflation at any level,  seems a distant threat at the moment, this nugget of wisdom is one to file for future reference.

Caveat Venditor

Gillian Tett (Financial Times): “Do you think that gold is currently a good investment?”

Alan Greenspan (private citizen): “Yes. Remember what we’re looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it.” – Council on Foreign Relations meeting, November, 2014

Let the seller beware! The German citizen/investor who put away a few rolls of 20 mark gold coins (.2304 tr ozs. shown below) in 1918 would have done so at 119 marks per ounce. By early 1920 the previous rapid inflation had suddenly German money given way to deflation. Had that gold owner decided to cash in on gold’s significant gains thinking runaway inflation was over, a 100,000 mark investment would have made him or her a millionaire.

The glow, however, would have quickly worn off. By late 1921 the runaway inflation had resurfaced but now with a vengeance. Gold shot to 4,000 marks per ounce. By mid-1922 gold reached 10,000 marks per ounce and the wholesale price index went from 13 to 70. By late 1922, the roof caved in. Gold traded at 134,000 marks per ounce. In January, 1923, it cracked 1,000,000 marks per ounce. By midyear, it broke the 100 million marks per ounce barrier and at the peak of the hyper-inflationary breakdown, it sold for over 100 billion marks per ounce.

The individual who thought he or she had the cat by the tail and cashed-in his or her golden chips during the 1920’s deflation became a millionaire. In short order though, that millionaire became a pauper as wave after wave of hyperinflation washed over the German economy. One moral from this somewhat frightening tale is that becoming a millionaire or even a billionaire on one’s gold holdings was inconsequential. Another is not to give up one’s hedge until there is ample evidence that it is no longer needed. Momentary nominal profits can be illusory.

Caveat venditor!


Trailer note – From The Nightmare German Inflation by Scientific Market Analysis: “Those who held funds in dollars, pounds or other stable currencies, or in gold, saved their capital. The government set up rigid exchange controls as the inflation proceeded. As usual under such conditions, a black market flourished. The ones who fared best were the small minority who had the foresight to exchange marks into foreign money or gold very early, before new laws made this difficult and before the mark lost too much value.”

The currency image (top left) illustrates the rapid depreciation in Germany’s paper money with single notes going from a 20 mark value in 1918 (the paper equivalent of one 20 mark gold coin) to a 20 million mark value in 1924. Fast forward to 2015, nearly one hundred years later, and we find that all currencies are being deliberately devalued against one another in an on-going global currency war. That hedge is no longer available. Only gold stands outside the fray. Perhaps that is why former Fed chairman Alan Greenspan recently said, “Remember what we’re looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it.”

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Dollar stalls after rally, braces for headwinds in new quarter

Reuters/Sinichi Saoshiro/3-29-2018

“The dollar stalled against its peers on Friday as the recovery seen earlier this week petered out ahead of the new quarter, which could potentially bring renewed pressure on the greenback. . . . ‘A key part of the dollar’s recent gains were quarter-end flows, with many investors seen to have closed out short positions on the currency to lift the dollar,’ said Shin Kadota, senior strategist at Barclays in Tokyo. ‘It remains to be seen if the dollar can retain its gains next week when the new quarter begins, as it will no longer have support from such flows. Much of the challenging themes will remain the same in the next quarter, such as the health of the U.S. economy and trade issues.’”

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Gold forges its best run since 2011

Bloomberg/Staff/3-29-2018

“Gold bulls are finding 2018 offers plenty of reasons to be cheerful. Bullion’s wrapping up a third quarterly gain, a feat not seen since 2011, and exchange-traded fund holdings are near the highest in a half-decade. Haven demand may also get a boost with foreign-policy hawks in the ascendant in Washington. . . Meanwhile, trading activity in the metal has also soared. Volume on the Comex exchange, the biggest futures market, hit a record 23 million contracts in the first quarter, according to data compiled by Bloomberg.”

MK note:  Gold’s first quarter 2018 gain amounts to 1.6%.  The Dow Jones Industrial Average, by way of comparison, registered a 2.3% loss.

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Gold regains its footing

LATE REPORT

Gold ended up lower on the day, but overall regained its footing after the stumble of the past few days. Trading in a narrow range, it finished at $1325 down $1.50 after all was said and done. Silver, on the other hand, managed to eke out a minor gain finishing up 3¢ on the day at $16.36. Coincident with the firming up in the metals both the Japanese yen and Chinese yuan showed a little life, while the overall dollar index pretty much tracked sideways.

After all was said and done this first tumultuous quarter of 2018, gold finished up 1.6% for the 90 day period – a modest gain but a gain nevertheless. Silver did not fare so well – down 3.6% in the first quarter.

Quote of the Day:
“We are at crossroads. Inflation embers are aglow, the US has turned more protectionist, Brexit threatens Europe, Italy the world’s largest eighth economy is beset by populism, and an Italian exit from the EU looms. In the Middle East, the Iran nuclear deal may be scrapped. America’s debt chickens are coming home to roost and a buyer’s strike of US debt is in the offing. We are now at the beginning of the end of the long bull run and the beginning of an inflationary storm that will not end well. . . Ironically, this president is good for gold. Gold will be a good thing to have while so much fear stalks the world. We continue to expect gold to reach $2,200 an ounce within 18 months.” – John Ing, Gold Eagle


Are you new to the USAGOLD website?

