Author Archives: Daily Market Report

US tax reform drains more dollars from global economy than Fed

Financial Times/Delphine Strauss/6-20-2018

“US companies repatriating profits drained more dollars from global markets in the first quarter of the year than did the Federal Reserve’s actions to shrink its balance sheet, according to data that suggests embattled emerging markets cannot simply blame the Fed for their plight.”

USAGOLD note:  Interesting factoid to blend into the general analysis. . . . . .

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Gold trading circumspectly this morning, quiet summer day in markets

DAILY MARKET REPORT

Gold is trading circumspectly this morning in and around the $1275 mark and level with yesterday’s closing number. Silver is also running sideways. A statement from Fed chairman Powell that the central bank will stay the course on raising interest rates, which normally might have undermined the price, is balanced with concerns about the intensifying trade war between the U.S. and China. The commodities complex and U.S. dollar are also level on the day with stocks displaying marginal weakness. In short. . .a quiet day summer day in the markets.

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

Chart of the Day

Chart note: When the United States abandoned the gold standard in 1971 and freed currencies to float against one another, the fiat money era began. We are still in that era today. This chart shows the performance of gold from the early 1900s to 1971 when gold backed the dollar, and the era from 1971 to present when it did not. Gold has had its ups and down since 1971, but clearly, over the long run, in the absence of an official gold standard, individual investors have been well-served by putting themselves on a private gold standard, as Mervyn King suggests above.

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Better Business Bureau Five Star Review

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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.

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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.

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DMR–Gold off marginally early, market confusion reigns over crisis in Italy

DAILY MARKET REPORT

Gold is off marginally in early Monday trading at $1297 (-$1.00). Silver is down 11¢ at $16.41. In Europe, gold moved up on concerns about Italy as the political crisis pushed into financial markets, but when the U.S. market opened those gains were wiped out. Spain was pulled into Italy’s vortex and George Soros publicly raised concerns about Europe being on the brink of another major financial crisis. Bond and currency markets were fragile anyway before any of this happened. They are even more fragile now.

Oddly, the dollar too at first gained on the turmoil in Italy, but then, like gold, reversed itself adding to the confusion among market participants. In the era of algo-driven markets, the things that would make gold demand rise, do not always translate to the things that would make the price rise. So, the cautious European who deems it a good time to buy some gold is likely to find that the price today is to his or her liking.

Quote of the Day
“So, we were just chatting away there in friendly conversation and then Volcker walks in, you can’t miss him because I think he’s about six-and-a-half feet tall. So, he walks in and I thought, “well I have to shake his hand and say hello.” He didn’t even look at me. He didn’t come to me. He went straight to his staff and he said, ‘what’s the price of gold?’ So, I thought, ‘gold is important to him’ and I still think it’s every bit as important to Fed people now because it is the ultimate measurement of the dollar. They can rig it and monkey around with it and play games, but ultimately, the market will have its say.” – Ron Paul from a recent Mises Institute Interview with Jeff Deist

Chart of the Day

Chart note: LIke a good many others, we thought that the excess reserves held by commercial banks at the Federal Reserve were a ticking time bomb for inflation. Once the commercial banks began drawing down those reserves, we reasoned, we would finally have the response to quantitative easing so many thought was imminent following the 2007-2008 meltdown. Well, excess reserves have come down almost 28% since their August, 2014 high of $2.7 trillion. It is a mystery though where that capital has gone. The money supply, as reported here recently, is actually shrinking. Inflation, though widely anticipated, has yet to surface in any meaningful way. Instead we remain stuck in the same disinflationary rut that has characterized this economy for more than a decade. So where has the money – some $740 billion – gone? We can only hope some economic sleuth will come along and solve for us The Case of the Missing Excess Reserves.

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Last week’s drop in gold was just a “storm in a teacup” – Clive Maund

Commodity Trade Mantra/Clive Maund/5-23-2018

“Gold’s breach of nearby support last week freaked out some longs of a nervous disposition, but it did no technical damage of any significance, as we can see on our latest 3-year chart shown below on which we can observe that it is still above important supporting trendlines.”

