Author Archives: Daily Market Report

Gold pushes steadily higher in advance of today’s Fed meeting

(USAGOLD – March 19, 2019) – Gold pushed steadily higher overnight in advance of today’s Fed meeting – up $7 at $1310.  Silver is up another 8¢ this morning at $15.42. The advance which began in Asia carried over to European trading and the open in New York.  It’s principal influence remains an anticipated dovish result to the meeting on two fronts – the direction of interest rates and an announcement of a time certain for ending the Fed’s quantitative tightening program. 

In a report that asks if the world is running out of gold,  Germany’s Deutche Welle answers with a quote from CFRA researh analyst Matthew Miller:  “The largest and most prolific reserves have already been found. Gold miners are struggling to grow reserves in line with their production.” John Ing, an analyst at Canada’s Maissons, offers a different take on the situation. “Finding gold is a function of the gold price,” he says. “There is no shortage of gold in the world but just at this price there is a shortage. It’s quite possible that gold will be $2,000 per ounce, you will see a rush of exploration and more deposits being found.” 

Quote of the Day
“If you could go back to 2007 would you really choose these policies again? Had they been used as short-term shock therapy only, the central bankers might have got away with it. As it is they now made our economies more dysfunctional than ever – and, worse, they can’t find a way out. . .They helped get us into this. They are not having much luck getting us out. But our elected governments have still ceded such enormous power over our financial system to them that we have no choice but to listen to their every word – if we want to have a chance of figuring out how the next (inevitable) crisis will play out, that is. Of all the things that have happened since 2007 that, I think, is the one that makes the least sense of all.” – Merryn Somerset Webb, Editor-in-Chief, Money Week

Chart of the Day

Chart note: This quarterly chart zeroes-in on why the national debt matters to ordinary Americans. Rising interest rates and massive growth in the gross debt will push these numbers much higher – so much so that it will exceed in the near future what the nation spends on national defense. . . .and the higher interest rates grow the greater the problem will become. One would think that like Italy or Greece, at some point, the level of debt and interest payments will affect the national credit rating. Last, please note the acceleration in debt payments over the last twelve months (the last bar represents Q3-2018).

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

A 42% surge in India’s gold bar imports

Scrap Monster/3-18-2019

“The combined gold bar imports during the initial eleven-month period of the current fiscal year totaled $7,183.02 million. The imports surged higher significantly by 41.80%, upon comparison with the imports that had totaled only $5,065.71 million during the corresponding eleven-month period of the previous fiscal year.”

USAGOLD note:  About a month ago, reports were circulating that investment gold demand would drop in India due to increasing acquisition prices in rupiah terms.  We questioned that assumption saying that the increase seemed small when compared to the concern Indians might have about the future value of their currency.  It turns out we were right on that score. Bullion sales are up 42% over the past eleven months in India as investors move to protect their assets against further depreciation of the rupiah.

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Gold edges higher to start Fed Week

(USAGOLD – March 18, 2019) – Gold is off to a positive start on the week trading at $1305.50 and up $3 on the day.  Silver is up 11¢ at $15.38.  With the Federal Reserve Open Market Committee meeting tomorrow and Wednesday, this morning’s upside is something of a victory for the yellow metal in that Fed Week is typically spent trading sideways to down. 

The Wall Street Journal this morning ran an article with the headline “Fed is likely to signal rate boost isn’t near” which summarizes pretty much where Wall Street stands on the meeting. Adding to that assessment, Wall Street Journal Fed reporter Nick Timiraos offered this insight in Saturday’s edition:  “New York Fed President John Williams, Fed governor Lael Brainard and Mr. Clarida, who are often in sync with Fed Chairman Jerome Powell, have all made recent statements compatible with this assessment by underscoring the need for a very cautious approach right now.” In doing so, Timiraos somewhat surprisingly enters Powell’s name on a list of Fed players known for their dovish sentiments.

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

Chart of the Day

Chart courtesy of HowMuch.net

Chart note: As you can see, after the United States and China, GDP for the rest of the nation states falls off quickly. Japan is a distant third and Germany an even more distant fourth. The European Union as a whole even without the United Kingdom, however, would replace China as number two if counted as a whole. This visualization drives home what’s at stake in the trade war between the United States and China. It involves the two largest economies in the world by far and nearly 40% of the global economy.

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Gold-buying trends show fragile European sentiment

Investment Week/Alistair Hewitt/3-15-2019

“In 2018, central bank gold buying hit its highest level since 1967, with the likes of Poland and Hungary becoming the first European central banks to significantly increase their gold reserves in more than 25 years. In a survey of 22 central banks YouGov conducted on [World Gold Council’s] behalf last year, 76% cited gold’s role as a safe haven asset as being extremely relevant to their investment. Some 35% of respondents cited political risk as an important motivation for their gold holdings.”

USAGOLD note:  This bodes well for physical gold market fundamentals in the months and years to come – gold’s renaissance as an asset of last resort among global central banks.

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Posted in Today's top gold news and opinion |

Gold speculators lowered their bullish bets for 3rd straight week

Through Tuesday, March 12, 2019
Charts and commentary courtesy of CountingPips.com
Tables courtesy of GoldSeek

Note: Commitment of Traders reports are published Friday with data from the previous Tuesday.


Gold speculators lowered their bullish bets for 3rd straight week

 

Gold Non-Commercial Speculator Positions:

Large precious metals speculators reduced their bullish net positions in the Gold futures markets this week, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on Friday.

