Author Archives: Daily Market Report

Gold hammered lower on combination of Fed Week and upcoming options expiration

DAILY MARKET REPORT

Today’s sell-off in gold – down as much as $14 at $1193 in early trading – came on the COMEX open and coincided with a major sell-off of foreign currencies across the board led by the British pound. Given the broad circumstances, our best guess is that the downside is a reaction to next week’s Fed meeting. It is a given that the U.S. central bank will raise interest rates by a quarter point. The gold and FOREX markets though are probably registering concern about an announcement, or allusion, to further increases running into 2019. We also have October gold and silver options expiration Tuesday next week. Gold has a history of selling off during Fed Week. It also has a history of selling off at options expiration. Perhaps the combination of the two – even though October is a light month for futures volume – served as inspiration to the shorts, or perhaps even one aggressive short, to unceremoniously hammer gold lower. As we post today’s report, we see the metal has retraced some of its earlier losses – down now about $10 on the day.

We will update later if more information surfaces.

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

Chart of the Day

Chart courtesy of TradingEconomics.com

Chart note: This chart illustrates how quickly things can swing from placid to nearly out of control. As you see, for six years between 2008 and 2014, the Argentina peso held relatively steady against the U.S. dollar (right scale). Then the wheels came off. Argentina is now seen as something of a poster child for emerging countries debt and currency problems. Those who own gold in Argentina understand the value of laying in the proper hedge ahead of a currency crisis and few would argue with the wisdom offered in our Quote of the Day. Few believe that Argentina’s problems will vanish as quickly as they appeared.

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Posted in dailyquotes |

DMR–Gold hammered lower on combination of Fed Week and upcoming options expiration

DAILY MARKET REPORT

Today’s sell-off in gold – down as much as $14 at $1193 in early trading – came on the COMEX  open and coincided with a major sell-off of foreign currencies across the board led by the British pound.  Given the broad circumstances, our best guess is that the downside is a reaction to next week’s Fed meeting.  It is a given that the U.S. central bank will raise interest rates by a quarter point.  The gold and FOREX markets though are probably registering concern about an announcement, or allusion, to further increases running into 2019.  We also have October gold and silver options expiration Tuesday next week.  Gold has a history of selling off during Fed Week.  It also has a history of selling off at options expiration.  Perhaps the combination of the two – even though October is a light month for futures volume – served as inspiration to the shorts, or perhaps even one aggressive short, to unceremoniously hammer gold lower.  As we post today’s report, we see the metal has retraced some of its earlier losses – down now about $10 on the day.

We will update later if more information surfaces.

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

Chart of the Day

Chart courtesy of TradingEconomics.com

Chart note: This chart illustrates how quickly things can swing from placid to nearly out of control. As you see, for six years between 2008 and 2014, the Argentina peso held relatively steady against the U.S. dollar (right scale). Then the wheels came off.  Argentina is now seen as something of a poster child for emerging countries debt and currency problems. Those who own gold in Argentina understand the value of laying in the proper hedge ahead of a currency crisis and few would argue with the wisdom offered in our Quote of the Day. Few believe that Argentina’s problems will vanish as quickly as they appeared.

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

Gold subdued but inching forward on early signs of sentiment shift

DAILY MARKET REPORT

Gold is up marginally in early trading this morning in a somewhat subdued reaction to a show of strength among the major currencies. The yuan, euro, franc, yen and pound are all notably higher. Gold is up a modest $3 at $1207. Silver is steady at $14.26. Gold’s inching higher is noteworthy nevertheless.

Sentiment seems to be shifting a bit against the dollar and in gold’s favor. China’s public proclamation yesterday in support of the yuan is the chief driving factor. Other early signs have begun to emerge. The bond market decline stands out, as does yesterday’s industrial metals’ rally based, Financial Times tells us, on “robust demand.” (Where did that come from?) In an unusual turn of events, a Bloomberg article this morning offers the possibility that the Fed’s widely expected rate hike next week will present, of all things, a sell signal for the dollar.

“Going into year-end,” says Invesco’s Noelle Corum, “we would expect fundamentals will begin to drive markets again, and this will drive the dollar weaker.’’ Similarly, BNP Paribas’ Momtchil Pojarliev says that “We have a turning point where the dollar is going to weaken” and that the dollar is at the “maximum positive point.”

The way things are shaping up, we could have further news as the day progresses. If so, we will update.

Quote of the Day
“So why gold? People buy gold to protect their savings not because it is rare, yellow or shiny, but because of what it isn’t. Gold isn’t debt, equity or any other financial promise. It doesn’t rely on anyone else’s survival to exist. It can’t be destroyed any more than it can be created at will. Call it the ‘gut level case for gold’ – an urgent, all-consuming need to buy a dumb lump of metal which does so little, it doesn’t even rust, but which people in all ages and all cultures have used to store value.” – Adrian Ash, Bullion Vault

Chart of the Day

Chart note: The collective wisdom on gold has changed over the years. Gold has traveled a long and winding road from abandoned orphan and shunned castaway (the 1990s), to grudgingly respected over-achiever (the 2000s), and finally established portfolio stalwart for millions of global investors (the 2010s). That renaissance is illustrated tellingly by the substantial change in volumes at the COMEX since 2000. The ramped-up volumes are the product of burgeoning demand for gold globally among private investors, institutions and funds. It is the latter two – institutions and funds – that are most responsible for volumes rising to the record levels of the last few years.

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Posted in dailyquotes |

DMR–Gold subdued but inching forward on early signs of sentiment shift

DAILY MARKET REPORT

Gold is up marginally in early trading this morning in a somewhat subdued reaction  to a show of strength among the major currencies. The yuan, euro, franc, yen and pound are all notably higher.  Gold is up a modest $3 at $1207. Silver is steady at $14.26.  Gold’s inching higher is noteworthy nevertheless.

Sentiment seems to be shifting a bit against the dollar and in gold’s favor. China’s public proclamation yesterday in support of the yuan is the chief driving factor. Other early signs have begun to emerge. The bond market decline stands out, as does yesterday’s industrial metals’ rally based, Financial Times tells us, on “robust demand.”  (Where did that come from?) In an unusual turn of events, a Bloomberg article this morning offers the possibility that the Fed’s widely expected rate hike next week will present, of all things, a sell signal for the dollar.

“Going into year-end,” says Invesco’s Noelle Corum, “we would expect fundamentals will begin to drive markets again, and this will drive the dollar weaker.’’ Similarly, BNP Paribas’ Momtchil Pojarliev says that “We have a turning point where the dollar is going to weaken” and that the dollar is at the “maximum positive point.”

The way things are shaping up, we could have further news as the day progresses.  If so, we will update.

