Monthly Archives: December 2018

Bad financial moon rising

Project Syndicate/William White

“No one should overestimate economists’ powers of understanding. Just as the magnitude of the global downturn that began in mid-2008 took most economists completely by surprise, so did the sclerotic nature of the recovery. Similarly, economic forecasts today appear to be nothing more than hopeful extrapolations of recent growth. In reality, all is not well beneath the surface. Should another financial crisis materialize, the subsequent recession might be even costlier than the last one, not least because policymakers will face unprecedented economic and political constraints in responding to it.”

USAGOLD note:  When William White speaks, people listen.  He is the former deputy governor of the Bank of Canada and economist at the Paris-based Organization for Economic Cooperation and Development. His views have gravitated in recent years to great concern about a potential economic crisis as outlined at the link above.


Repost from 10-8-2018

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USAGOLD – Quality service and pricing since 1973

_________________________________________________

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.

Call or drop us an e-mail.

1-800-869-5115
Ext#100
orderdesk@usagold.com


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.

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USAGOLD – Quality service and pricing since 1973

_________________________________________________

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.

Call or drop us an e-mail.

1-800-869-5115
Ext#100
orderdesk@usagold.com


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.

_______________________________________________

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Posted in ClientInsights, Today's top gold news and opinion |

Gold abruptly turns south coincident with sharp drop in yuan

DAILY MARKET REPORT

Gold abruptly turned south in overnight and early U.S. trading coincident with a sharp drop in China’s yuan. The yuan in turn fell abruptly on growth numbers that fell short of expectations and speculation that the Peoples Bank of China might move to lower interest rates. Not helping matters, the European Central Bank formally announced plans to halt its quantitative easing program, but also stated it would reinvest proceeds from maturing bonds. In addition, it reassured markets that it would refrain from raising interest rates until late next year.

In short, China and Europe went dovish at a time when the Fed is scheduled next week to raise U.S. interest rates another .25%. The dollar index jumped over a half a point in response and gold dropped about the same. As today’s DMR is posted, gold is down $7.50 at $1235. Silver is down 20¢ at $14.54. Stocks are not all that happy with overnight developments either – down nearly 200 in futures’ trading.

Quote of the Day
“Buying gold today is a statement that you believe that global economic events may spiral out of the control of Central Bankers. It is insurance against some sort of massive monetary policy mistake that cannot be fixed without re-conceptualizing the global economic regime – hyperinflation in a developed nation, the collapse of the Euro, something like that – not an expression of a commonly shared belief in some inherent value of gold.. . . . The stronger the Narrative of Central Banker Omnipotence, the more likely it is that the price of gold goes down. The weaker the Narrative – the less established the Common Knowledge that central bank policy determines market outcomes – the more likely it is that the price of gold will go up. In other words, it’s not central bank policy per se that makes the price of gold go up or down, it’s Common Knowledge regarding the ability of central banks to control economic outcomes that makes the price of gold go up or down.” – W. Ben Hunt, Epsilon Theory

Chart of the Day

Chart note: This chart shows the gains or losses in gold from the same month a year earlier. Since the Fed began raising interest rates in early 2016, gold has gone higher in 22 out of the past 34 months. That means that you could have purchased gold in any one of those months a year earlier and showed a gain 12 months later, and sometimes that gain was significant – as much as 10% to 22%!

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Posted in dailyquotes |

DMR–Gold abruptly turns south coincident with sharp drop in yuan

DAILY MARKET REPORT

Gold abruptly turned south in overnight and early U.S. trading coincident with a sharp drop in China’s yuan.  The yuan in turn fell abruptly on growth numbers that fell short of expectations and speculation that the Peoples Bank of China might move to lower interest rates.  Not helping matters, the European Central Bank formally announced plans to halt its quantitative easing program, but also stated it would reinvest proceeds from maturing bonds.  In addition, it reassured markets that it would refrain from raising interest rates until late next year.

In short, China and Europe went dovish at a time when the Fed is scheduled next week to raise U.S. interest rates another .25%.  The dollar index jumped over a half a point in response and gold dropped about the same.  As today’s DMR is posted, gold is down $7.50 at $1235.  Silver is down 20¢ at $14.54. Stocks are not all that happy with overnight developments either – down nearly 200 in futures’ trading.

