Monthly Archives: April 2019
“It’s stunning how dramatically the Fed’s perspective has shifted since the fourth quarter. There’s now a chorus of Fed governors and Federal Reserve Bank Presidents calling for the central bank to accommodate higher inflation. Watching the inflation data (March CPI up 1.9% y-o-y), it’s not readily apparent what has them in such a tizzy. And with crude prices surging 40% to start 2019, it takes some imagining to see deflationary pressures in the pipeline. The Fed’s (and global central banks’) dovish U-turn was clearly in response to December’s global market instability. Quickly, the global system was lurching toward the precipice. Acute fragility revealed – with central bankers left shaken.”
USAGOLD note: Deflation might be a distant concern, but the stubborn disinflationary tangle is difficult to ignore.
Repost from 4-21-2019
“However, with the sector backed by supportive economic conditions, including low real interest rates, high debt levels, policy uncertainty and robust physical demand, it seems only a matter of time before the precious metal breaks above this level and the gold sector enters the next phase of its recovery cycle.”
USAGOLD note: London-based Baker Steel Capital sees the gold sector as “positioned for a breakout performance” pushed by a reversal in overall market sentiment.
(USAGOLD – 4-25-2019) – Gold edged higher in a somewhat confused reaction to conflicting reports on the economy and another strong surge in the oil price. It is trading at $1277 and up $2.50 on the day. Silver is down 2¢ at $14.90. The Labor Department reported an unexpected uptick in applications for unemployment, the biggest rise in 19 months. Contrasting that, durable goods [refrigerators, washing machines, etc] orders rose 2.7%, the largest increase in eight months. As we go to post today’s report, it seems that oil’s rise is winning the day in the gold market. After a brief drop following the durable goods report, it is back to the upside.
Bert Dohmen, Dohmen Capital Research, offers some contrarian perspective on recent weakness in the gold price. “In 2018, bullish sentiment for gold and silver was at a multi-year low,” he says. “Very few people were interested. That’s usually the time to take a fresh look, technical and fundamental. If everything lines up, my analysis would go against the bearish majority. The chart below [not shown] shows the exposure to gold of managed money in gold futures and options. It shows that the allocation to gold was at its lowest point on this chart in October 2018, at least since 2006. Also important is that in spite the extremely low interest in gold, the gold price (yellow line) in 2018 was higher than at the gold low in 2016. I call this a very important long-term, bullish divergence.”
Quote of the Day
“The ‘threat’ is best seen through the emergence of exchange-traded funds (ETFs), which allow investors to get a proxy physical gold exposure through an investment via their stockbroker. In truth, these products are, in many cases, more expensive than trading and storing physical gold (especially for larger investors with a long-term investment time frame), have less trading flexibility, and are less secure than owning real physical gold.” – Jordan Eliseo, ABC Bullion/Australia
Chart of the Day
Chart note: J.P. Morgan Asset Management released a report recently ranking investments over the past twenty years. It shows gold as the second best performer over the period at a 7.7% average gain annually. REITs were number one at a 9.9% gain. Stocks ranked fourth at 5.6%.
“This increased Russia’s total gold reserves to 69,700,000 ounces or 2,167.9 tonnes, the central bank stated. Gold represents around 18% of the central bank’s total reserves. During the first quarter of 2019, Russia acquired 56 tonnes of the precious metal, buying 37.3 tonnes of that in January and February.”
USAGOLD note: It is unclear at this juncture if all of the additions to Russia’s reserves are coming from its gold mining sector. There has been speculation among some analysts that in addition Russia has been purchasing gold on the open market.
“India’s central bank is likely to join counterparts in Russia and China scooping up gold this year, adding to its record holdings and lending support to worldwide bullion demand as top economies diversify their reserves.”
USAGOLD note: The article reports that India may purchase 1.5 million ounces in 2019 or 46.7 tonnes – a big number when you consider it will come from open market purchases. China and Russia are adding to central bank reserves but the additions are coming from internal production not open market purchases. This article expands on the rationale behind the purchases from the perspective of developing countries.