We invite you to kick back and stay awhile.
Do a little interest-driven browsing.

We launched this website in 1997 and it has happily been providing guidance and market information for investors ever since. It remains one of the most highly referenced and visited web portals in the gold business. We once had a client tell us of visiting the Gold Souk in Dubai and being surprised that so many merchant stalls had USAGOLD on their computer screens. Whether you are a new investor exploring the advantages of gold and silver ownership or a veteran looking for a place to keep up with the market, we invite your visits.

The USAGOLD Website
Coin of the realm for gold investors

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Gold regains its footing

LATE REPORT

Gold ended up lower on the day, but overall regained its footing after the stumble of the past few days. Trading in a narrow range, it finished at $1325 down $1.50 after all was said and done.  Silver, on the other hand, managed to eke out a minor gain finishing up 3¢  on the day at $16.36. Coincident with the firming up in the metals both the Japanese yen and Chinese yuan showed a little life, while the overall dollar index pretty much tracked sideways.

After all was said and done this first tumultuous quarter of 2018, gold finished up 1.6% for the 90 day period – a modest gain but a gain nevertheless. Silver did not fare so well – down 3.6% in the first quarter.

Quote of the Day:
“We are at crossroads. Inflation embers are aglow, the US has turned more protectionist, Brexit threatens Europe, Italy the world’s largest eighth economy is beset by populism, and an Italian exit from the EU looms. In the Middle East, the Iran nuclear deal may be scrapped. America’s debt chickens are coming home to roost and a buyer’s strike of US debt is in the offing. We are now at the beginning of the end of the long bull run and the beginning of an inflationary storm that will not end well. . . Ironically, this president is good for gold. Gold will be a good thing to have while so much fear stalks the world. We continue to expect gold to reach $2,200 an ounce within 18 months.” – John Ing, Gold Eagle


Are you new to the USAGOLD website?

We invite you to kick back and stay awhile.
Do a little interest-driven browsing.

We launched this website in 1997 and it has happily been providing guidance and market information for investors ever since. It remains one of the most highly referenced and visited web portals in the gold business.  We once had a client tell us of visiting the Gold Souk in Dubai and being surprised that so many merchant stalls had USAGOLD on their computer screens. Whether you are a new investor exploring the advantages of gold and silver ownership or a veteran looking for a place to keep up with the market, we invite your visits.

The USAGOLD Website
Coin of the realm for gold investors

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Common IRA rollover mistakes

GOLD/SILVER IRAs

Investopedia/Mary Hall/3-29-2018

“Have you thought about rolling your traditional IRAs from one financial institution to another? Maybe you’re looking for higher returns, more investment selections or better service. If you roll over your traditional IRA, there are some common mistakes you should avoid. ‘IRA rules can be tricky and some have even changed over the years, so you need to be careful, otherwise you could pay income tax and penalties,’ says Dan Stewart, CFA, president, Revere Asset Management, Inc., in Dallas, Texas. In this article, we’ll give you an overview of IRA rollover rules and discuss how to avoid breaking them.”

USAGOLD note 1:  We have a steady stream of new clients who come to us for help with rollovers from existing retirement plans into gold and silver inclusive IRAs. The rules can be confusing and somewhat cumbersome, but they are not difficult to manage. The link above will guide you through the most common, out-of-the-gate stumbling blocks.

USAGOLD note 2: Beyond the mistakes investors make with the mechanics, we continue to receive inquiries from investors who have included graded modern gold and silver bullion coins in their plans at hefty premiums wanting to know if we can help them with what turned out to be a bad situation. At about the time that these investors receive their first evaluation from a trust company, they discover too late that they paid far more for their gold and/or silver than they should have.  Don’t let that happen to you. For the best results, we continue to strongly advise IRA investors to stick with the ungraded, ordinary gold and silver bullion coins (pictured above) that sell at standard market prices.  You will be glad that you did.


We are happy to help with your questions and get you started on the right track.

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Choose the right portfolio mix with the right firm at the right price.
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Gold’s safe-haven bid still intact

Seeking Alpha/Cliff Droke/3-28-2018

“The iShares Gold Trust (IAU), my preferred gold trading vehicle, confirmed an immediate-term buy signal per the rules of the 15-day MA trading method. This signal is predicated on a 2-day higher close above the rising 15-day moving average, as long as it’s accompanied by a majority of five supporting factors. To reiterate, those factors include a strengthening silver price, strengthening crude oil price, weakening dollar, and rising gold relative strength vs. equities, along with a rise in the gold ETF price itself (below).  To date, four of the above-mentioned five factors are supportive of an immediate-term (1-4 week) gold uptrend to some degree or other. Only silver’s price performance is lagging right now . . . . “

MK note:  Droke sees these factors as over-riding shorter term considerations.