Quote of the Day
“Buying gold today is a statement that you believe that global economic events may spiral out of the control of Central Bankers. It is insurance against some sort of massive monetary policy mistake that cannot be fixed without re-conceptualizing the global economic regime – hyperinflation in a developed nation, the collapse of the Euro, something like that – not an expression of a commonly shared belief in some inherent value of gold.. . . . The stronger the Narrative of Central Banker Omnipotence, the more likely it is that the price of gold goes down. The weaker the Narrative – the less established the Common Knowledge that central bank policy determines market outcomes – the more likely it is that the price of gold will go up. In other words, it’s not central bank policy per se that makes the price of gold go up or down, it’s Common Knowledge regarding the ability of central banks to control economic outcomes that makes the price of gold go up or down.” – W. Ben Hunt, Epsilon Theory

Chart of the Day

Chart note: This chart shows the gains or losses in gold from the same month a year earlier. Since the Fed began raising interest rates in early 2016, gold has gone higher in 22 out of the past 34 months. That means that you could have purchased gold in any one of those months a year earlier and showed a gain 12 months later, and sometimes that gain was significant – as much as 10% to 22%!

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Posted in Daily Market Report, Today's top gold news and opinion |

Fate of $1 trillion in risky U.S. loans may be in Japan’s hands

Bloomberg/Cecile Gutscher and Tracy Alloway/12-14-2018

“Years of low yields spurred investors to pour money into leveraged loans – credit extended to companies with the weakest balance sheets. Such assets were pitched as a haven for those worried about the prospect of rising interest rates, and were often repackaged into so-called collateralized loan obligations, or CLOs, with credit enhancements to protect investors.”

USAGOLD note:  More on the dangerous CLO situation Janet Yellen brought to public attention earlier in the week.  Now we learn that the counter-party risks go beyond the United States to Japan, and no doubt to banks in other countries that chose to push aside the risks in the pursuit of greater short-term returns.  Yellen warned that the CLO had structural similarities to subprime loan portfolios at the root of the 2007-2008 credit crisis. (See repost below.) It all sounds very familiar. . . . . . .

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Former Fed Chair Yellen says excessive corporate debt could prolong a downturn

CNBC/Thomas Franck/12-10-2018

“’I think a lot of the underwriting of that debt is weak. I think investors hold it in packages like the subprime packages … the same thing has happened. It’s called CLOs, or collateralized loan obligations,’ she added.”

USAGOLD note:  Sounds ominous. . . . .Former Fed chair Yellen warns the situation could lead to “lots of bankruptcies in the non-financial corporate sector.”  Few outside Wall Street ever even heard of CLOs. Now CNBC says the CLO problem could “spook” investors who recall the origins of the last crisis. With these revelations from Janet Yellen, the quiet problem of corporate debt will move to center stage.


Repost from 12-11-2018

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The science behind melting gold at room temperatures

SafeHaven-Mining.com/12-12-12018

“First, they placed a small piece of gold in an electron microscope. Then they started observing it at the highest level of magnification and began gradually increasing the electric field to extremely high levels. When they reached the highest electric field, they noticed that the surface layers of gold had actually melted – at room temperature. ‘I was really stunned by the discovery. This is an extraordinary phenomenon, and it gives us new, foundational knowledge of gold,’ Ludvig de Knoop, a researcher at Chalmers, said in a media statement.”

USAGOLD note:  Once again, science teaches us that anything is possible – even melting gold at room temperatures.

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How much gold does China have? A lot more than you think

MoneyWeek/Dominic Frisby/12-12-2018

“Next time the international money system comes under stress – and that time may not be far away – where the gold is, and who owns it, could be of great importance. You may think gold is an antiquated asset, irrelevant to a modern digital world. China clearly doesn’t. Since the global financial crisis, China has been accumulating gold at a staggering pace.”

USAGOLD note:  This article by Dominic Frisby gets your attention and keeps it.  It also comes to an interesting conclusion centering around the self-explanatory chart from our old friend, Nick Laird (GoldChartsRUs) immediately below.  China – people, banks and government – is quietly accumulating itself into a very good financial position – over 15,000 tonnes cumulatively as of 2015.  The pool has grown even larger over the last three years.

Chart courtesy of GoldChartsRUs

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These 5 countries are in bear markets. Is the U.S. next?