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“Tell me how this ends? was the despairing question attributed to American generals as they contemplated the quagmires in Vietnam and Iraq. The same question needs to be asked by US policymakers now, as they consider the escalating tensions between America and China.”
USAGOLD note: Gideon Rachman does a good job of boiling down what’s at stake for the United States and China in their developing trade and geopolitical conflict. China, he says, needs to consider that the attitude toward China is bipartisan and likely to outlast the Trump administration. The United States, for its part, needs to realize that it cannot stop China’s rise. But those two considerations are a simplification of a much more complicated and detailed analysis at the link above.
Repost from 12-18-2019
The road to confetti is long and winding
“Does the deployment of helicopter money not entail some meaningful risk of the loss of confidence in a currency that is, after all, undefined, uncollateralized and infinitely replicable at exactly zero cost? Might trust be shattered by the visible act of infusing the government with invisible monetary pixels and by the subsequent exchange of those images for real goods and services? . . . To us, it is the great question. Pondering it, as we say, we are bearish on the money of overextended governments. We are bullish on the alternatives enumerated in the Periodic table. It would be nice to know when the rest of the world will come around to the gold-friendly view that central bankers have lost their marbles. We have no such timetable. The road to confetti is long and winding.” – James Grant, Grant’s Interest Rate Observer
Dr. MoneyWise says. . . .Some think it takes an advanced degree in economics to understand the merits of a diversification in gold and silver when all it takes is a little common sense. Common sense ownership of physical metal saved the skeptical saver in the time of the French assignat inflation in 1789, the nightmare German inflation in 1923, the global bank collapses in 1932, the American stagflationary breakdown in the 1974 and Venezuela’s inflation in 2019 – even though those episodes span almost 250 years. As old Ben Franklin once said: “A change of fortune hurts a wise Man no more than a change of the Moon.”
“But there was a serious problem: The colonial government had no money, and failed to secure a loan. It fell to a small committee of prominent citizens to figure out what to do. The head of the committee was a man named Elisha Hutchinson. . . Hutchinson and the others devised an unusual solution to the problem. They issued what is generally recognized as the first fiat currency in the Western world. The twenty-shilling notes they printed cheekily claimed that they ‘shall be in value equal to money’ — meaning that they were equivalent to silver coin.”
USAGOLD note: Though, as Mihm explains, the original paper currency Massachusetts introduced in 1690 functioned reasonably well in terms of holding its value, some of its successors did not do so well. Years later, a paper currency inflation during and after the American Revolutionary War earned a prominent place in the Amerian lexicon for the phrase “not worth a Continental.” Mihm’s article makes reference to the period in Massachusetts around 1690 as a “crude forerunner” of Modern Monetary Theory and is an interesting read.
“The Congress issued six million dollars of continentals in 1775, and the issues increased each year. One hundred and forty millions were issued in 1779. As prices rose, the government found that it needed more and more dollars to finance its expenditures. More money was printed. This added supply of dollars led to further depreciation in the infamous spiral of inflation. At the outset, the continental had circulated at par with a dollar of specie. By 1780, over one hundred continental dollars were required to exchange for one specie dollar; Congress had printed continentals until they were worth almost nothing.” – Murray N. Rothbard, Faith and Freedom, (1950) as published at the Mises Institute, 12/17/2018
Repost from 3-17-2019
Dollar Collapse/John Rubino
“In the decade since the trough of the Great Recession, nearly every sector of every major economy took on historically unprecedented amounts of new debt. And now the old “optimal” inflation rate of 2% isn’t enough to make interest payable for a growing number of borrowers. The solution? Higher inflation of course. The old 2% target was arbitrary in any event. And as with so many other things in life, if a little was good, a little more must be better, right?