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Exclusive: China taking first steps to pay for oil in yuan this year – sources

PETROYUAN/PETRODOLLAR

Reuters/Sumeet Chatterjuee and Meng Ment/3-29-2018

“China is taking its first steps towards paying for imported crude oil in yuan instead of the U.S. dollar, three people with knowledge of the matter told Reuters, a key development in Beijing’s efforts to establish its currency internationally. . . The move would mark a major step in reviving usage of the currency of the world’s second-largest economy for offshore payments after several years of on-again, off-again measures. If successful, it could also trigger shifting other product payments to the yuan, including metals and mining raw materials.” [Emphasis added]

MK note:  Reuters emphasizes that the plans described are in the early stages.  I am trying to think of a reason why China would not move quickly to encourage any potential sellers of crude oil to take yuan in settlement.  Russia and Angola, two of three top suppliers of oil to China, have already expressed an interest in breaking the petrodollar’s dominance.  When you stop to think about the petroyuan introduction, it is in China’s interest to maintain a strong yuan against the dollar for obvious reasons – the end seller will end up with the stronger of the two currencies in terms of global purchasing power.  Such a development would be an economic game-changer the parameters of which are yet to be defined and likely a boost to gold as a hedge against dollar weakness.

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Gold down marginally this morning in quiet trading

EARLY REPORT

Gold is down marginally this morning in quiet trading – off $2 at $1324.50. Silver is down 3¢ at $16.29. Aggressive selling in gold futures on the COMEX, the key feature to trading since early Wednesday, seems to have dissipated somewhat this morning as we go into the long Easter weekend.

The Federal Reserve’s favorite inflation gauge, the Personal Consumption Expenditures Index (PCE) came in at 1.6% well below its 2% target. Accompanying the low inflation reading was a strong jobs report that put unemployment at the lowest level since 1973. Neither the markets nor the Fed are likely to be impressed with either report in that both are essentially the latest markers in well-established trends already figured into the equation. Both the Japanese yen and Chinese yuan are showing some strength in the early going and that could accrue in gold’s favor as the day moves along.

Chart of the Day

Chart note: Since gold’s current rally began in early 2016, silver has kept up with its sibling metal in fits and starts. Presently, at a ratio of over 81 to 1, silver is greatly undervalued relative to gold. The gap between the two metals, as you can see in the chart, has become accentuated in recent months leading some to think silver is overdue for a catch-up rally. There is precedent for such a rally. Silver languished behind in gold in early 2016 only to stage a sharply accelerated rally beginning in April of that year that closed the gap. Silver enthusiasts are hoping for similar performance in 2018.
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Gold down marginally this morning in quiet trading

EARLY REPORT

Gold is down marginally this morning in quiet trading – off $2 at $1324.50. Silver is down 3¢ at $16.29. Aggressive selling in gold futures on the COMEX, the key feature to trading since early Wednesday, seems to have dissipated somewhat this morning as we go into the long Easter weekend.

The Federal Reserve’s favorite inflation gauge, the Personal Consumption Expenditures Index (PCE) came in at 1.6% well below its 2% target. Accompanying the low inflation reading was a strong jobs report that put unemployment at the lowest level since 1973. Neither the markets nor the Fed are likely to be impressed with either report in that both are essentially the latest markers in well-established trends already figured into the equation. Both the Japanese yen and Chinese yuan are showing some strength in the early going and that could accrue in gold’s favor as the day moves along.

Chart of the Day

Chart note: Since gold’s current rally began in early 2016, silver has kept up with its sibling metal in fits and starts. Presently, at a ratio of over 81 to 1, silver is greatly undervalued relative to gold. The gap between the two metals, as you can see in the chart, has become accentuated in recent months leading some to think silver is overdue for a catch-up rally. There is precedent for such a rally. Silver languished behind in gold in early 2016 only to stage a sharply accelerated rally beginning in April of that year that closed the gap. Silver enthusiasts are hoping for similar performance in 2018.
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Fed mistakes could spark ‘unusually fast’ bear market, ‘lost decade’ for stocks

MarketWatch/Ryan Vlastelica/3-29-2018

“Uncertainty over trade policy may be the primary driver of the U.S. stock market at the moment, but the real policy risk facing equities could be coming from the Federal Reserve, with the potential downside a lot more pronounced than investors are currently anticipating. . .Barry Bannister, head of institutional equity strategy at Stifel, said it was a concern that the Fed’s view for 2019 and 2020 had grown more hawkish, which raised the risk of the central bank making a policy mistake. ‘What matters for investors is that any decline is likely to be unusually rapid and occur as a result of P/E compression, resulting from policy risks not weak GDP,’ he wrote in a research report. “Investors need a bit more acrophobia, as our best model points to a bear market and lost decade for stocks.”