Investopedia/Mark Kolakowski/12-12-2018

“Already, 14 major stock indexes have dropped by 10% or more from their previous highs, and six of these, representing five different countries, have suffered bear market declines of 20% . . .”

USAGOLD note:  Kolakowski goes on to list China, Germany, Italy, Mexico and South Korea with stock indexes down more than 20%. Outliers or early birds in a generalized global trend?  He goes on to assess the prospects for the U.S. stock market.


Frankfurt Exchange image by Dontworry [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)], from Wikimedia Commons [Edited]

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Vanguard founder says buy bonds to protect yourself from ‘unstable’ U.S. government

Financial News/Chris Newlands/12-13-2018

“The 89-year-old founder of asset management giant Vanguard told Financial News: ‘Investors are not paying nearly enough attention to the risks that could affect our markets: an unstable US federal government, a Brexit debacle, and a US stock market that remains at relatively high valuations.'”

USAGOLD note:  I can think of something else – something with an even healthier track record for weathering economic and political instability.  As James Grant once put it: “I would be short the Ph.D standard, long the periodic table.”

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Bloomberg reports Saudi Arabia to target U.S. with sharp export cuts

Bloomberg/Javier Bias and Tina Davis/12-13-2018

“After flooding the U.S. market in recent months, Saudi Arabia plans to slash exports to the world’s largest oil market in the coming weeks in an effort to dampen visible build-ups in crude inventories. American-based oil refiners have been told to expect much lower shipments from the kingdom in January than in recent months following the OPEC agreement to reduce production, according to people briefed on the plans of state oil company Saudi Aramco.”

USAGOLD note:  This embargo will likely find its way to consumer and producer price indices. Oil prices and the energy complex as a whole reacted immediately with higher prices.  Gold is marginally affected out of the gate, but let’s see how this plays out over the next several days.

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DMR–Gold continues to track sideways, some cheerful technical analysis ($1300 by year-end?)

DAILY MARKET REPORT

Gold continued to track sideways this morning – down $2.50 at $1243.50. The metal was stable in Asian trading then dropped moderately on minor speculative selling on London AM fix associated with Theresa May’s surviving a Tory vote of no-confidence.  All in all, the wait-and-see, sideways pattern established earlier in the week seems to have gained the upper hand for now. Barring a major event, we could remain in a narrow range until after Wednesday’s meeting of the Federal Open Market Committee. Silver is up 2¢ on the day $14.77.

Anna Couling, who posts technical commodity analysis at Investing.com, offers a hopeful note as we move toward the conclusion to 2018.  In a short analysis titled Some Christmas Cheer for Gold Bugs [LINK], she says –

“Last week’s price action was seminal, with gold breaking through strong resistance in the $1238 per ounce region. In addition, this price action was supported with excellent volume and in agreement, with the trend monitor confirming the transition to the bullish sentiment. A recovery to $1280 per ounce now seems possible and possibly to $1300 per ounce, provided this is supported with strong and rising volume on the weekly chart. And of course, further weakness in the USD may well provide additional help given the FED’s pace of rate increases which looks set to slow.”

With those words of reassurance, we will close out today’s report and wish you a pleasant rest of your day.

Quote of the Day
“Reality is far more vicious than Russian roulette. First, it delivers the fatal bullet rather infrequently, like a revolver that would have hundreds, even thousands of chambers instead of six. After a few dozen tries, one forgets about the existence of a bullet, under a numbing false sense of security. Second, unlike a well-defined precise game like Russian roulette, where the risks are visible to anyone capable of multiplying and dividing by six, one does not observe the barrel of reality. One is capable of unwittingly playing Russian roulette – and calling it by some alternative ‘low risk’ game.” ― Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

Chart of the Day

Chart note: Since the turn of the new century, gold consistently provided a real rate of return on investment when measured against inflation.  In fact, it provided a real rate of return in twelve of the eighteen years represented on the chart.  The period was one of subdued inflation. Gold’s performance, as a result, took many analysts and professional money managers by surprise and altered the perception among money managers that the precious metal is solely an inflation hedge.

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Posted in Daily Market Report, Today's top gold news and opinion |

Gold continues to track sideways, some cheerful technical analysis ($1300 by year-end?)