The non-commercial futures contracts of Gold futures, traded by large speculators and hedge funds, totaled a net position of 78,819 contracts in the data reported through Tuesday March 12th. This was a weekly decrease of -9,199 net contracts from the previous week which had a total of 88,018 net contracts.

The week’s net position was the result of the gross bullish position (longs) going up by 2,622 contracts to a weekly total of 205,250 contracts but were more than offset by the gross bearish position (shorts) which saw a advance by 11,821 contracts for the week to a total of 126,431 contracts.

The net speculator position has now fallen for three straight weeks and by a total of -66,828 contracts over that period. Despite the recent weakness, gold positions remain in bullish territory and have been above the +75,000 net contract threshold for thirteen straight weeks.

Gold Commercial Positions:

The commercial traders position, hedgers or traders engaged in buying and selling for business purposes, totaled a net position of -108,474 contracts on the week. This was a weekly increase of 5,523 contracts from the total net of -113,997 contracts reported the previous week.

Gold Futures:

Over the same weekly reporting time-frame, from Tuesday to Tuesday, the Gold Futures (Front Month) closed at approximately $1298.10 which was an advance of $13.40 from the previous close of $1284.70, according to unofficial market data.


Silver speculators lowered their bullish bets for a 2nd week

 

Silver Non-Commercial Speculator Positions:

Large precious metals speculators decreased their bullish net positions in the Silver futures markets this week, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on Friday.

The non-commercial futures contracts of Silver futures, traded by large speculators and hedge funds, totaled a net position of 27,082 contracts in the data reported through Tuesday March 12th. This was a weekly decrease of -5,439 net contracts from the previous week which had a total of 32,521 net contracts.

The week’s net position was the result of the gross bullish position (longs) dropping by -771 contracts to a weekly total of 76,183 contracts combined with the gross bearish position (shorts) which saw a lift by 4,668 contracts for the week to a total of 49,101 contracts.

The rise in Silver’s net speculative position is cooling off and has now fallen for two straight weeks and for the fourth time in the past five weeks. Silver bets had climbed out of an overall bearish position in early December to the highest level since November of 2017 on February 26th.

This week’s decline brought the speculative net position under the +30,000 contract level for the first time in eleven weeks.

Silver Commercial Positions:

The commercial traders position, hedgers or traders engaged in buying and selling for business purposes, totaled a net position of -46,261 contracts on the week. This was a weekly gain of 5,980 contracts from the total net of -52,241 contracts reported the previous week.

Silver Futures:

Over the same weekly reporting time-frame, from Tuesday to Tuesday, the Silver Futures (Front Month) closed at approximately $1541.30 which was an advance of $30.80 from the previous close of $1510.50, according to unofficial market data.


US Dollar Index speculators raise bets to a 12-week high


US Dollar Index Speculator Positions

Large currency speculators raised their bullish net positions in the US Dollar Index futures markets this week, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on Friday.

The non-commercial futures contracts of US Dollar Index futures, traded by large speculators and hedge funds, totaled a net position of 35,074 contracts in the data reported through Tuesday March 12th. This was a weekly advance of 1,360 contracts from the previous week which had a total of 33,714 net contracts.

This week’s net position was the result of the gross bullish position gaining by 3,358 contracts to a weekly total of 45,030 contracts which overcame the gross bearish position total of 9,956 contracts that rose by 1,998 contracts for the week.

The net speculator position gained for a second straight week after having dipped in five out of the previous six weeks. The current standing is now at the most bullish level since December 18th, a span of twelve weeks.


*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) as well as the commercial traders (hedgers & traders for business purposes) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators). Find CFTC criteria here: (http://www.cftc.gov/MarketReports/CommitmentsofTraders/ExplanatoryNotes/index.htm).
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As Fed’s QE era ends, a new trillion dollar bond dilemma emerges

Bloomberg/Liz McCormick and Alex Harris/3-15-2019

“While Fed officials have made it clear they want to go back to owning mostly Treasuries, as they did before the financial crisis, it’s unclear how the central bank will get there or what it will buy. Its current policy, replacing mortgage bonds only when they mature, could take a decade or more. That’s led some to advocate outright sales, which the Fed has never done.”

USAGOLD note: This article raises some interesting questions on future Fed policy with respect to unwinding, or not unwinding, the deep pool on the asset side of its balance sheet.

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Posted in Today's top gold news and opinion |

DMR–Gold in recovery mode on China trade progress, chart technical support

(USAGOLD – March 15, 2019) – Gold is in recovery mode this morning following yesterday’s sell-off – trading now at $1303 and up $7 on the day. Silver is up 16¢ at $15.33. Gold began its rebound in early Asian trading, stayed steady during the European session, then leveled off in New York.  The rebound in Asia coincided with a report published in the South China Morning Post that the US and China had made “concrete progress” on a trade agreement in a telephone conversation between Chinese Vice-Premier Liu He,  U.S. trade rep Robert Lighthizer and Treasury Secretary Steve Mnuchin.

Technical traders might see gold’s consolidation and support at the $1295 level as a hopeful sign.  Several days ago, we mentioned gold’s history of taking the stairs up and the elevator down.  Is it now beginning the slow ascent back up the stairs? A quick of review of short-term chart leads us to answer with a strongly-held “Maybe. . . .” We will leave it to the chart technicians to render the final judgment.