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Economist fears a 30 percent stock market correction with consumer spending ‘maxed out’

CNBC/Silvia Amaro/3-27-2018

“Steen Jakobsen, from Saxo Bank, cited several factors including growing credit loans, a widening fiscal deficit in the U.S., doubts over infrastructure spending plans and a potential trade war. ‘I think overall we have been pricing in for Goldilocks and we are closer to Frankenstein to be honest,’ he said. He added that in a scenario of a potential sudden economic recession, he sees a possible market correction of between 25 and 30 percent.”

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Hedge funds that are short dollar-yen stare down fiscal year squeeze

Bloomberg/Michael G. Wilson and Chikako Mogi/3-28-2018

“The culmination of the country’s fiscal year this week — which has historically capped dollar strength amid repatriation flows — month-end fund rebalancing and easing trade tensions are creating the conditions for a dollar bounce against the yen, according to traders and strategists. The rebound looks to have already begun, with the pair climbing as high as 106.41 Wednesday as Japanese importers were seen selling the domestic currency.”

MK note:  I alluded to this process in yesterday’s LATE REPORT.  The link is provided for those who wish to digest the details. If I am reading this right, the technical yen selling should be done by the end of the week at which time other influences – geopolitical and tariff considerations – might regain the ascendancy in the Japanese foreign exchange market.  Time will tell. . . . . .

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Gold besieged by short-selling today, sell-off in Japanese yen

LATE REPORT

Gold dropped precipitously under a siege of short-selling today to finish down almost $21 on the day at $1325.50. Silver was also down sharply on the day finishing at $16.31 and off 26¢.

The short-selling in gold began yesterday with a volume of 28 million ounces and continued through today’s session with another nearly 39 million ounces being sold – for a total of nearly 2100 metric tonnes in notional gold sold on the COMEX over a two-day period. (For more information, we direct you to this morning’s EARLY REPORT which includes a chart summarizing the action.)

The market action hearkens back to the days of unexplained waterfall drops in the price of gold in what looked like bouts of heavy black box, programmed trading, rather than thousands of gold traders and speculators suddenly deciding to sell their positions. In the past, the effects have been short-lived as the short-sellers cover quickly to capture profits with programmed purchases. Long-term accumulators of the physical metal, at the same time, have viewed these waterfall drops as buying opportunities.

Adding to gold’s woes today, the Japanese yen also experienced heavy selling as Japan’s banks and importers sold the currency to balance books for the end of their fiscal year. Weakness or strength in the yen in recent months has carried over to gold, as traders view the two these days as directional companions. The yen was down sharply today losing 1.45% against the dollar.

On the other side of the dollar/yen ledger, the yen has gained a reputation as a safe-haven in recent years and any escalation in geopolitical or trade tensions could quickly send it in the other direction.  We have seen on numerous occasions thus far in 2018 how quickly market sentiment can change.

Quote of the Day
“Imagine if the world’s metre sticks all grew or shrunk a bit each year. That would make for a confusing system of weights and measures, wouldn’t it? Well, that is exactly what happens with money. We have been measuring the world around us for thousands of years. Units like feet and cubits have been used for distances, pounds and kilograms to measure weight, and dollars and yen to measure economic value. Measuring value, however, is by far the most complicated of the measurements that must be taken. This is because – unlike the other units – the various items that have been used to represent dollars and yen are constantly fluctuating in value.

Monetary units have always been closely tied up with units of weight. For instance, the word ‘pound’ has been used to describe both the British monetary unit (£) and the weight (lb). The pound weight was originally based on wheat. In 1266, King Henry III decreed that the British unit referred to as the grain should be defined as the weight of a corn of wheat ‘well dried, and gathered out of the middle of the ear.’ Thirty-two grains were to be equal to a pennyweight, twenty pennyweights equal to an ounce, and twelve ounces added up to a pound. So the early English pound, otherwise known as the Tower pound, was comprised of 7,680 ‘well-dried’ grains from the middle of an ear of wheat.” – JP Koning, Bullion Star


Recent BBB client review

One of 41 five star reviews published at the BBB website
Three new positive reviews just this past week.

“In June, 2009, I decided to make gold ownership an essential part of my investment portfolio. Based on the recommendation of financial professionals, and because I liked that they had been in business for so long, I contacted USAGOLD. After a thorough review of my financial goals and budget constraints, they provided me with a comprehensive set of suggestions as to which gold coins, and what quantities, I should consider. That advice perfectly addressed my investment needs and I have been a customer ever since. Over my years with USAGOLD, I have completed several transactions, both buying and selling gold. Each one was handled with the highest integrity, and the advice I received was always reliable, based on their extensive awareness of current and projected market conditions for gold. I recommend them without reservation. Do not make a decision regarding gold ownership without contacting them.” – Jack D.

If the market madness of the past few weeks has you thinking you might need to hedge your portfolio with gold and silver, we invite to get in touch with us. We will provide the same kind of pricing and service that has made Jack D. a long-time client and friend of the firm.

1-800-869-5115
Extension #100
–– or ––
If you prefer e-mail to get started
orderdesk@usagold.com

 

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Gold besieged by short-selling today, sell-off in Japanese yen

LATE REPORT

Gold dropped precipitously under a siege of short-selling today to finish down almost $21 on the day at $1325.50. Silver was also down sharply on the day finishing at $16.31 and off 26¢.