Quote of the Day
“So why gold? People buy gold to protect their savings not because it is rare, yellow or shiny, but because of what it isn’t. Gold isn’t debt, equity or any other financial promise. It doesn’t rely on anyone else’s survival to exist. It can’t be destroyed any more than it can be created at will. Call it the ‘gut level case for gold’ – an urgent, all-consuming need to buy a dumb lump of metal which does so little, it doesn’t even rust, but which people in all ages and all cultures have used to store value.” – Adrian Ash, Bullion Vault

Chart of the Day

Chart note: The collective wisdom on gold has changed over the years.  Gold has traveled a long and winding road from abandoned orphan and shunned castaway (the 1990s), to grudgingly respected over-achiever (the 2000s), and finally established portfolio stalwart for millions of global investors (the 2010s). That renaissance is illustrated tellingly by the substantial change in volumes at the COMEX since 2000. The ramped-up volumes are the product of burgeoning demand for gold globally among private investors, institutions and funds. It is the latter two – institutions and funds – that are most responsible for volumes rising to the record levels of the last few years.

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

Gold seesawing around $1200, but higher this morning on firming yuan, China premier comments

Gold continued to seesaw around the $1200 mark this morning. At report post-time, it is trading in the $1203 range and up $3 on the day. Silver is up 4¢ at $14.23. Overnight, gold got as high $1206 after Chinese Premier Li Keqiang was quoted on Bloomberg as saying China would refrain from devaluing the yuan to boost exports. The yuan is also higher in early trading.

The yield on the 10-year Treasury went vertical yesterday to 3.048% on a TIC report showing a minor reduction in Chinese holdings of U.S. sovereign debt. In keeping with Li Kequiang statements this morning, China might be forced to sell U.S. government paper in order to defend the yuan. Yield on the 10-year is even higher this morning at 3.074%, an indication that the market has not backed-off from yesterday’s assessment. Julius Baer’s Norbert Ruecker told Reuters this morning that “Overall, we are constructive for gold and we are telling our clients to start to build a long-term position. Negative sentiment and positioning looks like it has hit rock bottom, so this will start normalizing and support gold.”

Chart courtesy of TradingEconomics.com

Quote of the Day
“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – William Strauss and Neil Howe, The Fourth Turning

Chart of the Day

Chart note: The CBOE SKEW Index signals when option traders are concerned about a black swan event. In August, the SKEW hit its highest level since inception in 1999. Since then it has backed-off marginally, but the trend in sentiment and the danger signal remain intact.

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Posted in dailyquotes |

DMR–Gold seesawing around $1200, but higher this morning on firming yuan, China premier comments

DAILY MARKET REPORT

Gold continued to seesaw around the $1200 mark this morning.  At report post-time, it is trading in the $1203 range and up $3 on the day.  Silver is up 4¢ at $14.23.  Overnight, gold got as high $1206 after Chinese Premier Li Keqiang was quoted on Bloomberg as saying China would refrain from devaluing the yuan to boost exports.  The yuan is also higher in early trading.

The yield on the 10-year Treasury went vertical yesterday to 3.048% on a TIC report showing a minor reduction in Chinese holdings of U.S. sovereign debt. In keeping with Li Kequiang statements this morning, China might be forced to sell U.S. government paper in order to defend the yuan.  Yield on the 10-year is even higher this morning at 3.074%, an indication that the market has not backed-off from yesterday’s assessment. Julius Baer’s Norbert Ruecker told Reuters this morning that “Overall, we are constructive for gold and we are telling our clients to start to build a long-term position. Negative sentiment and positioning looks like it has hit rock bottom, so this will start normalizing and support gold.”

Chart courtesy of TradingEconomics.com

Quote of the Day
“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – William Strauss and Neil Howe, The Fourth Turning

Chart of the Day

Chart note:  The CBOE SKEW Index signals when option traders are concerned about a black swan event.  In August, the SKEW hit its highest level since inception in 1999.  Since then it has backed-off marginally, but the trend in sentiment and the danger signal remain intact. 

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

Gold unmoved by trade war escalation

DAILY MARKET REPORT

Gold had a muted reaction to today’s trade war escalation with the price going sideways. The U.S./China trade war thus far has had a negative effect on commodities across the board including gold, so holding its own and not retreating further comes as something of a surprise. Alibaba’s Jack Ma came out over the weekend predicting a protracted struggle that could last twenty years. Thus far, the reaction in the West to the trade conflict has been subdued. That sentiment, however, could change as the trade war moves from peripheral concern to immediate reality. In China, the trade wars have done little to put a damper on gold imports. It is on track this year to import another 2000+ metric tonnes of the metal – two-thirds of the annual global mine production.

Quote of the Day
“Two confrontational, nationalistic, and militaristic leaders playing chicken with each other, while the world is watching to see which one will be caught bluffing, or if there will be a hellacious war. We can also say that if … things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit.” – Ray Dalio, Bridgewater Securities

Chart of the Day


Chart courtesy of HowMuch.net

Chart note: “One thing is immediately clear, ” says HowMuch. “Imports and exports are both on an upward trajectory year over year, but imports tend to grow faster. In other words, when looking at the graph you will notice the gap between the two numbers has gotten larger and larger while the space between the two circles has also become darker and darker. In short, the trade deficit used to be relatively small, averaging less than $150B year over year in the 1990s, but then it exploded in the 2000s. The single biggest increase occurred in 2004 when it jumped from $532B to $655B—a whopping $122B in one year.”

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Posted in dailyquotes |

DMR–Gold unmoved by trade war escalation

DAILY MARKET REPORT

Gold had a muted reaction to today’s trade war escalation with the price going sideways. The U.S./China trade war thus far has had a negative effect on commodities across the board including gold, so holding its own and not retreating further comes as something of a surprise. Alibaba’s Jack Ma came out over the weekend predicting a protracted struggle that could last twenty years.  Thus far, the reaction in the West to the trade conflict has been subdued.  That sentiment, however, could change as the trade war moves from peripheral concern to immediate reality.  In China, the trade wars have done little to put a damper on gold imports.  It is on track this year to import another 2000+ metric tonnes of the metal – two-thirds of the annual global mine production.

Quote of the Day
“Two confrontational, nationalistic, and militaristic leaders playing chicken with each other, while the world is watching to see which one will be caught bluffing, or if there will be a hellacious war. We can also say that if … things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit.” – Ray Dalio, Bridgewater Securities

Chart of the Day


Chart courtesy of HowMuch.net

Chart note:  “One thing is immediately clear, ” says HowMuch. “Imports and exports are both on an upward trajectory year over year, but imports tend to grow faster. In other words, when looking at the graph you will notice the gap between the two numbers has gotten larger and larger while the space between the two circles has also become darker and darker. In short, the trade deficit used to be relatively small, averaging less than $150B year over year in the 1990s, but then it exploded in the 2000s. The single biggest increase occurred in 2004 when it jumped from $532B to $655B—a whopping $122B in one year.”