Quote of the Day
“. . .[I]f you go down the line of currencies around the world, you don’t find many attractive opportunities. And that’s why I say if the world were to give up on dollars and give up on euros, they’d probably go back to the old standby, which is gold. And I don’t mean by gold, government run gold standard, like we had in the late 19th century. That’s politically impossible. Governments will never be willing to subordinate their policies to the constraints of a hard commodity ever again… So how could gold make a revival as a sort of international money? Well, we don’t actually need a government run gold standard anymore…since people have always had confidence in gold as a long-term store of value, there’s no reason why it couldn’t play that role.” – Benn Steil, Director of International Economics, Council on Foreign Relations

Chart of the Day

Chart note: “The figure,” say the authors of this study published by the St. Louis Federal Reserve, “shows that the uncertainty shocks that hit the economy in the fourth quarter of 2018 and in the first quarter of 2019 (January) have been the largest during our sample period. Based on the framework we use, this finding has potentially ominous implications for the U.S. economy.”  A fitting chart for the Ides of March 2019. . . . . . .


Laura E. Jackson, Kevin L. Kliesen, and Michael T. Owyang, “A Bad Moon Rising? Uncertainty Shocks and Economic Outcomes,” Economic Synopses, No. 6, 2019. https://doi.org/10.20955/es.2019.6
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Gold sells off in Asia and Europe, steadies in U.S.

(USAGOLD – March 14, 2019) – Gold sold off steadily during Asian trading hours on weakness in both China’s yuan and Japan’s yen. That weakness in turn is the result of economic stimulus policies sponsored by both countries’ central banks.  In addition, reports that U.S.-China trade talks had stalled did not help matters. The downside picked up some momentum in London trading on a House of Commons vote rejecting a “no-deal Brexit.” The developing European economic crisis, as a result, appears tabled for the moment – at least that part of it inspired by Britain’s leaving the Union. That, however, could all change in a heartbeat. Gold steadied at the New York open, but it did not improve.  It is off $12 at $1298 in early trading.  Silver is off 21¢ at $15.25. 

Quote of the Day
“Gold is scarce. It’s independent. It’s not anybody’s obligation. It’s not anybody’s liability. It’s not drawn on anybody. It doesn’t require anybody’s imprimatur to say whether it’s good, bad, or indifferent, or to refuse to pay. It is what it is, and it’s in your hand.” – Simon Mikhailovich, Tocqueville Funds

Chart of the Day

Chart note: This long-term chart on the annual average price of gold since 1970 dispels the notion that gold is somehow volatile or unpredictable and as a result unreliable as a long-term portfolio safe haven. To the contrary, it shows gold living up to its reputation as a portfolio safe haven during times of rapidly changing economic circumstances.

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Gold moves higher on Brexit, emerging global stimulus programs

(USAGOLD – March 13, 2019) – Gold moved higher in international markets for the second straight day – up $6 at $1308. Silver is up just 2¢ at $15.47.  Gold climbed steadily in Asian trading overnight in a carryover response to yesterday’s Brexit defeat in the House of Commons for the May goverment and a more dovish position on rates and the Fed’s balance sheet reinforced over the weekend by Jerome Powell during a 60-Minutes interview. The dollar has been in a modest, but steady, slide since last week. 

Gold broke from its lethargy last Friday when the European Central Bank’s Mario Draghi warned of weakening European economy and announced new measures to prop up the banks.  The Peoples Bank of China has also moved to stimulate a lagging economy.  Growing concern about a global slowdown, in short, has driven capital in the direction of gold as a safe haven.

Quote of the Day
“For we have reached a critical point. In a sense, it is true that the mists are lifting. We can, at least, see clearly the gulf to which our present path is leading. Few of us doubt that we must, without much more delay, find an effective means to raise world prices; or we must expect the progressive breakdown of the existing structure of contract and instruments of indebtedness, accompanied by the utter discredit of orthodox leadership in finance and government, with what outcome we cannot predict.” – John Maynard Keynes, The Means to Prosperity (1933)

Chart of the Day

Charts courtesy of TradingEconomics.com

Chart note: These four charts show the central bank balance sheet debt holdings of the top four largest economies – the United States, China, Japan and the European Union. Together the four central banks hold an astonishing nearly $17 trillion in debt instruments, and not all are of the highest quality. The US Federal Reserve is in the process of trimming its balance sheet, but that process is expected to come to a halt before the year is out. The European Central Bank was scheduled to begin reducing its holdings later this year, but then altered course again just last week. The Bank of Japan, for its part, says it will continue with its acquisition program as long as it deems necessary.  Though China marginally reduced its balance sheet over the past few months, recent weakness in its economy may force the central bank to put further reductions on hold.

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Afternoon Update

(USAGOLD – March 12, 2019) – Gold pushed back over the $1300 mark today with an $8.50 gain to stand at $1301 in late afternoon trading. Silver is up 14¢ at $15.44.  Gold gained early in the day on the weaker inflation data from the Labor Department. It got another push later in the day on the news that UK’s parliament rejected the Brexit arrangement the May government negotiated with Brussels. Gold’s current assault on the $1300 level began last Friday on expectations that the major central banks were going dovish to varying degrees on monetary policy to counter a softening global economy.  That sentiment underpins all else in the gold market at the moment.

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No DMR today. . .

. . . but please check back.  We may post an update later.