The short-selling in gold began yesterday with a volume of 28 million ounces and continued through today’s session with another nearly 39 million ounces being sold – for a total of nearly 2100 metric tonnes in notional gold sold on the COMEX over a two-day period. (For more information, we direct you to this morning’s EARLY REPORT which includes a chart summarizing the action.)

The market action hearkens back to the days of unexplained waterfall drops in the price of gold in what looked like bouts of heavy black box, programmed trading, rather than thousands of gold traders and speculators suddenly deciding to sell their positions. In the past, the effects have been short-lived as the short-sellers cover quickly to capture profits with programmed purchases. Long-term accumulators of the physical metal, at the same time, have viewed these waterfall drops as buying opportunities.

Adding to gold’s woes today, the Japanese yen also experienced heavy selling as Japan’s banks and importers sold the currency to balance books for the end of their fiscal year.  Weakness or strength in the yen in recent months has carried over to gold, as traders view the two these days as directional companions. The yen was down sharply today losing 1.45% against the dollar.

On the other side of the dollar/yen ledger, the yen has gained a reputation as a safe-haven in recent years and any escalation in geopolitical or trade tensions could quickly send it in the other direction.  Likewise, traders selling gold short could be forced to cover quickly if risk factors suddenly turned once again against the dollar.  We have seen on numerous occasions thus far in 2018 how quickly market sentiment can change.

Quote of the Day
“Imagine if the world’s metre sticks all grew or shrunk a bit each year. That would make for a confusing system of weights and measures, wouldn’t it? Well, that is exactly what happens with money. We have been measuring the world around us for thousands of years. Units like feet and cubits have been used for distances, pounds and kilograms to measure weight, and dollars and yen to measure economic value. Measuring value, however, is by far the most complicated of the measurements that must be taken. This is because – unlike the other units – the various items that have been used to represent dollars and yen are constantly fluctuating in value.

Monetary units have always been closely tied up with units of weight. For instance, the word ‘pound’ has been used to describe both the British monetary unit (£) and the weight (lb). The pound weight was originally based on wheat. In 1266, King Henry III decreed that the British unit referred to as the grain should be defined as the weight of a corn of wheat ‘well dried, and gathered out of the middle of the ear.’ Thirty-two grains were to be equal to a pennyweight, twenty pennyweights equal to an ounce, and twelve ounces added up to a pound. So the early English pound, otherwise known as the Tower pound, was comprised of 7,680 ‘well-dried’ grains from the middle of an ear of wheat.” – JP Koning, Bullion Star


Recent BBB client review

One of 41 five star reviews published at the BBB website
Three new positive reviews just this past week.

“In June, 2009, I decided to make gold ownership an essential part of my investment portfolio. Based on the recommendation of financial professionals, and because I liked that they had been in business for so long, I contacted USAGOLD. After a thorough review of my financial goals and budget constraints, they provided me with a comprehensive set of suggestions as to which gold coins, and what quantities, I should consider. That advice perfectly addressed my investment needs and I have been a customer ever since. Over my years with USAGOLD, I have completed several transactions, both buying and selling gold. Each one was handled with the highest integrity, and the advice I received was always reliable, based on their extensive awareness of current and projected market conditions for gold. I recommend them without reservation. Do not make a decision regarding gold ownership without contacting them.” – Jack D.

If the market madness of the past few weeks has you thinking you might need to hedge your portfolio with gold and silver, we invite to get in touch with us. We will provide the same kind of pricing and service that has made Jack D. a long-time client and friend of the firm.

1-800-869-5115
Extension #100
–– or ––
If you prefer e-mail to get started
orderdesk@usagold.com

 

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As bonds and stocks fall, what’s gone up?

Seeking Alpha/Rob Marstand/3-27-2018

“After a sleepy 2017, stock volatility is back in 2018. But, so far this year, long-dated US treasury bonds have failed to provide an offset to sharp stock falls. However, one asset has done well, performing its portfolio hedging task nicely. That’s gold. I continue to recommend a meaningful allocation to physical gold (and even more to cash). . . .Whether it’s speculators, investors, jewellery demand or central bank buying, someone has been bidding up gold. As regular readers know, I recommend a holding of physical gold – being bars or bullion coins for two main reasons.”

MK note:  Rob Marstand does a good job covering the basics  – a solid entry level synopsis on why gold ownership makes  sense under current market circumstances.

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Gold down on heavy short-selling

EARLY REPORT

Gold is down $16.25 this morning at $1329.50 under heavy pressure from short-sellers as shown in this morning’s Chart of the Day. As you can see, the spike in short sales is telling – 28 million ounces yesterday and another nearly 29 million ounces so far today. The only recognizable external cause to warrant a drop to this degree would be the reduction of tensions with North Korea based on its statement overnight that it was “committed” to denuclearization – something we would enter under the unlikely/dubious column.