DAILY MARKET REPORT

Gold continued to track sideways this morning – down $2.50 at $1243.50. The metal was stable in Asian trading then dropped moderately on minor speculative selling on London AM fix associated with Theresa May’s surviving a Tory vote of no-confidence. All in all, the wait-and-see, sideways pattern established earlier in the week seems to have gained the upper hand for now. Barring a major event, we could remain in a narrow range until after Wednesday’s meeting of the Federal Open Market Committee. Silver is up 2¢ on the day $14.77.

Anna Couling, who posts technical commodity analysis at Investing.com, offers a hopeful note as we move toward the conclusion to 2018. In a short analysis titled Some Christmas Cheer for Gold Bugs [LINK], she says –

“Last week’s price action was seminal, with gold breaking through strong resistance in the $1238 per ounce region. In addition, this price action was supported with excellent volume and in agreement, with the trend monitor confirming the transition to the bullish sentiment. A recovery to $1280 per ounce now seems possible and possibly to $1300 per ounce, provided this is supported with strong and rising volume on the weekly chart. And of course, further weakness in the USD may well provide additional help given the FED’s pace of rate increases which looks set to slow.”

With those words of reassurance, we will close out today’s report and wish you a pleasant rest of your day.

Quote of the Day
“Reality is far more vicious than Russian roulette. First, it delivers the fatal bullet rather infrequently, like a revolver that would have hundreds, even thousands of chambers instead of six. After a few dozen tries, one forgets about the existence of a bullet, under a numbing false sense of security. Second, unlike a well-defined precise game like Russian roulette, where the risks are visible to anyone capable of multiplying and dividing by six, one does not observe the barrel of reality. One is capable of unwittingly playing Russian roulette – and calling it by some alternative ‘low risk’ game.” ― Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

Chart of the Day

Chart note: Since the turn of the new century, gold consistently provided a real rate of return on investment when measured against inflation. In fact, it provided a real rate of return in twelve of the eighteen years represented on the chart. The period was one of subdued inflation. Gold’s performance, as a result, took many analysts and professional money managers by surprise and altered the perception among money managers that the precious metal is solely an inflation hedge.

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Italy: A brewing storm within the EU

Mises Institute/Claudio Grass/12-12-2018

“Since the release of the draft withdrawal agreement, largely perceived as a victory for the EU, those who support the European project and believe in a strong leadership from Brussels have projected confidence and optimism for the future. According to these voices, the divisions caused by the rise of nationalism and populism in the past years are healing, the relationship between member states is normalizing, while a future of stability and harmony awaits. However, such a vision might prove naive, as it discounts a much greater risk to the EU than Brexit ever was: the political and economic powder keg that is Italy.” [Emphasis added.]

USAGOLD note: Swiss investment advisor Claudio Grass offers some perspective on Italy and the future of the European Union.  He ends with this quote from Dr. Anthony Sutton: “Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort.”

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Tepid inflation gives Fed room to slow rate rises

Financial Times/Sam Fleming/12-12-2018

“A new spell of tepid inflation in the US is giving the Federal Reserve space to slow down its interest rate-raising programme as it gauges new global risks on the horizon.”

USAGOLD note:  An overview of what the Fed might be thinking now in light of significant economic and financial market conditions.

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National debt under Trump is surging at its fastest pace since 2012

Bloomberg/Alexandre Tanzi/12-12-2018

“If this year’s growth rate is sustained through the end of the year, it would be the biggest jump in percentage terms since the last year of President Barack Obama’s first term, at a time when the economy needed fiscal stimulus in the aftermath of the financial crisis. As of Monday, the nation’s debt stood at a record $21.9 trillion.”

USAGOLD note:  For many years, Americans  erroneously were led to believe that the national debt did not matter because we owed it to ourselves.  That all changed when analysts began to point out that the growing expenditure for interest on the national debt necessarily was coming out of tax revenues.  In short, the debt matters because the interest rate payments matter – now nearly the equivalent of what the nation spends on national defense, i.e., $610 billion in 2017 (compared to $521 billion paid in interest).

Needless to say two factors will impact that number in 2019 – first, the rapid growth in additions to the aggregate national debt and the rising overall interest rate paid on the total.  Note the spike in interest payments in the chart below for 2017.  The 2018 number is yet to be posted at the St. Louis Federal Reserve.