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Atlanta Fed slashes GDP growth prediction to near zero

NewsMaxWires/Staff/3-11-2019

“The U.S. economy will barely grow in the first quarter, based on data on domestic construction spending in December released on Monday, the Atlanta Federal Reserve’s GDPNow forecast model showed. The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2019 is 0.2 percent on March 11, down from 0.5 percent on March 8.”

USAGOLD note:  What is troubling about the numbers that are now coming out is how quickly things have eroded. . . .from good to great to good to plain awful.

 

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Gold off to quiet start for the week

No DMR today 3-12-2019.  Please check back though.  We may post an update later.


(USAGOLD – March 11, 2019) – Gold gave back a small portion of Friday’s gains this morning as the week got off to a quiet start – moving off the $1300 mark to trade down $1.50 at $1297.50.  Silver is level on the day at $15.30.  The slowdown in global growth continues to be the headline story for markets today.  For the most part, though, there is not much in the way of news of interest to the gold market at the New York open. We will post later in the day if things change.

Quote of the Day
“Nobody knows what would happen if Britain’s LCH or Germany’s Eurex Clearing came under stress. They have thin layers of capital compared to banks. Before the 2008 crisis most derivatives were cleared by trading parties in direct dealings. The G20 shift has lifted the share of CCPs [central counterparties] for interest rate derivatives from 20 to 60 percent. The effect is to concentrate risk. The BIS warns that the system may encourage a rush for the exit in events of extreme stress. The International Monetary Fund has also flagged the dangers. It warned this year that CCPs ‘increase the risk of a failure of the infrastructure itself’ and could lead to a ‘catastrophe’ if the all layers of defense were overrun by a big default. It would be like the failure of the Maginot Line.” – Ambrose Evans-Pritchard, BIS warns of seizure at heart of financial clearing system

Chart of the Day

Chart note: The chart on gold and silver since September of last year is an impressive one even with the recent correction factored into the equation. Gold is up 8.5% and silver is up 9% as of last Friday’s close.

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AFTERNOON UPDATE–Gold approaches $1300 on Chinese market fears, weak U.S. jobs data

MarketWatch/Myra Saefong and Rachel Koning Baels/3-8-2019

“Gold was ‘clearly reacting to the jobs numbers, but this is too obvious,’ said Jeff Wright, executive vice president of GoldMining Inc. ‘In my opinion, gold is responding to the weekly downtrend in the U.S. equity markets along with U.S. dollar weakness [Friday] across the major currencies.’”

USAGOLD note:  To that, we will add concerns about the general global trend toward economic weakness as pointed out in this morning’s DMR.  It will be interesting to see how Asia opens late Sunday.

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U.S. payrolls shock suggests dawn of a long-forecast slowdown

Bloomberg/Katia Dmitrieva and Carlyann Edwards/3-8-3019

“The U.S. labor market may not be as weak as February’s payrolls number suggested, but the report provides a reality check that a long-forecast slowdown is arriving.”

USAGOLD note:  Echoes of this morning’s DMR. . . . . . . . .

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Gold reverses engines, moves sharply higher

(USAGOLD – March 8, 2019) – Gold reversed its engines this morning and moved sharply higher – rising $13 to the $1299 level.  Silver followed suit – up 18¢ at $15.27.  Suddenly, investors are returning to a safe-haven mindset following reports of abrupt slowdowns in both China and Europe. Central banks in both states have moved quickly to announce stimulus measures and support for their banking systems.  Those measures, rather than instilling confidence in the markets, created a sense that the oft-predicted global slowdown might actually be in its early stages. Adding to concerns, the U.S. Labor Department reported an anemic payrolls increase of 20,000 – a number far short of the 180,000 increase expected. Gold began its rise during Asian trading hours and gained momentum at the New York open when that report came public. Technical analysts have been eyeing the $1275-1285 price level as a support zone for gold and that is where the overnight buying materialized.

Quote of the Day
“There are those who are persuaded that some new price-enhancing circumstance is in control, and they expect the market to stay up and go up, perhaps indefinitely. Then there are those, superficially more astute and generally fewer in number, who perceive or believe themselves to perceive the speculative mood of the moment. They are in to ride the upward wave; their particular genius, they are convinced, will allow them to get out before the speculation runs its course. They will get the maximum reward from the increase as it continues; they will be out before the eventual fall. For built into this situation is the eventual and inevitable fall.  Built in also is the circumstance that it cannot come gently or gradually. When it comes, it bears the grim face of disaster. That is because both of the groups of participants in the speculative situation are programmed for sudden efforts at escape.” – John Kenneth Galbraith, A Short History of Financial Euphoria, 1990 (With thanks to John Hussman, Hussman Funds)

Chart of the Day


Charts courtesy of TradingView and BullionRates.com

Chart[s] note: “The countries with the highest country risk,” says analyst Daniel LaCalle of Thinking Heads Agency, “are also those that have abused most of the financing of public spending by the central bank through the printing of currency. Argentina has a higher country risk than apparently more fragile economies due to the constant refusal on the part of the successive governments to adopt a prudent monetary policy and to defend the purchasing power of the currency.” As economies around the globe weaken, the temptations presented by the monetary printing press will become increasingly difficult to resist. In each instance, domestic gold demand is likely to rise as a consequence.  It is usually only a matter of time until the price in that currency follows suit.  The two short-term charts shown above illustrate the process.