The market action hearkens back to the days of unexplained waterfall drops in the price of gold in what looked like bouts of heavy black box, programmed trading. In the past, the effects have been short-lived as the short-sellers cover quickly to capture profits with programmed purchases. Long-term accumulators of the physical metal, at the same time, have viewed these waterfall drops as buying opportunities.

Chart of the Day

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Gold down on heavy short-selling

EARLY REPORT

Gold is down $16.25 this morning at $1329.50 under heavy pressure from short-sellers as shown in this morning’s Chart of the Day.   As you can see, the spike in short sales is telling – 28 million ounces yesterday and another nearly 29 million ounces so far today.  The only recognizable external cause to warrant a drop to this degree would be the reduction of tensions with North Korea based on its statement overnight that it was “committed” to denuclearization – something we would enter under the unlikely/dubious column.

The market action hearkens back to the days of unexplained waterfall drops in the price of gold in what looked like bouts of heavy black box, programmed trading. In the past, the effects have been short-lived as the short-sellers cover quickly to capture profits with programmed purchases.  Long-term accumulators of the physical metal, at the same time, have viewed these waterfall drops as buying opportunities.

Chart of the Day

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Posted in Today's top gold news and opinion |

China says North Korea’s Kim pledged commitment to denuclearization

Reuters/Ben Blanchard and Joyce Lee/3-26-2018

“‘It is our consistent stand to be committed to denuclearization on the peninsula, in accordance with the will of late President Kim Il Sung and late General Secretary Kim Jong Il,’ Kim Jong Un said, according to the ministry.”

MK note:  What is it about this statement that has me comparing the denuclearization storyline to the one about the end to the trade wars?

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Biggest currency whales make their move

Bloomberg/Katherine Greifeld/3-26-2018

“Of course, the dollar commands the lion’s share of the world’s $11.3 trillion of international reserves and most expect it to remain that way. But even a small shift — whether as a hedge against Trump’s trade policies or in the name of diversification — could have big consequences. After shunning the common currency for years because of negative interest rates and the region’s persistent turmoil, reserve managers at some of the biggest central banks are now looking to add more euros, according to two heads of foreign-exchange strategy who’ve held regular discussions with them.”

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The challenge of reducing the trade deficit

TRADE WARS

SafeHaven/Michael Ashton/3-27-2018

“The underlying fundamentals, of course, haven’t changed much between Friday and Monday. The chance of a trade war didn’t decline – the probability of a trade war is now 1.0, since it has already happened. Unless you want to call an attack and counterattack a mere skirmish, rather than a trade war, there is no longer any debate about whether there will be conflict on trade; the only discussion is on magnitude. And on that point, nothing much has changed either: it was always going to be the case that the initial salvo would be stridently delivered and then negotiated backwards. I’m not sure why people are so delighted about the weekend’s developments, except for the fact that investors love stories, and the story trade war is ended!’ is a fun story to tell the gulli-bulls.”

MK note:  Michael Ashton agrees with our assessment posted below under the heading China, U.S. trade barbs over who is threatening trade system – posted, by the way, yesterday  morning before the 500 point reversal in the Dow.

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‘This is the single biggest change in capital markets, maybe of all time’ – Union Bank Switzerland

SPECIAL REPORT 3-27-2018

by Michael J. Kosares, USAGOLD

“China’s launch on Monday of its crude futures exchange will improve the clout of the yuan in financial markets and could threaten the international primacy of the dollar, argues a new report by Hayden Briscoe, APAC head of fixed income at UBS Asset Management. ‘This is the single biggest change in capital markets, maybe of all time,’ Briscoe said in a follow-up telephone interview.” – Kate Duguid, Reuters, 3-26-2018

Let’s just assume for a moment that an oil contract denominated and settled in Chinese yuan for whatever reasons becomes more attractive to oil traders than one denominated and settled in U.S. dollars. To the degree that decision is shared among market participants, demand will lessen for dollars and increase for yuan – strengthening one and weakening the other. Instead of all oil purchases being routed through the dollar, some level of the international oil trade will be routed through the yuan, including among American companies. “This,” says UBS’ Hayden Briscoe, “helps cement the exchange’s viability and challenges the petro-dollar system, in which oil deals are executed in dollars. This would decrease demand for the greenback and boost U.S. inflation.”

At this time, it is impossible to gauge the impact except to say that such a change in oil market dynamics goes far beyond ordinary commerce to the very heart of the monetary and financial system simply because oil is such a huge chunk of the daily international commerce. That is why Briscoe says it is “the biggest single change in capital markets, maybe of all time.”

In order for the yuan to openly challenge the U.S. dollar, petroyuan volumes will need to be large enough to attract the attention of speculators and investors globally. OilPrice.com reports that on the first day of trading, a respectable 15.4 million barrels of crude (about $1 billion worth) were traded in the September contract with Glencore, Trafigura and Freepoint Commodities among the first to take positions. Jeff Brown, president of FGE, an energy consultant, told Reuters that “The government (in Beijing) seems determined to support it, and I hear a number of firms are being asked or pressured to trade on it, which could help.”