USAGOLD note:  A similar conclusion to the one we posted in our 5-18 Chart of the Day only with considerably more detail and a battalion of supporting charts.  Maund draws one trend line with support at $1260 and a second with support at $1300.  We split the difference on our trend line making $1280 the magic number.  So far it’s held. . . . . . .

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DMR–Gold back below $1290 on mixed market news

Gold dropped back below the $1290 mark in early trading. Silver is up marginally at $16.47. Market news is mixed with the dollar down, bonds steady, the stock market up and Treasury Secretary Mnuchin announcing “very meaningful progress” in the China trade talks. What precisely he means by that remains to be seen, but the stock and gold markets took him at his word – the former rising over 300 points and the latter dropping almost $6 to $1288.50.

Stepping back for a moment, it seems the list of problem areas continues to lengthen even as the White House manages to put a few on hold. The Trump administration has a lot of balls in the air – China, Iran, Europe, Russia and now the emerging countries as a group.  Items on the back burner, as we have seen in the past, can move to the front burner in a very short time frame, and areas seemingly under control can go out of control in a heartbeat.  Markets, including gold, are likely to remain unstable and on a hair trigger.

Quote of the Day
“Carrying on with current monetary policy brings with it the threat of inflation. And given economists’ lack of understanding of either the level of ‘potential’ or the inflationary process itself, it could easily get out of hand. However, inflation is not the only danger. First, debt ratios have been allowed to rise for decades, even after the crisis began. Moreover, whereas before the crisis this was primarily a problem of the advanced economies, it has since gone global. Second, tolerance of risk-taking threatens future financial stability, as does the narrowing of the profit margins for many traditional financial institutions. Third, the misallocation of real resources by banks and other financial institutions is encouraged by this monetary environment. With markets unable to allocate resources properly, due to the actions of central banks, the likelihood that rising debt commitments will not be honoured has risen sharply.” – William White, chairman of the Paris-based economic and development review committee at the Organization for Economic Co-operation and Development.

Chart of the Day

Chart note:  This chart is a follow-up to one posted last week on the performance of gold during the gold standard and fiat money eras.  It compares the performances of gold and stocks since 1971.  A $10,000 investment in gold in 1971 would be worth about $370,000 today. By comparison, a $10,000 investment in stocks in 1971 would be worth about $280,000 today. We should keep in mind too that gold is in the early stages of recovery from  a major sell-off while stocks are trading at all-time highs.

Warren Buffett made a rather noisy argument recently that stocks vastly outperformed gold since 1942.  A $10,000 stock investment in 1942, he says, would have become $51 million by 2018 – a figure that took many by surprise. That phenomenal return rests primarily on the compounding effect of reinvested dividends. What Buffett left out of the analysis, though, is the eroding effect of taxes and inflation.  Had he included it, those returns would have returned to Earth and the discussion on stocks and gold would have returned to the chart shown above.  A comparison between stocks and gold before 1971, when the gold price was fixed at $35 per ounce, is a pointless exercise.

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A bullish signal for gold

Seeking Alpha/Andres Cardenal/4-13-2018

“No system is perfect or infallible, and past performance does not guarantee future returns, so backtested returns should always be interpreted with caution. However, based on the statistical evidence, it makes sense to expect attractive risk-adjusted returns over the long term when selecting the asset classes that are both in upward price trends and outperforming other asset classes.

As of the time of this writing, SPDR Gold Trust ETF is one of the 3 ETFs selected by the system. This is indicating that gold is one of the top-ranked asset classes when considering price trends and relative strength in combination. If history is any valid guide, this bodes well for gold prices going forward.”

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Fed hike set to collide with McCabe firestorm in trying week

Seeking Alpha/The Heisenberg/3-19-2018

“As usual, the chances of the worst case scenario playing out are almost by definition less than the chances of a more benign outcome. But I guess what I would say is that these juxtapositions between monetary policy tightening and heightened political uncertainty seem to be getting increasingly stark as time goes on. My guess is that you’re going to missing Janet Yellen sooner rather than later.”

MK note:  Interesting take on the upcoming week. . . .And the conclusion posted above did catch my attention.  I’m not sure I agree with The Heisenberg, but he provides some food for thought. This week will give us a pretty fair indication where we are headed with the Powell Fed.