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Gold, silver looking to consolidate at current levels

(USAGOLD – March 7, 2019) – Gold and silver are looking to consolidate at current levels – $1285 and $15 respectively – but one would have to say that the jury is still out whether or not the reversal that began at the $1345 level has fully run its course. Sierra Alpha Research Chief Strategist David Keller is one technical analyst who sees gold as “attractive” at current prices having moved slowly over the past few months from “weakness to strength.” In a Bloomberg presentation yesterday, he said that gold looks “attractive” if it can hold above the $1275 Fibonacci support level.  As it is, gold has traded down eight of the last ten trading sessions and it is down $3 in today’s early going at $1284.  Silver is down 8¢ at $15.04.

The ECB’s Mario Draghi today announced a weakening European economy and still another lending program for troubled European banks.  The euro promptly hit the skids against the dollar. The response in the gold market thus far has been a mixed bag.  While a weakened euro is likely to hurt gold, increased physical safe-haven demand is likely to help it as European investors move to safeguard their assets. In short, quantitative easing is alive and well in Europe and perhaps a portent of things to come in other parts of the world experiencing the same economic weakness.

Quote of the Day
“I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.” – John Maynard Keynes, 1946

Chart of the Day

Chart courtesy of the World Gold Council (Click to enlarge)

Chart note:  “Gold is a liquid asset,” says the World Gold Council, “ranking at levels comparable to many global stock markets as well as currency spreads. Its liquidity is often sourced during periods of stress in the markets, one of its appealing qualities.”

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Gold clings to $1285 price level unmoved by unsettling trade gap report

(USAGOLD – March 6, 2019) – Gold found itself clinging to the $1285 mark for the second day in a row at the New York open – down $3 on the day.  Silver is down 4¢ at $15.11.  Other markets find themselves in similar straits with stocks, commodities and bonds all trading indecisively early.  The Commerce Department this morning reported a $621 billion trade deficit for 2018 – the largest since the 2008 financial crisis. For December the trade gap was $59.8 billion with China accounting for $38.7 billion of it. If the tariffs are having an effect, it is buried somewhere in those numbers. Seemingly unmoved by the unsettling trade report, gold thus far today remains stuck in the technical sell-off that began last Friday.


Chart courtesy of TradingEconomics.com

Quote of the Day
“The population of the world is increasing at the rate of five thousand four hundred every hour. A small percentage of these people will become gold hoarders, people who are frightened of currencies, who like to bury some sovereigns in the garden or under the bed. Another percentage needs gold fillings for their teeth. Others need gold-rimmed spectacles, jewelry, engagement rings. All these new people will be taking tons of gold off the market every year. New industries need gold wire, gold plating, amalgams of gold. Gold has extraordinary properties which are being put to new uses every day. It is brilliant, malleable, ductile, almost unalterable, and more dense than any of the common metals except platinum. There’s no end to its uses. But it has two defects. It isn’t hard enough. It wears out quickly, leaving itself on the linings of our pockets, and in the sweat of our skin. Every year, the world’s stock is invisibly reduced by friction. I said that gold has two defects…The other, and by far the major defect, is that it is the talisman of fear. Fear, Mr Bond, takes gold out of circulation and hoards it against the evil day. In a period of history when every tomorrow may be the evil day, it is fair enough to say that a fat proportion of the gold that is taken out of one corner of the Earth is at once buried again in another corner.” – Ian Fleming, Goldfinger

Chart of the Day

Chart note: Popular belief holds that foreign investors and central banks hold the lion’s share of the nearly $22 trillion federal debt. These charts from the St. Louis Federal Reserve tell the real story. Though it has not always been the case, private domestic investors now hold the largest share of the national debt at $13.1 trillion. Foreign investors are number two at $6.2 trillion. Federal Reserve banks are number three at $2.8 trillion. As you can see, federal debt held by private investors is on an ascending curve while both foreign and Federal Reserve banks’ purchases have leveled off. At present, private investors hold more than half the national debt (59.3%) as shown in the pie chart at the very top. Foreign investors hold 28.1% of the U.S. federal debt.

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Gold pushes still lower, Goldman still bullish on the precious metals

(USAGOLD – March 5, 2019) – Gold pushed still lower this morning shaving another $4.00 off the price to trade at $1283.50.  Silver is level on the day at $15.10.  We will stick with our earlier contention that two primary factors influenced the sell-off –  algo-based, technical trading having to do with resistance near the $1350 mark, and a resurgence of stubborn disinflationary tendencies in the overall economy and the Fed’s publicly stated position that it would delay enacting policies to deal with it until the third quarter of the year. Goldman Sachs is out with a report this morning that it has turned cautious on the commodities complex after many months of touting their upside. Commodities, it says, are “no longer significantly undervalued relative to their current fundamentals.” Having gone sour on commodities in general, Goldman remains bullish on gold and silver according to this morning’s Bloomberg Open report.  The firm revised its six and twelve-month gold forecasts to $1400 and $1450 respectively based on a weakening dollar and ramped-up geopolitical tensions.