 

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Special Report

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The National Debt and Gold
Here’s why the two have risen together since the 1970s
and why the correlation is likely to continue

[LINK]

“It is a fact that when your national debt gets to the level ours is, that it constitutes an economic threat to the society, and that kind of threat ultimately has a national security consequence for it.” – John Bolton, U.S. National Security Adviser to President Trump

“Last month, as the US midterm elections approached, Deutsche Bank analysts released a calculation that should have made American voters wince. It shows that the US government currently pays $1.43bn each day (yes, day) to service its public debt — 10 times more than any other G7 country (Italy is a distant second in this grim league).” – Gillian  Tett, Financial Times

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Posted in Announcements, Today's top gold news and opinion |

IMF warns storm clouds gathering for next financial crisis

The Guardian/PJ Partington/12-11-2018

“The storm clouds of the next global financial crisis are gathering despite the world financial system being unprepared for another downturn, the deputy head of the International Monetary Fund has warned. David Lipton, the first deputy managing director of the IMF, said that ‘crisis prevention is incomplete’ more than a decade on from the last meltdown in the global banking system. ‘As we have put it, ‘fix the roof while the sun shines’. But, like many of you, I see storm clouds building and fear the work on crisis prevention is incomplete.'”

USAGOLD note:  Isn’t this the same refrain regulators expressed in their assessment of the causes and cures for the last financial crisis?  Apparently Wall Street and the regulators did not learn a thing from the 2008 credit crisis and now the IMF warns that another crisis is pending – about as clear an argument in favor of gold and silver ownership that one can make.

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Commerzbank sees major rally in gold, $1500 in 2019

Scrap Register

“‘In our view, gold has fallen too far,’ Commerzbank said. ‘The current price hardly reflects the numerous political and economic uncertainties prevailing. The record level of speculative net short positions suggests a substantial price rally before the end of the year. Given the lower starting point, we are lowering our forecast for year-end to $1,300 per troy ounce. We still expect the price to rise in 2019 to $1,500.’”


Repost 8-29-2018

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The super rich of silicon valley have a doomsday plan

Bloomberg/Olivia Carville

“Years of doomsday talk at Silicon Valley dinner parties has turned to action. In recent months, two 150-ton survival bunkers journeyed by land and sea from a Texas warehouse to the shores of New Zealand, where they’re buried 11 feet underground. Seven Silicon Valley entrepreneurs have purchased bunkers from Rising S Co. and planted them in New Zealand in the past two years, said Gary Lynch, the manufacturer’s general manager. At the first sign of an apocalypse — nuclear war, a killer germ, a French Revolution-style uprising targeting the 1 percent — the Californians plan to hop on a private jet and hunker down, he said.”

USAGOLD note:  We bring attention to this article to show the level of concern about economic, social and political instability among very rich, self-made, independently-minded entrepreneurs.  The placidity of the moment can give way to chaos in a heartbeat as anyone who has studied history – or lived through a Venezuela-type moment – will attest.  The odds of society having to deal with a breakdown at this level are slim, as these occurrences are rare.  It is the many levels of danger short of the ultimate unraveling that truly need to be hedged, bridged, survived.  Anyone who has thought their way through the problem will find their way to gold – the most effective and practical insurance policy against the dangers outlined in this article and the one that buys time. . . .that most valuable of commodities.


Repost from 9-5-2018

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JP Morgan’s top quant warns next crisis to have flash crashes and social unrest not seen in 50 years

CNBC/Hugh Son

“Sudden, severe stock sell-offs sparked by lightning-fast machines. Unprecedented actions by central banks to shore up asset prices. Social unrest not seen in the U.S. in half a century. That’s how J.P. Morgan Chase’s head quant, Marko Kolanovic, envisions the next financial crisis. The forces that have transformed markets in the last decade, namely the rise of computerized trading and passive investing, are setting up conditions for potentially violent moves once the current bull market ends, according to a report from Kolanovic sent to the bank’s clients on Tuesday.”

USAGOLD note (12-12-2018 update): The madness of machines. . . . This CNBC article highlighting the thinking of JPM’s Marko Kolanovic proved prescient.