One day does not a market make, but it is interesting to note that on March 26th, the yuan appreciated sharply against the U.S. dollar reaching its highest level in 31 months. Gold, it is worth noting, followed it higher along the exact same timeline. Whether or not the petroyuan establishes itself as a tour de force that openly and effectively challenges the petrodollar, its journey is something that warrants our close attention. Needless to say with everything else that is going on in the financial markets these days, the petroyuan is one component that has not been even modestly factored into the equation.

The Reuters article by Kate Duguid, China oil futures launch may threaten primacy of U.S. dollar quoted at the top of this post is an excellent starting pointa must read. Though the word “gold” is never mentioned, it offers one of the most persuasive arguments in favor of acquiring the precious metal to surface in a very long time.

 

Investor note –– If you are new to this page, we invite you to bookmark it and return frequently for news, opinion and analysis on the precious metals markets posted from a variety of sources, but always with the gold and silver investor in mind. Commodity HQ rates it one of the TOP TEN gold blogs on the world wide web.

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‘This is the single biggest change in capital markets, maybe of all time’ – Union Bank Switzerland

SPECIAL REPORT 3-27-2018

by Michael J. Kosares, USAGOLD

“China’s launch on Monday of its crude futures exchange will improve the clout of the yuan in financial markets and could threaten the international primacy of the dollar, argues a new report by Hayden Briscoe, APAC head of fixed income at UBS Asset Management. ‘This is the single biggest change in capital markets, maybe of all time,’ Briscoe said in a follow-up telephone interview.” – Kate Duguid, Reuters, 3-26-2018

Let’s just assume for a moment that an oil contract denominated and settled in Chinese yuan for whatever reasons becomes more attractive to oil traders than one denominated and settled in U.S. dollars. To the degree that decision is shared among market participants, demand will lessen for dollars and increase for yuan – strengthening one and weakening the other. Instead of all oil purchases being routed through the dollar, some level of the international oil trade will be routed through the yuan, including among American companies. “This,” says UBS’ Hayden Briscoe, “helps cement the exchange’s viability and challenges the petro-dollar system, in which oil deals are executed in dollars. This would decrease demand for the greenback and boost U.S. inflation.”

At this time, it is impossible to gauge the impact except to say that such a change in oil market dynamics goes far beyond ordinary commerce to the very heart of the monetary and financial system simply because oil is such a huge chunk of the daily international commerce.  That is why Briscoe says it is “the biggest single change in capital markets, maybe of all time.”

In order for the yuan to openly challenge the U.S. dollar, petroyuan volumes will need to be large enough to attract the attention of speculators and investors globally.  OilPrice.com reports that on the first day of trading, a respectable 15.4 million barrels of crude (about $1 billion worth) were traded in the September contract with Glencore, Trafigura and Freepoint Commodities among the first to take positions.  Jeff Brown, president of FGE, an energy consultant, told Reuters that “The government (in Beijing) seems determined to support it, and I hear a number of firms are being asked or pressured to trade on it, which could help.”

One day does not a market make, but it is interesting to note that on March 26th, the yuan appreciated sharply against the U.S. dollar reaching its highest level in 31 months. Gold, it is worth noting, followed it higher along the exact same timeline. Whether or not the petroyuan establishes itself as a tour de force that openly and effectively challenges the petrodollar, its journey is something that warrants our close attention. Needless to say with everything else that is going on in the financial markets these days, the petroyuan is one component that has not been even modestly factored into the equation.

The Reuters article by Kate Duguid, China oil futures launch may threaten primacy of U.S. dollar quoted at the top of this post is an excellent starting pointa must read. Though the word “gold” is never mentioned, it offers one of the most persuasive arguments in favor of acquiring the precious metal to surface in a very long time.

 

Investor note –– If you are new to this page, we invite you to bookmark it and return frequently for news, opinion and analysis on the precious metals markets posted from a variety of sources, but always with the gold and silver investor in mind. Commodity HQ rates it one of the TOP TEN gold blogs on the world wide web.

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Posted in Today's top gold news and opinion |

Investment chief of $250 billion firm says financial markets are on a ‘collision course for disaster’

CNBC/Tae Kim/3-27-2018

“I have come to realize that the markets are potentially on a collision course for disaster. The collision course is being brought about by strong fiscal stimulus in the late stage of the business cycle, when conventional economic wisdom mandates that it should be heading the other direction to create fiscal drag,” the firm’s global chief investment officer [Guggenheim Investments Scott Minerd] wrote in a note to clients Monday. “With the huge fiscal stimulus coming online, the Federal Open Market Committee (FOMC) will feel obliged to play the role of creating economic headwinds.”

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China, U.S. trade barbs over who is threatening trade system

Bloomberg/Bryce Baschuk/3-27-2018

“The U.S. shot back at China’s assertion that Donald Trump was undermining the World Trade Organization with his decision to impose $50 billion worth of tariffs on Chinese products. ‘The WTO system is not threatened — as China claims — where a member takes steps to address harmful, trade-distorting policies not directly covered by WTO rules,’ a U.S. trade official said during a WTO meeting in Geneva on Tuesday, according to a copy of the statement provided by the U.S. trade representative. The comments come a day after China’s Ambassador to the WTO Zhang Xiangchen said the ‘WTO is under siege’ due to Trump’s decision to impose ‘purely unilateral’ tariffs against the Asian nation.”