Quote of the Day
“Picture yourself and your loved ones in the midst of a howling blizzard that lasts several years. Think about what you would need, who could help you, and why your fate might matter to anybody other than yourself. That is how to plan for a saecular winter. Don’t think you can escape the Fourth Turning. History warns that a Crisis will reshape the basic social and economic environment that you now take for granted.” – William Strauss & Neil Howe, The Fourth Turning [1997]

Chart of the Day

Chart note: “Central bank net purchases reached 651.5t in 2018, 74% higher year over year,” says the World Gold Council in its year-end gold demand report. “This is the highest level of annual net purchases since the suspension of dollar convertibility into gold in 1971, and the second highest annual total on record. These institutions now hold nearly 34,000 tonnes of gold. Heightened geopolitical and economic uncertainty throughout the year increasingly drove central banks to diversify their reserves and re-focus their attention on the principal objective of investing in safe and liquid assets.”

 

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Gold sheds another $9 as funds retreat from inflation bets

(USAGOLD – March 4, 2019) – Gold shed another $9 this morning to trade at $1284.  Silver is down 13¢ at $15.10.  The Wall Street Journal may have put its finger on the problem for precious metals this morning in a piece headlined “Investors Pull Back Inflation Bets.”  Though the piece centered on Treasury inflation protected securities, or TIPS, some money managers put gold and silver in that same category. Hence the fund-led paper market sell-off in precious metals over the past several days.

At the same time, as inflation moves down the worry list, disinflation and deflation move up – a sentiment change of which the Fed is well aware, according to the article. The central bank, it reports, is now interested in allowing inflation to go over its target levels in order to assure investors that deflation is not in our collective futures. We are reminded in this context that disinflation fueled the 2008 systemic meltdown and that gold subsequently rose more than 250% as investors around the world embraced it as a safe haven and portfolio insurance.

Quote of the Day
“Were Keynes alive today, he would likely be arguing along with German Chancellor Angela Merkel for more monetary discipline and a return to a more balanced international system. No doubt, however, his neo-Keynesian acolytes would be dismissing his concerns as hopelessly outdated and reactionary. Keynes was an economic theorist, but he was also a clear-eyed market analyst, and a passionate and committed speculator for his own account and for Cambridge University. If he took in today’s economic vista of near-zero interest rates and quantitative easing, it is clear that he would be buying gold hand over fist—regardless of what his disciples might think.” – Richard Hurowitz, Octavian Report (in a Wall Street Journal editorial published September 2015)

Chart of the Day

Chart courtesy of GoldChartsRUs/Nick Laird

Chart note: This interesting chart on consumer prices from 1550 to present shows the direct relationship between declining purchasing power in the British pound and the sterling price of gold after 1931, the year Britain departed the gold standard. Prior to 1931, there was an occasional minor bump higher in the price of gold, as you can see, but for the most part it followed along the same flat line as consumer prices. It was only after Britain separated the pound from gold in 1931 that gold showed its true colors as portfolio defense against a depreciating domestic currency. The metal’s price moved significantly higher after 1971 when the Bretton Woods agreement was abandoned and currencies and gold were allowed to move freely in international markets. The real lesson in this chart is that when a nation-state moves away from gold-backed to fiat money, gold coins and bullion become a logical and worthwhile alternative for citizen-investors – even after centuries of relative price stability.

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A few words on Friday’s selloff

SATURDAY UPDATE

(USAGOLD – March 2, 2019) – When first viewing the chart shown below, the eye immediately wanders to the right and the vivid red lines describing the last few days’ drop.  While doing so, however, the discerning eye cannot help but note the strong upward trajectory preceding it.  Though gold took a significant hit on Friday, it is still up about 6.5% from the August-September lows. Leveraged speculators who bought in the trough are understandably taking profits at what has been resistance in the past. That profit-taking developed into a broader liquidation that sent the market into a tailspin.

In Friday’s DMR, we mentioned gold liking to take the elevator down and the stairs up. The chart below offers a telling illustration of the process. At the same time, since the 2008 financial crisis, hedge funds, financial institutions and central banks capable of deploying huge amounts of capital quickly have become a strong and consistent presence in the market. A good many in that group like to buy the dips.  Abrupt turnarounds, like the one this past November, have been the result. We at USAGOLD work with investors all the time who like to buy on weakness as well. We suspect, based on past experience, that activity among that group will begin to pick-up as of Monday.

Repost from 3-2-2019

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Gold continues rapid slide, trading now near previous support

(USAGOLD – March 1, 2019) – Gold continued its rapid slide toward the $1300 level this morning.  It is now trading at $1305 and down $9 on the day.  Silver is down 19¢ at $15.44.  Less than two weeks ago it was probing the $1345 level and two days ago it was attempting to hold its own at the $1330 level. The decline has been swift. As the old saying goes: Gold likes to take the elevator down and the stairs up. The market continues to be influenced primarily by technical factors in combination with a Federal Reserve policy that appears in practice to be more restrictive over the near term than what was projected in theory just a couple of weeks ago.  In the recent past gold has found short-term support near the $1300 level. We could find out as early as today whether or not buyers are going to materialize at that level.

Quote of the Day
“Most serious accidents have multiple causes. A series of mistakes or pieces of bad luck line up to allow disaster. The Torrey Canyon was hampered by an unforgiving schedule, barely adequate charts, unhelpful winds and currents, confusion over the autopilot, and the unexpected appearance of fishing boats in the intended course. But reading Richard Petrow’s contemporary account of the Torrey Canyon disaster, a clear lesson is that Capt Rugiati was too slow to adjust. He had a plan, and saw far too late that the plan was doomed to failure — and with it, his ship.” – Tim Hartford, Financial Times columnist

Chart of the Day


(Interactive chart)

Chart note: This interactive chart compares price appreciation for gold and the dollar index. Gold has consistently outperformed the dollar in twelve of the last eighteen years – a formidable record. Even if one were to add in average yields on dollar-based investments, gold still comes out the clear winner in those twelve years. Gold had an off-year in 2018 – down 1% while the dollar was up almost 7%. Given the performance record, though, contrarian investors might see the present disparity as a buying opportunity.