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

Gold up $11 on technical factors, oversold conditions

Gold got the week off to a strong start nudging back over the $1200 level to $1205 – up $11.00 on the day. Silver is up 21¢ at $14.25. The move began overnight during Asian trading hours. It then carried over to Europe and got a bit of a kicker in early New York trading. Gold seems to be trading on technical factors and oversold conditions today rather than any specific political or economic development. Last week’s Commitment of Traders numbers revealed some minor short-covering that might be indicative of a trend. The record short-position in gold and silver remains the prime factor in the paper gold market. A number of analysts have made the case for a healthy rally once the short-covering begins in earnest. Turkey’s banks are reportedly selling physical gold to allay the effects of the lira crisis. If there has been an effect on the market price, it has been minimal thus far.

Quote of the Day
“Banks in the United States have the potential to increase liquidity suddenly and significantly – from $12 trillion to $36 trillion in currency and easily accessed deposits—and could thereby cause sudden inflation. This is possible because the nation’s fractional banking system allows banks to convert excess reserves held at the Federal Reserve into bank loans at about a 10-to-1 ratio. Banks might engage in such conversion if they believe other banks are about to do so, in a manner similar to a bank run that generates a self-fulfilling prophecy. . . What potentially matters about high excess reserves is that they provide a means by which decisions made by banksnot those made by the monetary authority, the Federal Reserve System – could increase inflation-inducing liquidity dramatically and quickly.” – Christopher Phelan, economist, Minneapolis Federal Reserve

Chart of the Day

Chart note 1: Though it is probably too early to confirm a correlation, this chart offers some early clues that Christopher Phelan’s scenario outlined in our Quote of the Day might be coming to fruition. In January 2015, the inflation rate was at its nadir under zero percent. Excess reserves were near their peak at $2.6 trillion. In September 2015, commercial banks began siphoning off excess reserves, leveraging that capital and lending it into the economy. Keeping in mind Milton Friedman’s widely accepted dictum that there is an 18 to 24 month lag between monetary stimulus and response, the first signs of inflation appear to be right on schedule. By September 2017 – two years from the initial draw downs – the inflation rate had climbed back to the 2% mark. As of last week’s Consumer Price Index release, it had reached 2.8%.

Chart note 2: This past June, the Fed lowered the rate on excess reserves to match the Fed Funds rate adding even more incentive for the banks to accelerate their draw downs.

Related: Please see Gold a safe haven in an ocean of excess reserves (Gold was trading at $1060 when this article was first-published.) Also see, the more recent update Excess reserve statement by chairman Powell moves markets

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Posted in dailyquotes |

DMR–Gold up $11 on technical factors, oversold conditions

DAILY MARKET REPORT

Gold got the week off to a strong start nudging back over the $1200 level to $1205 – up $11.00 on the day. Silver is up 21¢ at $14.25.  The move began overnight during Asian trading hours.  It then carried over to Europe and got a bit of a kicker in early New York trading.  Gold seems to be trading on technical factors and oversold conditions today rather than any specific political or economic development.  Last week’s Commitment of Traders numbers revealed some minor short-covering that might be indicative of a trend. The record short-position in gold and silver remains the prime factor in the paper gold market. A number of analysts have made the case for a healthy rally once the short-covering begins in earnest.  Turkey’s banks are reportedly selling physical gold to allay the effects of the lira crisis.  If there has been an effect on the market price, it has been minimal thus far.

Quote of the Day
“Banks in the United States have the potential to increase liquidity suddenly and significantly – from $12 trillion to $36 trillion in currency and easily accessed deposits—and could thereby cause sudden inflation. This is possible because the nation’s fractional banking system allows banks to convert excess reserves held at the Federal Reserve into bank loans at about a 10-to-1 ratio. Banks might engage in such conversion if they believe other banks are about to do so, in a manner similar to a bank run that generates a self-fulfilling prophecy. . . What potentially matters about high excess reserves is that they provide a means by which decisions made by banksnot those made by the monetary authority, the Federal Reserve System – could increase inflation-inducing liquidity dramatically and quickly.” – Christopher Phelan, economist, Minneapolis Federal Reserve

Chart of the Day

Chart note 1:   Though it is probably too early to confirm a correlation, this chart offers some early clues that Christopher Phelan’s scenario outlined in our Quote of the Day might be coming to fruition.  In January 2015, the inflation rate was at its nadir under zero percent.  Excess reserves were near their peak at $2.6 trillion. In September 2015, commercial banks began siphoning off excess reserves, leveraging that capital and lending it into the economy. Keeping in mind Milton Friedman’s widely accepted dictum that there is an 18 to 24 month lag between monetary stimulus and response, the first signs of inflation appear to be right on schedule.  By September 2017 – two years from the initial draw downs – the inflation rate had climbed back to the 2% mark.  As of last week’s Consumer Price Index release, it had reached 2.8%.  

Chart note 2: This past June, the Fed lowered the rate on excess reserves to match the Fed Funds rate adding even more incentive for the banks to accelerate their draw downs. 

Related:  Please see Gold a safe haven in an ocean of excess reserves (Gold was trading at $1060 when this article was first-published.) Also see, the more recent update Excess reserve statement by chairman Powell moves markets

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

A word on the ten-year anniversary of the Lehman Brothers’ collapse

DAILY MARKET REPORT

Gold pushed back below the $1200 mark this morning in lackluster trading – down $4 on the day at $1198. Silver is down 4¢ at $14.14.

Much of the news and opinion the past few days has centered around the Lehman Brothers’ collapse ten years ago this weekend. One of the more telling features is the amount of analysis pointing to a repeat crisis before 2020. JP Morgan, Ray Dalio, Moody’s Analytics, SocGen are prominent among a group warning of a Lehman moment at some point over the next two years. Even former Fed chairman, Ben Bernanke, says there will be a Wile E. Coyote moment in 2020.

The rush to the podium (so to speak) among analysts to make sure they are on the record with their warnings is something to behold. It is a much different spectacle from the financial elite’s We-Didn’t-See-It-Coming mantra first uttered in 2008 and religiously ever since. The Queen of England was among the group to hear that rationalization. Her response was classically discreet: “People had got a bit lax, had they?” Today, the financial elite display great care. The general public though has become alarmingly lax. Complacency is a word often bandied about in this context. In 2008, it was the other way around: The financial capitals were lax but the public was vigilant – as evidenced by the strong gold demand at the time.