USAGOLD note: As Alan Greenspan reminded us this past week, a 4% inflation rate in the early 1970s was enough for the Nixon administration to impose wage and price controls. Now with a 2%, even 2.5%, as a worthy goal for the Federal Reserve, a temporary 4% inflation rate would likely be passed off as something to be watched but not a major concern. The problem with inflation, and it has always been so down through history, is that the controlled blaze can suddenly and inexorably slip outside its designated parameters. Worst case examples – like Zimbabwe in the late 1990s (currency pictured) or Venezuela today – abound, as do lesser examples. Though hyperinflation in the United States is a distant concern, even inflation of the runaway, double-digit variety would wreak havoc on the markets, the economy and personal finances. The old admonition to “be careful what you wish for” comes to mind.
Repost from 4-19-2019
“In fact, year after year, the firm has found that investors are often their own worst enemy, failing to exercise the necessary discipline to capture the benefits markets can provide over longer time horizons, while succumbing to short-term strategies such as market timing or performance chasing as they did in 2018, Dalbar has found.”
USAGOLD note: A powerful argument for a strong diversification in gold and silver – both of which have a low correlation to stocks and bonds. JP Morgan’s finding that gold ranks second among investments over the past twenty years speaks volumes. (Please scroll below.)
Repost from 4-19-2019
(USAGOLD – 4-24-2019) – Gold and silver are trading level at $1272 and $14.83 per ounce respectively as the U.S. session opens. No explanation of substance has surfaced with respect to yesterday’s sell-off though both metals did recover much of their early losses during the course of the day. China took the lead overnight in rejecting tighter sanctions on Iran’s crude oil exports. Financial markets, with the notable exception of crude oil itself, have underplayed rising Mideast tensions thus far.
We find ourselves in the same camp with Bloomberg’s Jake Lloyd Smith on the matter. “Gold,” he says, “is due for a delayed lift from the U.S. upping the ante against Iran with the decision to end the sanctions waivers. That move, if enforced, puts a U.S. boot on Tehran’s windpipe and sets the scene for further tensions. Iran is already talking about choking off the Strait of Hormuz, the vital maritime conduit for Persian Gulf shippers. While RBC Capital Markets reckons that the U.S. Fifth Fleet could handle a direct challenge in that area, any flare up would boost both crude and bullion.”
Quote of the Day
“In 2018, bullish sentiment for gold and silver was at a multi-year low. Very few people were interested. That’s usually the time to take a fresh look, technical and fundamental. If everything lines up, my analysis would go against the bearish majority. The chart below shows the exposure to gold of managed money in gold futures and options. It shows that the allocation to gold was at its lowest point on this chart in October 2018, at least since 2006. Also important is that in spite of the extremely low interest in gold, the gold price (yellow line) in 2018 was higher than at the gold low in 2016. I call this a very important long-term, bullish divergence.” – Bert Dohmen, Dohmen Capital Research – Forbes article
Chart of the Day
Chart courtesy of the World Gold Council (GoldHub)
Chart note: The last time we visited this chart, we noted that managed money net long positions had begun increasing as of December 2018. The price responded in the first quarter with an uptick. Since then, managed money long positions have leveled out and the price has been rangebound between $1275 and $1310. Thus far we have not seen the same level of turnaround in managed money positions that we did in 2016, 2017 and 2018 – something that a number of technical analysts see as a future possibility. In this morning’s Quote of the Day, we feature the thinking of Bert Dohmen (Dohmen’s Capital Research). “Gold, ” he says in the analysis linked above, “could have a secular bull market until 2030. That means the gold bull market could have about 11 more years to go. Historically, the final phase of a bull market is the most spectacular.”
“Essentially, the West will see fading growth. The Fed’s actions will be negative for the dollar and positive for the fear trade for gold. The East will see solid growth and that will be supportive for the love trade for gold.”
USAGOLD note: Stewart Thompson lays out the case for gold with 24 quick-read nuggets that tell why a huge relief rally is imminent. . . . .
“The outlook for commodities is bullish, according to Citigroup Inc., which expects raw materials to be supported by a confluence of positive factors including the agreement of a trade deal between Washington and Beijing, improved demand from China, and a weaker dollar.”