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Gold surges in Asia, falls back in New York; Romania contemplates gold repatriation

(USAGOLD – February 28, 2019) –  Gold made a fairly strong move to the upside in overnight trading on the announcement that talks had broken down between the United States and North Korea reaching the $1327 level.  It then ran into a wall of selling at the New York open (once again) and fell back to $1320 where it is trading as we post this report.  Silver is down 5¢ at $15.70.  The sharp drop in gold is coincident with an equally sharp rise in the dollar giving credence to the notion that geopolitical events in Asia – trade and military – are pushing capital in the greenback’s direction. The better than expected GDP number announced this morning is also playing a role in gold’s pricing in that it puts interest rate increases back into the mix.

On a more fundamental note, Bloomberg reports Romania is contemplating repatriation of 61 tonnes of gold deposited at the Bank of England.  If the relocation proceeds, Romania will join a list of countries that have decided to repatriate their gold reserves which includes Germany, Austria and Hungary – among others.  The rehabilitation of gold as a national asset has become one of the primary factors underlying gold’s price resurgence since 2016.

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 1: Sometimes the facts just get in the way. Though China might be tempted to choose devaluation as a tactic in the trade war, it creates other problems for the country that it has tried to avoid in the past – most notably capital flight. The fact of the matter is that China has chosen to do just the opposite. It has kept the yuan in a tight band against the U.S. dollar and sold from its pool of U.S. Treasuries as a means to stabilizing its currency. Since 2014 China’s foreign exchange reserves, as a result, went from nearly $4 trillion to just above $3 trillion since 2014. Meanwhile, the yuan has traded in a narrow channel between 14.5¢ and 16.5¢.

Chart note 2: PBoC governor Yi Gang has stated repeatedly and unambiguously that China “will not engage in competitive devaluation, and will not use the exchange rate as a tool to deal with trade frictions.” Part of the narrative behind the dollar’s strong showing of late has been concern that China would ‘weaponize’ the yuan in the trade war. If China is successful in keeping the yuan within a band, it will indirectly offer a helping hand to gold.

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Trump walks away from deal with North Korea’s Kim over sanctions demand

Reuters/Jeff Mason and Josh Smith/2-28-2019

“U.S. President Donald Trump said on Thursday he had walked away from a nuclear deal at his summit with Kim Jong Un because of unacceptable demands from the North Korean leader to lift punishing U.S.-led sanctions.”

USAGOLD note:   The U.S. also surprised Kim Jung Un with U.S. knowledge of previously unpublicized nuclear weapon facilities in North Korea.  At first blush, it seems a considerably larger gap exists between the two parties than commonly understood before today’s developments.  The financial markets will be concerned with the possibility of a return to the tense situation before the Singapore summit.

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Fed aims to unveil plan to end balance sheet rundown ‘fairly soon’

Financial Times/Sam Fleming/2-27-2019

“Jay Powell has said the US Federal Reserve is close to agreeing a plan to complete the process of reducing its multitrillion-dollar balance sheet by the end of 2019, teeing up an announcement as soon as its meeting next month.”

USAGOLD note:  Zero Hedge passes along a Goldman Sachs report specifying the third quarter of 2019 as the end date for the Fed’s balance sheet run0ff.

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Gold, like the Fed, ‘patient and watchful’ – biding its time

(USAGOLD – February 27, 2019) – Gold climbed back toward the $1330 mark in Asia overnight on a sudden escalation of tension between India and Pakistan. It then leveled off during European trading hours and is now trading at $1327 – down $2.50 on the day. Silver is trading at $15.89  – down 10¢ on the day. Gold held up well yesterday in the face of February options expiration and Congressional testimony from a “patient” and “watchful” Fed Chair Jerome Powell.  The metals’ market, in our view, is likely to read the market’s response to yesterday’s center-stage events as reinforcing the underlying, longer-term upward bias.

As it is, the gold market continues to move sideways within a tight range – biding its time and awaiting the next turn of events. It too is being patient and watchful.  Along these lines, International Adviser published an interesting quote from Merion Global Investors fund manager Ned Naylor-Leyland. “[N]ormalisation in rate hikes and the unwinding of central bank balance sheets,” he says, “has really gone the way of the dodo recently and that is very significant for gold because gold is about hedging your forward-looking purchasing power issues, and generally these things shift in very secular ways . . . But because everybody is a momentum investor now, I think that when it happens it will happen rather quickly because of this herd-like behaviour that you see now in respect to all assets.

Quote of the Day
“We have found that gold typically thrives amid deeper, longer-lasting and fundamentally driven bear markets, which are usually associated with a deteriorating macroeconomic outlook. Alternatively, gold’s performance is usually tepid when equities rise. A good analogy is home insurance: homeowners pay an insurance premium each year hoping the house doesn’t burn down, but if it does you redeem the policy. Here, we see gold’s “insurance characteristics” as becoming increasingly relevant for investors. But even if the insurance is not needed, gold could still offer value. If the US dollar slides (which we expect), emerging economies become wealthier while mining costs increase. Prices could therefore advance irrespective of US inflation, making gold more than just an insurance asset.” – Wayne Gordon, UBS Wealth Management

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.