Day to day, financial media tend to center their gold coverage around the price. The safe-haven argument for gold is offered but routinely muddied in the same paragraph. We tend to forget that the real reason to own gold is not to make speculative gains, but to protect against the kind of excesses the Lehman moment represents. The aftermath of 2008 is testament to gold’s role as the asset of last resort. The Queen’s question fittingly came, by the way, during a visit to the Bank of England’s gold room in 2012. The sight of all that gold must have set the wheels in motion. . . . .

Quote of the Day
“Why then is so much writing on the subject of money so needlessly complicated, with dense, impenetrable language and equations that make sense to only a handful of academicians? And why do so many people insist that bad ideas about monetary policy, like ‘inflation is needed to increase employment,’ are as settled and unassailable as scientific principles?” – Steve Forbes and Elizabeth Ames, Money: How the Destruction of the Dollar Threatens the Global Economy – and What We Can Do About It

Chart of the Day

Chart note: ““When President Nixon closed the gold window at the U.S. Treasury on August 15, 1971,” writes Economic Prism’s MN Gordon, “he told several whoppers. He said it was to, ‘defend the dollar against the speculators.’ He also said the action would, ‘suspend temporarily, the convertibility of the dollar into gold.’ Furthermore, he told Americans that, ‘your dollar will be worth just as much tomorrow as it is today.’ Nixon’s actions came on the heels of 60-years of gradual steps to remove gold’s backing of the dollar. In effect, $1 today has the same buying power that $0.16 had when Nixon took these ‘temporary’ actions. Over this same period, the U.S. national debt has run up from about $398 billion to over $21 trillion, and the economy has been utterly warped.” We sometimes become so immersed in the short-term ripples that we forget the long-term waves.

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Posted in dailyquotes |

DMR–A word on the ten-year anniversary of the Lehman Brothers’ collapse

DAILY MARKET REPORT

Gold pushed back below the $1200 mark this morning in lackluster trading – down $4 on the day at $1198. Silver is down 4¢ at $14.14.

Much of the news and opinion the past few days has centered around the Lehman Brothers’ collapse ten years ago this weekend. One of the more telling features is the amount of analysis pointing to a repeat crisis before 2020. JP Morgan, Ray Dalio, Moody’s Analytics, SocGen are prominent among a group warning of a Lehman moment at some point over the next two years. Even former Fed chairman, Ben Bernanke, says there will be a Wile E. Coyote moment in 2020.

The rush to the podium (so to speak) among analysts to make sure they are on the record with their warnings is something to behold. It is a much different spectacle from the financial elite’s We-Didn’t-See-It-Coming mantra first uttered in 2008 and religiously ever since. The Queen of England was among the group to hear that rationalization. Her response was classically discreet: “People had got a bit lax, had they?” Today, the financial elite display great care. The general public though has become alarmingly lax. Complacency is a word often bandied about in this context. In 2008, it was the other way around: The financial capitals were lax but the public was vigilant – as evidenced by the strong gold demand at the time.

Day to day, financial media tend to center their gold coverage around the price. The safe-haven argument for gold is offered but routinely muddied in the same paragraph. We tend to forget that the real reason to own gold is not to make speculative gains, but to protect against the kind of excesses the Lehman moment represents. The aftermath of 2008 is testament to gold’s role as the asset of last resort. The Queen’s question fittingly came, by the way, during a visit to the Bank of England’s gold room in 2012. The sight of all that gold must have set the wheels in motion. . . . .

Quote of the Day
“Why then is so much writing on the subject of money so needlessly complicated, with dense, impenetrable language and equations that make sense to only a handful of academicians? And why do so many people insist that bad ideas about monetary policy, like ‘inflation is needed to increase employment,’ are as settled and unassailable as scientific principles?” – Steve Forbes and Elizabeth Ames, Money: How the Destruction of the Dollar Threatens the Global Economy – and What We Can Do About It

Chart of the Day

Chart note: ““When President Nixon closed the gold window at the U.S. Treasury on August 15, 1971,” writes Economic Prism’s MN Gordon, “he told several whoppers. He said it was to, ‘defend the dollar against the speculators.’ He also said the action would, ‘suspend temporarily, the convertibility of the dollar into gold.’ Furthermore, he told Americans that, ‘your dollar will be worth just as much tomorrow as it is today.’ Nixon’s actions came on the heels of 60-years of gradual steps to remove gold’s backing of the dollar. In effect, $1 today has the same buying power that $0.16 had when Nixon took these ‘temporary’ actions. Over this same period, the U.S. national debt has run up from about $398 billion to over $21 trillion, and the economy has been utterly warped.” We sometimes become so immersed in the short-term ripples that we forget the long-term waves.

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

CPI report stops gold in its tracks

DAILY MARKET REPORT

A benign U.S. consumer price report stopped yesterday’s gold rally in its tracks this morning. Early on, the metal pushed past the $1210 mark and was up nearly $4 on the day. It is now down $3 on the day at $1204. Silver is down 4¢ on the at $14.21. Reuters reports that “Despite the moderation in price increases last month, inflation pressures are steadily building up, driven by a tightening labor market and robust economic growth.” The news service goes on to cite price increases building up in the supply pipeline resulting from tariffs on Chinese imports.

Yesterday, we posted our guess that some traders covered shorts in anticipation of the report. Those traders, if our hunch was correct, have apparently retreated to the sidelines – at least for now.  Yesterday’s rally is a reminder how quickly things can change once sentiment shifts.

“[T]he net short on COMEX,” writes GFMS’ Rhona O’Connell in a report released yesterday, “was at record levels at end-August since the CFTC introduced its ‘managed money’ classification, at 244 tonnes. With outright shorts standing at 593 tonnes. Some short covering has ensued; we expect more and a sharp short covering rally is not out of the question.”

Inflation worries are one in a long list of concerns that could instigate the short-covering rally many gold market professionals anticipate.

Quote of the Day
“I wish Montagu Norman, Philip Snowden and the monetary experts were admirals or generals. I can sink them if necessary. But when I am talking to bankers and economists, after awhile they begin to talk Persian, and then they sink me instead.” – Winston Churchill, 1924

Chart of the Day

Chart note: Growth in the money supply continues to be stubbornly restrained. That circumstance, however, does not necessarily signal weakness in the price of gold. As this chart illustrates, the effect can be just the opposite. As the 2008 credit crisis unfolded, gold to the surprise of many proved its mettle as a hedge under disinflationary circumstances. Demand flourished among investors worldwide concerned about potential bank failures and a stock and bond market crashes. Even in the more placid economic setting since early 2016, gold has risen as monetary growth has slowed.