USAGOLD note: If commodities get an assist from a U.S.-China trade deal, gold could be carried on the same wave of increased demand and higher prices. Over the longer run, if China’s income and profits rise so too should the demand for gold among a population already culturally attuned to the long-term benefits and safety of gold ownership. In any case, Citigroup joins Goldman Sachs and other in publicly declaring a positive longer-term outlook for the commodities complex.
Related: Commodity ETFs surge as investors hedge volatility/Yahoo/4-22-2019
“Crude prices rose to a five-month high on Tuesday, as Washington’s decision to end sanctions waivers on Iranian oil imports buoyed markets for a second day and sent shares in some of the world’s biggest energy companies higher.”
USAGOLD note: One would think that at some point gold would play catch-up with oil but the correlation between the two is not always reliable in the short term. It does tend to play out though over the longer run.
“[Standard Chartered’s Suki Cooper] expects the yellow metal to test last year’s closing high of $1362 an ounce in the final three months of the year. And, her forecast gets even more bullish by 2020. ‘We actually think gold prices are more likely to break upside further in 2020 averaging $1375 next year,’ said Cooper.”
USAGOLD note: A positive note on a negative day that improves as it wears on. . . . .
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USAGOLD Recommendation: The precious metals industry is unique in the financial industry in that it is not subject to oversight or regulation by third-party government entities like the SEC or CFTC. As such, marketplace forums and feedback sites often serve as a replacement for investors attempting due diligence. While several options can be found, by far the most impartial and least susceptible to vested influence is the Better Business Bureau. When looking at a company’s BBB profile, don’t focus solely on the rating. To be honest, pretty much everybody has an ‘A’ or ‘A+’ rating. What is far more important to assess is the number and nature of complaints, number and caliber of positive and negative reviews, longevity with the BBB, as well as the number of ‘stars’ given a company through the actual customer review system.
“The new downswing results from more than the 2010 financial crisis. There has been a wave of Chinese and Asian working-class resistance to exploitation, which has eroded profits. In the West, paradoxically, the historic defeat of the unions has flatlined wages. As a result, goods can be sold (and profits maintained) only by bolstering consumption through easy personal debt. That makes the Western capitalist model unsustainable and prone to endemic bank failure. The banks and their tame accounting firms are busy covering up this chronic instability via wholesale fraud. As a result, we are nowhere near the bottom of this K-wave.”
USAGOLD note: The link above takes you to an excellent overview of the various stages of the Kondratieff Wave when applied to recent history and includes the author’s opinion as to where we are now. . . . . . The chart above provides a simplified template of the Kondratieff Wave since 1800. We allow you to draw your own conclusions and only mention that gold is not just an historically proven inflation hedge, it has performed equally as well in modern times under disinflationary, stagflationary and deflationary circumstances.
Image: Kondratieff_Wave.gif: Internaszonalderivative work: Agmen [Copyrighted free use]
Repost from 4-9-2019
“‘Silver does not represent large components of end products,’ Smirnova explains, pointing out that electronics, cars, and medicines don’t use a lot of the metal per unit, so an economic slowdown probably won’t have a big impact on it. Its use in solar applications is also ‘insulated from economic growth” because that market is ‘more driven by government incentives and the need for renewable energy.’ Instead, it’s the ‘return of retail investment demand [that] will be the driving force behind an increase in the silver price,’ Smirnova predicts.”
USAGOLD note: Conclusions similar to our own. . . We will remind our readers that when silver moves to the upside, it tends to move in grand fashion. Please see chart above.
Repost from 4-15-2019
“About an hour and a half’s drive north from New York City lies a treasure — the gold kind. But it’s not one that you can go and find. In fact, you can’t get anywhere near it. Because this treasure belongs to the United States Treasury. Nearly a quarter of the U.S. government’s gold sits beneath a windowless building on the campus at West Point.”
USAGOLD note: You will enjoy this! Each bar is worth $500,000. . . . The Mint strikes the American Buffalo (pictured) and Eagle gold coins at the West Point facility.