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Gold stubbornly holding its ground, Mint shuts down silver American Eagle production

(USAGOLD – February 26, 2019) – Gold is stubbornly holding its ground just below the $1300 level this morning – down $1.50 at $1326. Silver is down 2¢ at $15.88.  Technical factors are keeping the downside at bay for gold while uncertainty about the outcome on a bevy of economic and geopolitical concerns keep a check on the upside.  The markets at this juncture, including gold, would be best described as taking a wait and see approach though that might not last.  Fed chairman Powell will testify before Congress today.  The Trump-Kim summit in Viet Nam begins tomorrow.  The United States Mint surprised the gold and silver markets once again with another shutdown of silver American Eagle production late last week – a problem that seems to occur whenever we get a ramp-up in investor demand.  We have options expiration today on the COMEX February contract for both gold and silver, so we could see more downside as the trading session progresses.

Quote of the Day
“While there will always be some standouts, it’s not clear why so many managers can claim sustained superior performance. The basic technology, data and expertise is readily available. Logically, the anomalies that the strategies rely on should dissipate. There is an inherent contradiction in that the approach exploits inefficiencies, but requires market efficiency to realign prices to generate returns. The reality is that any fund managers possessing a magic investment formula guaranteeing low risk and high returns would have no incentive to share the secret. Successful firms such as Renaissance Technologies LLC have closed some funds to outside investors, preferring to capture the returns for themselves. As legendary investor Paul Tudor Jones once noted, if there was a single easy formula to follow, then all investors would already be rich.” – Satyajit Das, Bloomberg opinion columnist

Chart of the Day

Chart courtesy of World Gold CouncilHUB

Chart note: “Tactically,” says the World Gold Council, “gold presents an interesting opportunity. Gold speculative positioning in futures markets remains low by historical standards. While CME-managed money net long positions increased in December 2018, they were at record lows, since data was first broken down by investor type in 2006, earlier in the year. Net combined speculative positions, which go back further, were at their lowest for the first time since December 2001. And in recent years, a large increase in short positions has been followed by a sharp rally in gold as we started to witness towards the end of 2018.”

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Gold gains momentum to start the week

(USAGOLD – February 25, 2019) – Gold steadied in overnight trading then gained enough momentum at the New York open to push back over the $1330 mark – up $4 at $1331.50.  Silver is up 6¢ at $15.96.  The White House decision to hold off on additional tariffs is probably the principal influence in gold’s pricing this morning (The Shanghai Composite Index closed up 5.6%), but underlying that is the solid technical picture that has unfolded over the past several months. All in all, we are off to a relatively quiet start for the week with little in the way of news other than the China trade developments.  We will update later if anything of interest develops.

Quote of the Day
“This flagrant abuse of property rights and the rule of law sent the economy into a deep dive. From 2000 to 2008, real G.D.P. per capita contracted on average by 8.29% per year. During this period, Zimbabwe ran large fiscal deficits financed by printing money and experienced the second most severe case of hyperinflation in history. On November 14, 2008, the annual inflation rate peaked at 89.7 sextillion percent every day, making Zimbabwe’s 100 trillion dollar notes worthless. In the end, the government was forced to scrap the Zimbabwean dollar, because Zimbabweans simply refused to use it.” – Steven Hanke, Zimbabwe’s Monetary Death Spiral, 1-1-2019

Chart[s] of the Day

The price of gold in four of the world’s most troubled currencies





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

Wild week ahead for trade, Brexit, Trump, Kim, Cohen and Fed

Bloomberg/Tony Czuczka/2-24-2019

“Get ready for a wild week. There will be plenty of opportunities for risk to hit markets in the coming days, with heaps of geopolitical news and major economic indicators due to land.”

USAGOLD note:  Stay tuned. If it’s important to gold owners, we will post it.

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Gold attempts to stabilize after yesterday’s steep sell off

(USAGOLD – February 22, 2019) – Gold is attempting to stabilize at just below the $1330 mark after yesterday’s steep sell-off.  It is trading at $1329 and up $2.50 on the day.  Silver, likewise, is up 5¢ at $15.90. The magnitude of yesterday’s decline – about $15 – took many by surprise.  Some saw it as an over-reaction and misinterpretation of the Fed’s clear intention to ratchet down its bond-selling, quantitative tightening program (Please see our Chart of the Day.) Overnight, gold hit a low of $1322 but opened in New York with a push to the upside.

Today could be an important day for gold.  If it manages to stabilize here and finish higher, the stage could be set for another attempt at the $1350 level next week.  In a Wall Street Journal article yesterday under the headline, Wary Investors Reach for Gold, Neuberger Berman’s Hakan Kaya is quoted as saying “A lot of people see a bad moon rising, and if you want to have a downside hedge, gold is the instrument.” If today’s early trend remains intact, gold will finish the week on the plus side despite yesterday’s stiff correction.

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

Chart of the Day

Chart note: Quantitative tightening – the process depicted on the far right of the chart – is progressing now at the fastest pace since its launch in January 2018. At his press conference in late January, Fed chair Powell suggested that the Fed would temper its bond selling program sooner rather than later – a gate opener for both the stock and gold markets in early 2019.

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