Repost from 9-5-2018

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That isn’t how it works

“Simple, compelling language describing cause and effect is both comforting and reassuring. The alternative to this soothing narrative is an unimaginable world of random disconcerting events. This stands in stark contrast to how we prefer to see the world around us: orderly, predictable, subject to expert management and prediction. Sorry, to say, but that isn’t how it works.” – Barry Ritholtz, Bloomberg

Dr. Moneywise says. . . . . .It is precisely because of the ‘random disconcerting events’ of life, economy and markets that shrewd investors are always on the lookout and why they include gold and silver in their portfolio plan.   Barry Ritholtz, I might add, is the author of the book, Bailout Nation. We recommend a visit to the article linked for more of Mr. Ritholtz’ deep-thinking.

 

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Trump makes one last try to get the Fed to ease up, but it likely won’t work

CNBC/Jeff Cox/12-12-2018

“President Donald Trump has made one last pitch to pressure the Federal Reserve into not raising interest rates next week, but it’s expected to have little impact. Despite a string of events that has seemed to push the central bank into a more dovish posture, a December hike now seems inevitable.”

USAGOLD note:  As we have reported consistently, gold tends to drag its way through Fed Week and the upcoming one is unlikely to depart from tradition.  It will be good news to the gold sector if it holds its own or rises – even if the gains are modest.

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Gold seesaws in range, biding its time

Gold seesawed in the $1242-1247 range unable to make up its mind on direction in overseas trading. By the time New York opened, though, it appeared comfortable with the northern edge of the range – up $3 on the day at $1246. Silver is up 13¢ at $14.72 and making progress toward the important $15 mark. Yesterday’s producer price report came in at a benign .1% and today’s consumer price report showed a 2.2% rise in prices – numbers unlikely to cause even a ripple among Wall Street traders.

The markets today are entertaining the notion of a thaw in the U.S.-China trade battle but it was another conflict – the one between the White House and Congressional Democrats – that dominated national attention yesterday. The president declared he would be “proud” to shut down the government over financing for a wall at the Mexican border. Those with a memory for major market events recalled that it was another shutdown in 2011 that caused Standard & Poor’s to downgrade the U.S government’s credit rating. Another downgrade now could have deadly consequences at a time when foreign creditors are already backing away from the U.S. treasuries’ market.

Gold, through all of it, appears to be biding its time, but seemingly at the ready. . . . . . . .

Quote of the Day
“A common feature of all these earlier troubles was that, having happened, they were over. The worst was reasonably recognizable as such. The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to ensure that as few as possible escaped the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. (Not only were a record 12,894,650 shares sold on 24 October; precisely the same number were bought.) The bargains then suffered a ruinous fall. Even the man who waited out all of October and all of November, who saw the volume of trading return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next twenty-four months. The Coolidge bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable.” – John Kenneth Galbraith, The Great Crash: 1929

Chart of the Day

Chart note: This long-term gold chart is drawn in log-scale. “Common percent changes,” says Investopedia of log-scale charts, “are represented by an equal spacing between the numbers in the scale. For example, the distance between $10 and $20 is equal to the distance between $20 and $40 because both scenarios represent a 100% increase in price.” On a linear chart, the lesser values are compressed to the point that the viewer misses the strength of a price move, and the greater values are extended to a degree that they tend to dramatize a price move – up or down. The log-scale chart presents data in a more realistic framework without the drama. As you can see from the chart above, the upward trend of the gold price since the early 2000s is not nearly as strong as the move between 1970 and 1980 in percentage terms leading some analysts to believe that we have considerable upside yet to be charted.

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DMR–Gold seesaws in a range, biding its time

DAILY MARKET REPORT

Gold seesawed in the $1242-1247 range unable to make up its mind on direction in overseas trading. By the time New York opened, though, it appeared comfortable with the northern edge of the range – up $3 on the day at $1246. Silver is up 13¢ at $14.72 and making progress toward the important $15 mark. Yesterday’s producer price report came in at a benign .1% and today’s consumer price report showed a 2.2% rise in prices – numbers unlikely to cause even a ripple among Wall Street traders.

The markets today are entertaining the notion of a thaw in the U.S.-China trade battle but it was another conflict – the one between the White House and Congressional Democrats – that dominated national attention yesterday.  The president declared he would be “proud” to shut down the government over financing for a wall at the Mexican border.  Those with a memory for major market events recalled that it was another shutdown in 2011 that caused Standard & Poor’s to downgrade the U.S government’s credit rating.  Another downgrade now could have deadly consequences at a time when foreign creditors are already backing away from the U.S. treasuries’ market.