Repost from 4-18-2019
“By that I mean that the suppression of interest rates has served to advantage one class of people: The savers have been disadvantaged whereas big banks have been very greatly advantaged, and the financial community has been advantaged. In short: the saver’s loss has been the speculators’ gain. So, the ordinary working person has been disadvantaged and that is apolitical. To speak metaphorically but, I still think truthfully, that kind of policy is bordering on criminal – and I stand by that.”
USAGOLD note: A strong position taken by one of our favorite Wall Street commentators (who also happens to be a long-time advocate of gold ownership).
Repost from 4-19-2019
(USAGOLD – April 23, 2019) – Gold plunged this morning falling below the $1275 support zone to trade at $1269 – down $6 on the day. Silver is down 22¢ at $14.81. Once again the sharp drop occurred in the absence of significant news, at the COMEX open, involving roughly the same volume (a little over $1.5 billion in notional paper gold) and exactly one-week to the hour from the last paper dump April 16th. We note also that the dollar moved sharply to the upside at the precisely the same moment.
Last time around, we first blamed one or more algo-based trading systems – institutional short sellers attempting to take advantage of a quiet, thinly-traded gold market. We then settled a few days later on the more likely possibility of a paper sale connected to Venezuela’s liquidation of bullion reserves. Whether or not we will repeat the same sequence this time around remains to be seen. We must admit though to starting out in the same place we did a week ago – in a complete quandary. Please stay tuned for further updates if more information surfaces.
Above: Chart of the COMEX open, April 16, 2019, with volumes just after the open.
Below: Chart of the COMEX open, April 23, 2019, with volumes just after the open.
Quote of the Day
“Why does the cycle move as it does? What causes these periodic alternations, this ebb and this flow, in the national priorities? If it is a genuine cycle, the explanation must be primarily internal. Each phase must flow out of the conditions – and contradictions – of the phase before and then itself prepare the way for the next recurrence. A true cycle is self-generating. It cannot be determined, short of catastrophe, by external events. Wars, depressions, inflations may heighten or complicate moods, but the cycle itself rolls on, self-contained, self-sufficient and autonomous. . .The roots of cyclical self sufficiencylies deep in the natural life of humanity. There is a cyclical pattern in organic nature — in the tides, in the seasons, in night and day, in the systole and diastole of the human heart.” – Arthur M. Schlesinger, Jr., The Cycles of American History
Chart of the Day
Chart note: National security advisor John Bolton recently focused attention on the national debt saying that it was “a threat to the society.” The national debt now stands at over $22 trillion and nearly $1.5 trillion was added in 2018. “And that kind of threat,” he added, “ultimately has a national security consequence for it.” An obvious consequence is that interest payments eat up what might otherwise be spent on the national defense. Perhaps that is what has Mr. Bolton worried. As you can see in this final chart of our series on the national debt, there is a strong relationship between growth in the national debt and gold – one that goes all the way back to the early 1970s.
Ever wander into a game against a pro where you should have walked away
“There are practically zero professionals who believe this rally has legs and will continue to blast through to new highs. Want some actual data as opposed to anecdotes? How about this chart from Sentiment Trader that measures hedge fund exposure to the equity market. . .”
USAGOLD note: A sobering look at the current stock market psychology and solid accompaniment to the post immediately below >>>>>>
“Today the United States sits in the midst of the largest wealth bubble in post-World War II history, as measured by household net worth (or wealth) relative to gross domestic product. As I showed in detail recently in the Journal of Business Economics, only two other postwar bubbles come close, with peaks in 1999 and 2006, just prior to the tech stock crash and the Great Recession.”
USAGOLD note: The headline above says it all. The investing public is in a peculiar place. By and large, it believes the assertions of analysts like Eugene Steurle, yet there has not been a mass migration out of the stock market. The prevailing attitude seems to be summed up in a thought process that goes something like this: “When the time comes, I’ll get out and get out fast. Until that time comes, I’m going to ride the wave.” Such thinking is based on a number of false assumptions but none more basic than believing that markets will be rational when that day arrives, particularly when investors will be faced with deflation of the largest wealth bubble since World War II. An ounce of prevention, as the saying goes, is worth a pound of cure.