 

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Posted in dailyquotes |

DMR–CPI report stops gold in its tracks

DAILY MARKET REPORT

A benign U.S. consumer price report stopped yesterday’s gold rally in its tracks this morning.  Early on, the metal pushed past the $1210 mark and was up nearly $4 on the day. It is now down $3 on the day at $1204. Silver is down 4¢ on the at $14.21. Reuters reports that “Despite the moderation in price increases last month, inflation pressures are steadily building up, driven by a tightening labor market and robust economic growth.” The news service goes on to cite price increases building up in the supply pipeline resulting from tariffs on Chinese imports.

Yesterday, we posted our guess that some traders covered shorts in anticipation of the report. Those traders, if our hunch was correct, have apparently retreated to the sidelines – at least for now. Yesterday’s rally is a reminder how quickly things can change once sentiment shifts.

“[T]he net short on COMEX,” writes GFMS’ Rhona O’Connell in a report released yesterday, “was at record levels at end-August since the CFTC introduced its ‘managed money’ classification, at 244 tonnes. With outright shorts standing at 593 tonnes. Some short covering has ensued; we expect more and a sharp short covering rally is not out of the question.”

Inflation worries are one in a long list of concerns that could instigate the short-covering rally many gold market professionals anticipate.

Quote of the Day
“I wish Montagu Norman, Philip Snowden and the monetary experts were admirals or generals. I can sink them if necessary. But when I am talking to bankers and economists, after awhile they begin to talk Persian, and then they sink me instead.” – Winston Churchill, 1924

Chart of the Day

Chart note:  Growth in the money supply continues to be stubbornly restrained. That circumstance, however, does not necessarily signal weakness in the price of gold.  As this chart illustrates, the effect can be just the opposite. As the 2008 credit crisis unfolded, gold to the surprise of many proved its mettle as a hedge under disinflationary circumstances. Demand flourished among investors worldwide concerned about potential bank failures and a stock and bond market crashes. Even in the more placid economic setting since early 2016, gold has risen as monetary growth has slowed.  

 

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

Might be short covering ahead of tomorrow’s CPI report

(USAGOLD) –– The gold market suddenly took a turn for the better just after 9am MT (11am ET). The timing coincides roughly with the release of the producer price report which came in under expectations. We are not certain, though, why this relatively benign PPI report would have been enough to inspire a strong uptick in the gold price. The move could be interest-rate/Fed related but we are not convinced. Our gut reaction? Short-covering ahead of the tomorrow’s Consumer Price Index release. A Reuters’ survey of economists estimates the report will show an increase in the .3% range, i.e. a 3.6% annualized rate of inflation. If inflation is indeed entering the picture, it could be enough to inspire fund and institution position covering in both the dollar and gold. As it stands gold is $11 higher at $1208. Silver is up 14¢ at $14.27.

We will update again if anything of interest surfaces. . . . .

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Posted in dailyquotes |

Might be short covering ahead of tomorrow’s CPI report

(USAGOLD) –– The gold market suddenly took a turn for the better just after 9am MT (11am ET).  The timing coincides roughly with the release of the producer price report which came in under expectations.  We are not certain, though, why this relatively benign PPI report would have been enough to inspire a strong uptick in the gold price. The move could be interest-rate/Fed related but we are not convinced.  Our gut reaction?  Short-covering ahead of the tomorrow’s Consumer Price Index release.  A Reuters’ survey of economists estimates the report will show an increase in the .3% range, i.e. a 3.6% annualized rate of inflation. If inflation is indeed entering the picture, it could be enough to inspire fund and institution position covering in both the dollar and gold.  As it stands gold is $11 higher at $1208.  Silver is up 14¢ at $14.27.

We will update again if anything of interest surfaces. . . . .

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Posted in Today's top gold news and opinion |

No DMR today.

We will post an update later if anything of interest occurs.  Quiet day thus far.

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Posted in Today's top gold news and opinion |

Gold in modest retreat, little to explain drop during London session

DAILY MARKET REPORT

Gold finds itself in a modest retreat this morning. Scanning the usual indicators turns up little in the way of explanation. The drop occurred suddenly during the London session. We are left to think that it might have been the result of a one-time sale of some size. Gold at the moment is down $3.00 at $1192 and attempting to claw back earlier losses. Silver is down 7¢ sympathetically, it would seem, at $14.08. The gold-silver ratio at 84 to 1 now stands at its highest level in nearly three decades.

Quote of the Day
“The cost of living has skyrocketed in recent years. Let’s look at the cost of goods in services in terms of a salary earned by a full college professor. In the 1980s, our ‘full professor’ needed to pay almost 15 minutes of his salary to buy one kilogram of beef. Today, in July 2017, our full professor needs to pay the equivalent of 18 hours to buy the same amount of beef. During the 1980s, our full professor needed to pay almost one year’s salary for a new sedan. Today, he must pay the equivalent of 25 years of his salary. In the 1980s, a full professor with his monthly salary could buy 17 basic baskets of essential goods. Today, he can buy just one-quarter of a basic basket. And what about the value of our money? Well, in March 2007, the largest denomination of paper money in Venezuela was the 100 bolivar bill. With it, you could buy 28 US dollars, 288 eggs, or 56 kilograms of rice. Today, you can buy .01 dollars, 0.2 eggs, and 0.08 kilograms of rice. In July 2017, you need five 100-bolivar bills to buy just one egg.” – Timothy D. Terrell, on life in Venezuela (2018)

Chart of the Day


CLICK TO ENLARGE
Chart courtesy of HowMuch.net

Chart note: “Looking at a map of economic freedom for the entire world reveals distinct pockets of freedom and repression,” says HowMuch.net, the creator of this chart. “The freest continuous group of countries stretches from the United States and Canada over to northern Europe and the Baltic countries. Russia is the only country touching the Arctic Ocean in a color other than dark and light green. Australia and New Zealand also stand out in the Pacific as bastions of freedom, especially combined with the other countries in Southeast Asia. On the other hand, almost all of South America, Africa, and Asia (at least on the continent itself) remain repressed.”

Chart note 2: It is also interesting to note that it is among the “mostly unfree” and “repressed countries” where the current emerging country currency and debt crisis resides.

 

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Posted in dailyquotes |

DMR–Gold in modest retreat, little to explain drop during London session

DAILY MARKET REPORT

Gold finds itself in a modest retreat this morning.  Scanning the usual indicators turns up little in the way of explanation. The drop occurred suddenly during the London session. We are left to think that it might have been the result of a one-time sale of some size. Gold at the moment is down $3.00 at $1192 and attempting to claw back earlier losses.  Silver is down 7¢ sympathetically, it would seem, at $14.08.  The gold-silver ratio at 84 to 1 now stands at its highest level in nearly three decades.