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Why stock investors can’t count on a Fed rescue

Investopedia/Mark Kolakowski/2-9-2018

“In the past, the Federal Reserve had tried to stem steep declines in equity prices by cutting interest rates or by postponing planned rate hikes. Called either the ‘Fed put’ or the ‘Greenspan put,’ after former Fed Chairman Alan Greenspan, investors should not expect such an intervention in the near future, The Wall Street Journal reports. The main reasons are, per the Journal, strength in the economy and stock market valuations that are excessive by many historic measures.”

MK note:  This Investopedia heads-up serves as a follow-up to Graham Summers observations posted here yesterday on the so-called “Greenspan put.” As I said in the note to that post: “Causes one to think that it would, in fact, be very difficult for the Fed to both raise interest rates and provide massive injections of liquidity into the financial system at the same time. Such would amount to supporting two different interest rate policies at the same time.”  The important point is that the Fed has backed itself into a corner at this juncture and would have to do a one-eighty in order to bail out the stock market through lower interest rates and greater liquidity.

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Gold down modestly, but rebounded sharply from lows on tariff announcement

LATE REPORT

Gold finished the day today down modestly at $1317 after rebounding sharply off the day’s lows.  Silver logged a similar performance closing at $16.48. The Trump administration precipitated the turnaround with an announcement that it would go through with heavy tariffs on steel and aluminum imports. The Dow Jones Industrial Average therein dropped over 580 points at one point and finished down 420 points on the day.  Volatility rose as did the yield on the 10-year Treasury. Gold jumped $10 off its lows.

That should bring you up to speed on today’s events in a nutshell. If you want more on this very important day, we invite you to scroll through the posts of the past few days.  There’s much here to think about. . . . . .

Quote of the Day
“I want to own commodities, hard assets, and cash. When would I want to buy stocks? When the deficit is 2%, not 5%, and when real short-term rates are 100bp, not negative. With rates so low, you can’t trust asset prices today. And if you can’t tell by now, I would steer very clear of bonds. Just think, Greece will have a budget deficit below 2% of GDP by the time ours grows to 5%-plus. The markets disciplined Greece for its budget transgressions; it’s just a matter of time before they discipline us. I think that time could be starting now with 10-year Treasuries rising to 3.75%, and 30-years to 4.5%, by year-end, and those are conservative targets.” – Paul Tudor Jones, 3-1-2018, Tudor Investment Corporation


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Gold, silver finish the day where they started, stock market drop big news of the day

LATE REPORT

Gold and silver finished the day pretty much where they started at $1319 and $16.42 respectively.  The big news of the day was the stock market’s waterfall drop in the last hour and a half of trading – an event that took many by surprise and set the stage for an interesting day tomorrow. Fed chairman Powell will return to Congress tomorrow likely with both the stock market drop and a lukewarm GDP number on his mind.  A Reuters’ survey of analysts concludes that “Elevated U.S. debt levels and volatility in stocks could boost gold prices above $1,400 longer-term.” Overnight trading is quiet as we put a wrap on the day.

Quote of the Day
“To suppose that the value of a common stock is determined purely by a corporation’s earnings discounted by the relevant interest rates and adjusted for the marginal tax rate is to forget that people have burned witches, gone to war on a whim, risen to the defense of Joseph Stalin and believed Orson Welles when he told them over the radio that the Martians had landed.” – James Grant, Interest Rate Observer




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“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 several days 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.

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Week in Review (Video) June 29, 2017

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Week in Review (Video) June 22, 2017

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Week in Review (Video) – June 6, 2017

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Week in Review (Video) – May 26, 2017

Link to Special Report: A Crisis in the Making and What it Means for Gold

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Week in Review – Special Report: A Crisis in the Making and What it Means for Gold

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Commentary:  Make no mistake, brick and mortar retail is dying.  And while there has been modest coverage of the topic in recent weeks, it has focused more on the dismal earnings and subsequent shellacking of a few retail stocks.  The reality is that this is much, much bigger.  We are in the early stages of a seismic shift in the way goods are purchased – a dislocation that has the potential to unleash far-reaching systemic implications and to profoundly alter the U.S. economy as we know it – from basic employment, to commercial real estate, to the stability of the financial sector and the very same banks brought to the brink during the financial crisis. And whether this takes years to play out or months, the end result is the same: The loss of the two largest employment categories by number of workers, combined with an unparalleled glut of unused commercial real estate, is a crisis in the making.