Gold, through all of it, appears to be biding its time, but seemingly at the ready. . . . . . . .

Quote of the Day
“A common feature of all these earlier troubles was that, having happened, they were over. The worst was reasonably recognizable as such. The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to ensure that as few as possible escaped the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. (Not only were a record 12,894,650 shares sold on 24 October; precisely the same number were bought.) The bargains then suffered a ruinous fall. Even the man who waited out all of October and all of November, who saw the volume of trading return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next twenty-four months. The Coolidge bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable.” – John Kenneth Galbraith, The Great Crash: 1929

Chart of the Day

Chart note:  This long-term gold chart is drawn in log-scale. “Common percent changes,” says Investopedia of log-scale charts, “are represented by an equal spacing between the numbers in the scale. For example, the distance between $10 and $20 is equal to the distance between $20 and $40 because both scenarios represent a 100% increase in price.” On a linear chart, the lesser values are compressed to the point that the viewer misses the strength of a price move, and the greater values are extended to a degree that they tend to dramatize a price move – up or down. The log-scale chart presents data in a more realistic framework without the drama. As you can see from the chart above, the upward trend of the gold price since the early 2000s is not nearly as strong as the move between 1970 and 1980 in percentage terms leading some analysts to believe that we have considerable upside yet to be charted.

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Posted in Daily Market Report, Today's top gold news and opinion |

Violent stock reversals

Bloomberg/Lu Wang/12-11-2018

“Equity investors are getting used to whiplash. They got a dose today, when the S&P 500 wiped out a 1.4 percent rally. And the day before, when a 1.9 percent loss was erased. So far, there have been six days this quarter when stocks completely reversed an intraday move of at least 1 percent, the most since 2011, when Standard & Poor’s downgraded the U.S. sovereign rating, sending stocks to the brink of a bear market.”

USAGOLD note:  That Standard & Poor’s downgrade in 2011 was associated with a closing down of the U.S. government and the lack of confidence it generated in credit markets.  Yesterday’s drama in the White House was a direct reminder that another shutdown is within the realm of possibility and that it could come before December is out.

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Posted in Today's top gold news and opinion |

The world’s biggest hedge fund is getting whacked, and why ‘moneyness’ matters

Dollar Collapse/John Rubino/12-10-2018

“The SNB (Swiss National Bank) loaded up on Big Tech like Apple, Amazon and Microsoft, and rode them to massive profits, which enriched both the Swiss people and the SNB’s stockholders (in another departure, it’s a publicly traded company as well as a central bank). But live by the sword, die by the sword. Turning your central bank into the world’s biggest hedge fund means outsized profits in good times, but potentially serious losses if those aggressive bets go wrong.”

USAGOLD note:  There was a time when gold was the centerpiece of the Swiss international banking enterprise.  It seems, as Rubino points out, the SNB has departed from its original impeccable standards to mixed results.

Swiss National Bank gold reserve (1975)


Image by Library of the ETH Zurich [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)]

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Posted in Today's top gold news and opinion |

China to cut tariffs on imported US cars

Financial Times/Demetri Sevastopulo and James Politi/12-11-2018

“China has agreed to cut tariffs on imported American cars from 40 to 15 per cent, the first concrete sign of a cooling in the trade war between the world’s two largest economies since Xi Jinping and Donald Trump agreed a 90-day truce this month.”

USAGOLD note:  A step in the right direction. . .Financial Times characterizes the tariff reduction on American cars going into China as the “first sign” of a thaw in the trade dispute.

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Posted in Today's top gold news and opinion |

Goldman Sachs sees risk of U.S. dollar nearing a ‘messy top’

BNN Bloomberg/Austin Weinstein/12-11-2018

“Timing is the messy part. ‘You can’t say with great conviction that these variables are going to be moving quickly and linearly to a dollar-weaker outcome,’ Pandl said. The outlook only adds to a dour picture for dollar bulls. Analysts from Morgan Stanley, Bank of America Merrill Lynch, and Citi all see a weaker dollar in 2019, as zesty U.S. growth converges with a more subdued global growth rate.”

USAGOLD note:  Over the past few years, dollar strength has equated to gold weakness.  If Goldman, BoAML and Citi are correct, we may see the opposite effect.

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Posted in Today's top gold news and opinion |