Quote of the Day
“The cost of living has skyrocketed in recent years. Let’s look at the cost of goods in services in terms of a salary earned by a full college professor. In the 1980s, our ‘full professor’ needed to pay almost 15 minutes of his salary to buy one kilogram of beef. Today, in July 2017, our full professor needs to pay the equivalent of 18 hours to buy the same amount of beef. During the 1980s, our full professor needed to pay almost one year’s salary for a new sedan. Today, he must pay the equivalent of 25 years of his salary. In the 1980s, a full professor with his monthly salary could buy 17 basic baskets of essential goods. Today, he can buy just one-quarter of a basic basket. And what about the value of our money? Well, in March 2007, the largest denomination of paper money in Venezuela was the 100 bolivar bill. With it, you could buy 28 US dollars, 288 eggs, or 56 kilograms of rice. Today, you can buy .01 dollars, 0.2 eggs, and 0.08 kilograms of rice. In July 2017, you need five 100-bolivar bills to buy just one egg.” – Timothy D. Terrell, on life in Venezuela (2018)

Chart of the Day


CLICK TO ENLARGE
Chart courtesy of HowMuch.net

Chart note:  “Looking at a map of economic freedom for the entire world reveals distinct pockets of freedom and repression,” says HowMuch.net, the creator of this chart. “The freest continuous group of countries stretches from the United States and Canada over to northern Europe and the Baltic countries. Russia is the only country touching the Arctic Ocean in a color other than dark and light green. Australia and New Zealand also stand out in the Pacific as bastions of freedom, especially combined with the other countries in Southeast Asia. On the other hand, almost all of South America, Africa, and Asia (at least on the continent itself) remain repressed.”

Chart note 2: It is also interesting to note that it is among the “mostly unfree” and “repressed countries” where the current emerging country currency and debt crisis resides.

 

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

Quiet prevails, could be punctured later in the week

DAILY MARKET REPORT

Quiet prevails. The markets are running sideways – stocks, bonds, gold, silver, the dollar, commodities. Even the Argentine peso, at least for the moment, looks stable. Gold is trading at $1197; silver at $14.22. The quiet, however, could be punctured later in the week. The Labor Department releases its latest consumer price report on Thursday. In the meanwhile, a feel-good story comes from Australia this morning. Miners at work in the Beta Hunt nickel mine, owned by RNC Minerals of Canada, hit the mother lode last week – a single blast producing 9000 troy ounces of gold worth $10,000,000. One 200-pound rock contains “2400 ounces of high-grade gold,” according to reports. The mining company will auction off the find as collectors’ items. It, by the way, says the mine might be even richer as it goes deeper.

Stay tuned. We will update if things change.

Quote of the Day
“Because Chinese and American leaders have all sorts of carrots and sticks (e.g., economic, military, cyber, etc.) that they can use, they are now determining which ones to use, how far to push the testing, and how far the other will go in inflicting pain and enduring it. The escalations come in the form of tit-for-tats—i.e., a series of escalations that can become progressively larger and more painful, and that take different forms that can extend beyond trade (e.g., to include capital wars). It’s this series of escalations that the wise Chinese leader that I referred to conveyed can easily get beyond anyone’s control.” [Emphasis added]

Chart of the Day

Chart note: With the US dollar the centerpiece of interest the past several weeks, we thought it appropriate to post the long-term overlay chart of the gold price and the major-currency version of the US Dollar index. As you can see, the dollar has been in a secular, long-term decline against other major currencies since the early 1970s when the U.S. abandoned gold-backing for the currency and the world switched to free-floating gold and currency prices. Despite all the talk of a strong dollar and how Treasury secretaries historically back the concept, the reality is the opposite – a weak dollar when measured against its major competitors. In the end, unencumbered ownership of physical gold coins and bullion, as this chart amply illustrates, has proven to be a very effective defense in the on-going process.

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Posted in dailyquotes |

DMR–Quiet prevails, could be punctured later in the week

DAILY MARKET REPORT

Quiet prevails.  The markets are running sideways – stocks, bonds, gold, silver, the dollar, commodities. Even the Argentine peso, at least for the moment, looks stable.  Gold is trading at $1197; silver at $14.22. The quiet, however, could be punctured later in the week. The Labor Department releases its latest consumer price report on Thursday.  In the meanwhile, a feel-good story comes from Australia this morning.  Miners at work in the Beta Hunt nickel mine, owned by RNC Minerals of Canada, hit the mother lode last week – a single blast producing 9000 troy ounces of gold worth $10,000,000.  One 200-pound rock contains “2400 ounces of high-grade gold,” according to reports.  The mining company will auction off the find as collectors’ items.  It, by the way, says the mine might be even richer as it goes deeper.

Stay tuned.  We will update if things change.

Quote of the Day
“Because Chinese and American leaders have all sorts of carrots and sticks (e.g., economic, military, cyber, etc.) that they can use, they are now determining which ones to use, how far to push the testing, and how far the other will go in inflicting pain and enduring it. The escalations come in the form of tit-for-tats—i.e., a series of escalations that can become progressively larger and more painful, and that take different forms that can extend beyond trade (e.g., to include capital wars). It’s this series of escalations that the wise Chinese leader that I referred to conveyed can easily get beyond anyone’s control.” [Emphasis added]

Chart of the Day

Chart note: With the US dollar the centerpiece of interest the past several weeks, we thought it appropriate to post the long-term overlay chart of the gold price and the major-currency version of the US Dollar index. As you can see, the dollar has been in a secular, long-term decline against other major currencies since the early 1970s when the U.S. abandoned gold-backing for the currency and the world switched to free-floating gold and currency prices. Despite all the talk of a strong dollar and how Treasury secretaries historically back the concept, the reality is the opposite – a weak dollar when measured against its major competitors. In the end, unencumbered ownership of physical gold coins and bullion, as this chart amply illustrates, has proven to be a very effective defense in the on-going process.

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

Gold seesaws around $1200 level, silver gets unexpected boost

Gold continued to seesaw above and below the $1200 mark overseas and in early New York trading unable to make up its mind how to react to the latest stew of news and analysis. Gold is trading at $1298.50 – down $3.00 on the day. Silver is up 6¢ at $14.24.