Anyone who has followed the gold market in recent years knows how it performs in times of crisis.  Yet, like everything else it would seem, analysis of the gold market has become painfully topical of late, laser focused on the next tweet, or headline, or comment from the Fed, that is going to make it move.  The information presented here is a call to dig deeper…to return to the type of fundamental, long-term analysis that fueled prudent (and ultimately well-compensated) accumulators in the early to mid 2000’s.  The writing is on the wall – just as it was back then – for those willing to look for it.

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Week in Review (Video) – May 1, 2017

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Week in Review (Video) – April 21, 2017

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Week in Review (Video) – April 14, 2017

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Week in Review (Video) – April 7, 2017

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Week in Review (Video) – March 24, 2017

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Week in Review (Video) – March 11, 2017

Headlines we just have to talk about: Gold Executives Say Good Assets Are ‘Hard to Come By’ – Bloomberg

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Week in Review (Video) – March 3, 2017

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Week in Review (Video) – February 24, 2017

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Week in Review (Video) – February 14, 2017

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Week in Review (Video) – February 1, 2017

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Week in Review (Video) – January 20, 2017

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Week in Review (Video) – January 13, 2017

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Short & Sweet

Golden notable quotables for 12/29/2016. . .

“First, ‘record levels’ of anything are records for a reason. It is where the point where previous limits were reached. Therefore, when a ‘record level’ is reached, it is NOT THE BEGINNING, but rather an indication of the MATURITY of a cycle. While the media has focused on employment, record stock market levels, etc. as a sign of an ongoing economic recovery, history suggests caution.” – Lance Roberts, Real Investment Advice (Article: Records are records for a reason)


“During November, the UK (London) re-emerged as the main provider of gold to Switzerland, with the Swiss importing 48 tonnes of gold from London. This is the highest monthly gold import flow from the UK to Switzerland since last January. The second largest source of gold flowing into Switzerland during November was Hong Kong which provided 35 tonnes, with the UAE (Dubai) a distant third providing 16 tonnes, and the US sending  just under 12 tonnes to the Swiss.” – Bullion Star

MK note:  An old story. The ETFs are selling.  The Chinese are buying.  The gold is flowing East through the London–Switzerland–HongKong-Shanghai pipeline.  The Chinese buy gold when the dollar price is falling.


“President-elect Donald Trump’s pick for budget chief, Mick Mulvaney, has been an active investor in gold and gold-mining stocks, often seen as a hedge against collapsing currency.The South Carolina Republican congressman has accused the Federal Reserve of debasing the value of the greenback and has praised bitcoin, an alternative currency. He held between $50,000 and $100,000 in precious metals as of the end of 2015, filings show.” – Noah Buhayer/Bloomberg


“Since the rate hike, gold prices have already risen a bit. This trend is on track to continue in the coming year, for a variety of reasons. For one thing, many experts believe as Donald Trump takes office it will strengthen the gold market.His proposed policies are likely to raise the national debt and increase inflation, which historically leads to a rise in precious metal values. There has also been an influx of commodities investments from China, which have driven copper and zinc up in the last few months, and stand poised to do the same for gold.” – Trevor Gerszt, NewsMax Finance


“[G]old has been a better investment than equities in recent times. Since the turn of the millennium, gold has returned over 300%, while the S&P 500 has returned 55.09%. In addition, the MSCI EAFE index, which represents the performance of large-cap and mid-cap stocks across 21 countries consisting of countries in Europe, the Pacific and the Middle East, has lost 5.21% since the turn of the millennium. If anything, the potential slump in gold should be seen an opportunity to add more gold to your portfolio for the long-term.” – Sam Alcock, The London Economic (Article: Why the potential gold slump will be temporary, hence presenting a buying opportunity)

MK note:  The one thing about “potential slumps” is you don’t know when they are going to suddenly end – particularly in the gold market.

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