“When Roger Williams got his turn at the microphone earlier this month, his question for the bank CEOs lined up before the House committee on financial services seemed an unusual one to put to seven sharp-suited financiers. ‘Are you a socialist or are you a capitalist?’ the Texas Republican asked each of them, from Citigroup’s Mike Corbat to David Solomon of Goldman Sachs. None struggled to assure him of their free market bona fides, but the fact the question was even asked reflected a remarkable change in the discussion about business in Washington and beyond in recent months.”
USAGOLD note: Whodathunk? Now as younger people of voting age embrace socialism (Gallup puts that number at 51%.) some on Wall Street are beginning to get concerned. Those with a positive view of capitalism amount to just 45% in the 18 to 29 year old grouping. These trends if they gain political momentum, and that is the fear according to this Financial Times article, ultimately will translate to higher taxes, more government spending, and looser Fed policies. In the end, opening the floodgates on socialism equates ultimately to opening the floodgates on money printing and, in that context, the floodgates on gold ownership. For those who like to stay on top the trends, this article is a must read.
Daily gold and silver price history
1968 to present
Our Daily Gold and Silver Price History pages are among the heaviest traffic pages at the USAGOLD website. The archived data is licensed from the ICE Benchmark Administration and the London Bullion Market Association and Netdania Creations and run from 1968 to present. FOREX prices for the day are posted as a live feed and then frozen at the end of each trading day. These pages are frequented by data gatherers of all descriptions from professors and their students to market professionals and investors – all interested in gold’s price performance both over the long run and within specific time constraints for their own research purposes.
Daily Gold and Silver Price History is another of the quiet pages at USAGOLD that garners significant global interest particularly when the market is moving or breaking news warrants more than average interest. We also invite you to return here regularly – to this Live Daily Newsletter page – for up-to-the-minute gold market news, opinion, and analysis as it happens.
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Daily gold and silver price history pages
“The success of Berkshire teaches us a couple of lessons: First, you must have a process for deploying capital in which you have a high degree of justified confidence; and second, you must be comfortable holding onto a position that isn’t working and possibly looking stupid, perhaps for years, as you wait for the cycle to turn. That’s enough to humble any mere mortal.”
USAGOLD note: In other words, successful investing amounts to a leap of faith combined with good amount of patience. . . . .
Repost from 2-25-2019
“The Federal Reserve’s San Francisco outpost recently released a report caroling the virtues of negative interest rates. Now its president — a certain Mary C. Daly — suggests the Federal Reserve could put quantitative easing on permanent market duty. That is, quantitative easing would attain general status — not restricted to emergency use only.”
USAGOLD note: Money printing may have become to financial markets and the economy what drugs are to the addict – a dependency difficult to reverse.
Repost from 2/12/2019
“Just as the stunning stock turnaround this year is boosting investor confidence, a ‘critical variable’ is now flashing warning signals—U.S. consumer confidence is starting to fall at rates not seen since the financial crisis. In a trillion-dollar economy where about 70% of activity is driven by consumption, that’s not a good sign and poses a major threat to the 10-year bull market.”
USAGOLD note: This report on consumer confidence falls in line with concerns that we might be headed for a recession and perhaps one of the first signs that we are already in dangerous territory.
Repost from 4-16-2019
Real Investment Advice/Jesse Colombo
“A very dangerous fallacy has taken the world of economics by storm over the last several years: the idea that there is very little inflation in the U.S. economy, therefore interest rates should remain at unusually low levels for an even longer period of time. As I will prove in this piece, the people who believe in the ‘low inflation’ myth are being fooled by the fact that inflation in this unusual, central bank-driven economic cycle is concentrated in asset prices rather than in consumer prices.”
USAGOLD note: And that fact of life raises all sorts of questions – about future central bank policy, about the future conduct of investors, about the future of price inflation, about the relationship between the White House and the Fed. Colombo says we have reached “a dangerous bubble in U.S. household wealth.” He says the bubble is going to burst and cause an economic depression. . .and the way things are going – the current trends so solidly in place – we find that opinion worthy of our readers’ attention.
Repost from 4-16-2019