We do sense in recent days’ trading some semblance of a positive reaction to inflationary news – detectable but muted. We saw it with the uptick in the PCE index and we are seeing it again today with the reported increase in wages. Beyond the day-to-day inflationary influences, there remains the big one – the imposition of tariffs on Chinese imports. With anecdotal evidence of price increases mounting, especially from American manufacturers and wholesalers, we may come to a place where the basic market reaction will not be to an increase in interest rates but to rising prices instead. We see signs of that tug-of-war at play in today’s back and forth trading.

Silver is getting an unexpected boost from reports of investor demand gaining some momentum. The Mint suddenly is having trouble keeping up with demand – buying no doubt sprung from attractively lower pricing courtesy of the speculative paper market where prices are set. Please scroll below for our comments on the situation.

Quote of the Day
“I’m fond of saying how crazy things get near the end of Bubbles. Convinced this is History’s Greatest Bubble, I’ve been anticipating a pretty astonishing variety of ‘crazy.’ Watching this all unfold with increasing trepidation, I sense an important line has been crossed. It’s time to retire ‘crazy’ – find a replacement that conjures up something more foreboding – more disturbing. And markets, well, they’re seemingly fine with it all; at times almost giddy. And that’s the fundamental problem: Dysfunctional markets continue to promote incredibly risky policy behavior – the polar (bear) opposite of imposing discipline.” – Doug Noland, Credit Bubble Bulletin

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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Posted in dailyquotes |

DMR–Gold seesaws around $1200 level, silver gets unexpected boost

DAILY MARKET REPORT

Gold continued to seesaw above and below the $1200 mark overseas and in early New York trading unable to make up its mind how to react to the latest stew of news and analysis.  Gold is trading at $1298.50 – down $3.00 on the day.  Silver is up 6¢ at $14.24.

We do sense in recent days’ trading some semblance of a positive reaction to inflationary news – detectable but muted.  We saw it with the uptick in the PCE index and we are seeing it again today with the reported increase in wages.  Beyond the day-to-day inflationary influences, there remains the big one – the imposition of tariffs on Chinese imports. With anecdotal evidence of price increases mounting, especially from American manufacturers and wholesalers, we may come to a place where the basic market reaction will not be to an increase in interest rates but to rising prices instead. We see signs of that tug-of-war at play in today’s back and forth trading.

Silver is getting an unexpected boost from reports of investor demand gaining some momentum.  The Mint suddenly is having trouble keeping up with demand – buying no doubt sprung from attractively lower pricing courtesy of the speculative paper market where prices are set.  Please scroll below for our comments on the situation.

Quote of the Day
“I’m fond of saying how crazy things get near the end of Bubbles. Convinced this is History’s Greatest Bubble, I’ve been anticipating a pretty astonishing variety of ‘crazy.’ Watching this all unfold with increasing trepidation, I sense an important line has been crossed. It’s time to retire ‘crazy’ – find a replacement that conjures up something more foreboding – more disturbing. And markets, well, they’re seemingly fine with it all; at times almost giddy. And that’s the fundamental problem: Dysfunctional markets continue to promote incredibly risky policy behavior – the polar (bear) opposite of imposing discipline.” – Doug Noland, Credit Bubble Bulletin

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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Posted in Today's top gold news and opinion |

Gold climbs back over $1200 on short-covering, a weak jobs report and emerging country capital reshuffle

Gold climbed back over the $1200 mark this morning with two London-based sources reporting short-covering in Europe. It is trading $1207 – up $9 on the day. Silver is trading at $14.26 – up 7¢ on the day. Gold also got an assist this morning from the release of the ADP jobs report which came in below expectations. Beyond those immediate influences, some of the flow from an on-going re-shuffling of capital out of emerging nation stocks and bonds is making its way into gold. The demand is coming both internally from beleaguered citizens within those countries and externally from global funds and institutions who see gold as an under-priced asset. Financial Times quotes Pimco’s Gene Frieda as saying “We’ve had a series of idiosyncratic shocks, but this week it has felt like a more generalized sell-off than an idiosyncratic one. Some investors just want to get out now.”

Quote of the Day
Our central bank monetary-led boom has made debt replace wealth for a long time. That’s not sustainable, of course. (We are ‘mining’ our soil for short-term gain.) We’ll see a return to the significance of productive stuff again I think, and that even includes farming – maybe especially farming. And the Midwest has a pretty good track record with productive stuff. Hard assets will matter again. But of course, I sound ridiculous even saying such things. Like a grumpy old grandpa.” – Mark Spitznagel, Universa Investments (as quoted by columnist, P.J. O’Rourke)

Chart[s] of the Day

Charts courtesy of TradingEconomics.com

Chart note: These three charts show the central bank balance sheet debt holdings for three of the top four largest economies – the United States, Japan and the European Union. Together the three central banks hold an astonishing nearly $13 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, albeit on a slow fuse. The European Central Bank is scheduled to begin reducing its holdings later this year. The Bank of Japan, for its part, says it will continue with its acquisition program as long as it deems necessary.

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Posted in dailyquotes |

DMR–Gold climbs over $1200 on short-covering, a weak jobs report, and emerging country capital reshuffle

DAILY MARKET REPORT

Gold climbed back over the $1200 mark this morning with two London-based sources reporting short-covering in Europe. It is trading $1207 – up $9 on the day.  Silver is trading at $14.26 – up 7¢ on the day. Gold also got an assist this morning from the release of the ADP jobs report which came in below expectations. Beyond those immediate influences, some of the flow from an on-going re-shuffling of capital out of emerging nation stocks and bonds is making its way into gold. The demand is coming both internally from beleaguered citizens within those countries and externally from global funds and institutions who see gold as an under-priced asset. Financial Times quotes Pimco’s Gene Frieda as saying “We’ve had a series of idiosyncratic shocks, but this week it has felt like a more generalized sell-off than an idiosyncratic one.  Some investors just want to get out now.”

Quote of the Day
Our central bank monetary-led boom has made debt replace wealth for a long time. That’s not sustainable, of course. (We are ‘mining’ our soil for short-term gain.) We’ll see a return to the significance of productive stuff again I think, and that even includes farming – maybe especially farming. And the Midwest has a pretty good track record with productive stuff. Hard assets will matter again. But of course, I sound ridiculous even saying such things. Like a grumpy old grandpa.” – Mark Spitznagel, Universa Investments (as quoted by columnist, P.J. O’Rourke)

Chart[s] of the Day

Charts courtesy of TradingEconomics.com

Chart note: These three charts show the central bank balance sheet debt holdings for three of the top four largest economies – the United States, Japan and the European Union.  Together the three central banks hold an astonishing nearly $13 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, albeit on a slow fuse. The European Central Bank is scheduled to begin reducing its holdings later this year.  The Bank of Japan, for its part, says it will continue with its acquisition program as long as it deems necessary.