MK note:  The lull in the trade wars, though well-received in global stock markets, may still turn out to be temporary, and the gains overdone. We see how quickly things changed for the better.  They could just as easily and quickly take a turn for the worse.  As you can see from the clip above, the positions are pretty well hardened on both sides. The possibility of deterioration is at least on equal footing with that of improvement. The stock market reaction over the past two days demonstrates more a hope and a prayer than it does a workable understanding of the forces and individuals at play in the trade drama.

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Global gold investment seen rising for fifth year in 2018 – CPM

Reuters/Renita D. Young/3-27-2018

“Bullion investors, miners and makers of coins will help drive the fifth straight annual increase in total global gold investment in 2018, CPM Group said in its Gold Yearbook 2018 on Tuesday, citing geopolitical tensions and fears that the bubbling U.S. economic expansion will end in a 2019 recession.”

MK note: Not sure I agree with the recession forecast, but I do agree with the demand for gold coins and bullion picking up as we move along through 2018.  Investors, as we reported yesterday, are moving out of stocks especially as uncertainties rise. They will be looking for a safe and logical place to park money.  Gold and silver should benefit from renewed interest.

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Gold hits overhead resistance, sells off

EARLY REPORT

Gold hit overhead resistance at the $1255 level yesterday and promptly sold-off.  It is trading at $1241.50 as this report is posted, down $11 on the day.  Silver also took a southerly turn and is trading down 11¢ at $16.57.

Technical factors seemed to be the biggest influence in gold’s pricing this morning.  Gold has made three attempts thus far in 2018 to penetrate the $1355-$1360 trading area and been rebuffed each time.  The bears seem determined at that number and gold thus far has not been able to muster the support to drive over the barrier.  On the downside, the bulls seem equally determined to support gold in a rising channel going back to early 2016.

The bullish pattern on the longer term charts of higher highs and higher lows since early last year remains in place forming the bullish flag pattern that whets the appetite of technical analysts. “The risk reversals number adds credence to the recent rise in gold prices (from $1,311 to $1,355) and could be an indication the investors are seeking upside protection against a potential bull flag breakout,” says FXStreet technical analyst Omkar Godbole.  (Please see our Chart of the Day)

Chart of the Day

 

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Posted in Today's top gold news and opinion |

Gold hits overhead resistance, sells off

EARLY REPORT

Gold hit overhead resistance at the $1255 level yesterday and promptly sold-off. It is trading at $1241.50 as this report is posted, down $11 on the day. Silver also took a southerly turn and is trading down 11¢ at $16.57.

Technical factors seemed to be the biggest influence in gold’s pricing this morning. Gold has made three attempts thus far in 2018 to penetrate the $1355-$1360 trading area and been rebuffed each time. The bears seem determined at that number and gold thus far has not been able to muster the support to drive over the barrier. On the downside, the bulls seem equally determined to support gold in a rising channel going back to early 2016.

The bullish pattern on the longer term charts of higher highs and higher lows since early last year remains in place forming the bullish flag pattern that whets the appetite of technical analysts. “The risk reversals number adds credence to the recent rise in gold prices (from $1,311 to $1,355) and could be an indication the investors are seeking upside protection against a potential bull flag breakout,” says FXStreet technical analyst Omkar Godbole. (Please see our Chart of the Day)

Chart of the Day

 

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Gold exults on move to safety

Seeking Alpha/Cliff Droke/3-26-2018

“Somewhat surprisingly, gold’s Five Factors have lined up in support of the bullion’s price in recent days. I say “surprisingly” since a fear-related gold rally like the one we saw last week often happens with little-to-no support from the Factors. The problem with such an unsupported rally is that once investors’ fears diminish the gold price will immediately reverse its rally. To reiterate, the technical factors which tend to support an extended gold rally are:

– Gold being above its rising 15-day moving average.
– Silver confirming gold by doing the same.
– Gold showing relative strength vs. the S&P 500 Index.
– A strengthening crude oil price.
– A weak U.S. dollar index.

As of Mar. 25, the gold price is being supported by at least four of the five supporting factors mentioned above.”

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Fifty years of ‘free’ gold

The Northern Miner/Jeffrey Christian/3-26-2018

“Setting such nuances aside, the modern gold market was born 50 years ago this March when the free or private gold price spun out of the control of central banks and governments. A more accurate description is that the fixed dollar-gold exchange rate that existed in the period from World War Two became too expensive and economically destructive for governments to maintain, so they let it go. The process of letting go started in March and April 1968. The change came in two big moves in March and April 1968: The closing of the London Gold Pool and the closing of the U.S. Treasury’s private gold window, through which non-governmental people and entities traded dollars for gold held by the Treasury.”

MK note:  Thus launching the new era for gold in which we are still engaged today. Jeffrey Christian lays out a quick history – how we got where we are.

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