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

Gold in recovery mode, emerging nation problems raise developed country contagion worries

Gold is in recovery mode in today’s early going – up $5 on the day at $1197 – as the markets attempt to gauge the extent and depth of the contagion spreading through emerging markets from Asia, South America, Africa and Europe’s soft under-belly. Financial Times even lists China among the countries analysts are monitoring for deeper problems.

That same article exposes what many see as the greatest source of vulnerability in this developing crisis: “The rise in the US dollar since April,” says FT, “has exacerbated troubles in several emerging economies with the amount of dollar-denominated debt they have more than doubling to $3.7tn over the past decade, according to the Bank for International Settlements.” That level of debt warns of a very large problem that is not going to be easily swept under the financial markets’ carpet as one country after the other tumbles into crisis.

So what happens when the debt repayments come due and these countries declare the lack of resources to meet their obligations? The IMF does not have the resources to engineer a emerging country bailout at the level that might be required. Where will emerging countries go for relief? Or do they simply default – in which case the crisis rolls unimpeded into New York, London, Frankfurt and financial centers beyond.

Please see: Emerging market sell-off spreads beyond Turkey and Argentina / Financial Times / 9-5-2018

Quote of the Day
“We have been in a state of stagnation since 2008. We’re moving towards stagflation. It feels good right now but it’s a false dawn.” – Alan Greenspan, May, 2018

Chart of the Day

Chart courtesy of VisualCapitalist.com

Chart note: In a note accompanying this chart Visual Capitalist notes that ” If you add up all the money that national governments have borrowed, it tallies to a hefty $63 trillion. In an ideal situation, governments are just borrowing this money to cover short-term budget deficits or to finance mission critical projects. However, around the globe, countries have taken to the idea of running constant deficits as the normal course of business, and too much accumulation of debt is not healthy for countries or the global economy as a whole.”

Too, we should not ignore the interlocking nature of global debt – a vulnerability that became all too evident during the last financial crisis and its aftermath. The emerging country debt and currency disaster now unflolding across the globe has its antecedents in that crisis. Cheap money, widespread bailouts, more reckless borrowing and a wobbly repayment structure – all threaten to come home to roost as a disinflationary crisis (like 2008), a long-anticipated surge in global inflation, or as Alan Greenspan suggests in our Quote of the Day, as stagflation, a combination of the slow growth and inflation. Greenspan advocates owning gold as a precautionary measure.

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Posted in dailyquotes |

DMR–Gold in recovery mode, emerging nation problems raise developed country contagion worries

DAILY MARKET REPORT

Gold is in recovery mode in today’s early going – up $5 on the day at $1197 – as the markets attempt to gauge the extent and depth of the contagion spreading through emerging markets from Asia, South America, Africa and Europe’s soft under-belly.   Financial Times even lists China among the countries analysts are monitoring for deeper problems.

That same article exposes what many see as the greatest source of vulnerability in this developing crisis:  “The rise in the US dollar since April,” says FT, “has exacerbated troubles in several emerging economies with the amount of dollar-denominated debt they have more than doubling to $3.7tn over the past decade, according to the Bank for International Settlements.”  That level of debt warns of a very large problem that is not going to be easily swept under the financial markets’ carpet as one country after the other tumbles into crisis.

So what happens when the debt repayments come due and these countries declare the lack of resources to meet their obligations?  The IMF does not have the resources to engineer a emerging country bailout at the level that might be required.  Where will emerging countries go for relief? Or do they simply default – in which case the crisis rolls unimpeded into New York, London, Frankfurt and financial centers beyond.

Please see: Emerging market sell-off spreads beyond Turkey and Argentina / Financial Times / 9-5-2018

Quote of the Day
“We have been in a state of stagnation since 2008. We’re moving towards stagflation. It feels good right now but it’s a false dawn.” – Alan Greenspan, May, 2018

Chart of the Day

Chart courtesy of VisualCapitalist.com

Chart note:  In a note accompanying this chart Visual Capitalist notes that ” If you add up all the money that national governments have borrowed, it tallies to a hefty $63 trillion. In an ideal situation, governments are just borrowing this money to cover short-term budget deficits or to finance mission critical projects. However, around the globe, countries have taken to the idea of running constant deficits as the normal course of business, and too much accumulation of debt is not healthy for countries or the global economy as a whole.” 

Too, we should not ignore the interlocking nature of global debt – a vulnerability that became all too evident during the last financial crisis and its aftermath.  The emerging country debt and currency disaster now unflolding across the globe has its antecedents in that crisis. Cheap money, widespread bailouts, more reckless borrowing and a wobbly repayment structure – all threaten to come home to roost as a disinflationary crisis (like 2008), a long-anticipated surge in global inflation, or as Alan Greenspan suggests in our Quote of the Day, as stagflation, a combination of the slow growth and inflation. Greenspan advocates owning gold as a precautionary measure.

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

Gold turns sharply lower on China ambassador’s yuan comments over the weekend

Gold took a sharp turn below the $1200 mark in Asia overnight that carried over to early trading in New York. The metal is down $10 on the day at $1191. Silver followed suit – down 41¢ on the day at $14.08. The bulk of the damage came from a drop in the yuan.

FOREX markets’ concerns about the yuan took a turn for the worse over the weekend. Tui Tiankai, China’s ambassador to the United States gave a speech in which he stated that “On what to do next, for China it is very clear. I wish to advise people to give up the illusion that another Plaza Accord could be imposed on China. They should give up the illusion that China will ever give in to intimidation, coercion or groundless accusation.”

The Plaza Accord was an agreement among major industrial countries in 1985 to drive down the value of the dollar against other currencies, particularly the Japanese yen. Cui’s comments were reported in Xinhua, China’s official press organ. The market reaction has been swift and gold is not the only casualty. The Dow is down 120. Bond yields are climbing and commodities across the boards, with the exception of oil, are taking a hit.

How much of this is posturing on the part of China and how strongly the Trump administration is likely to react to the statement are both open questions. The president has already made it clear that he would like the Fed’s cooperation in driving the dollar lower, so there is no doubt that the currency situation is at the top of his agenda.

Quote of the Day
“If we are lucky, the next Fed-caused downturn will cause only a resurgence of 1970s-style stagflation. The more likely scenario is the type of widespread economic chaos not seen in America since the Great Depression. The growth of cultural Marxism, the widespread entitlement mentality, and the willingness of partisans of various sides to use force against their political opponents suggests that this economic crisis will result in civil unrest that will be used to justify new crackdowns on individual liberty. Those who understand the causes of, and cures for, our current predicament have two responsibilities. First, prepare a plan to protect your family when the crisis occurs. Second, do all you can to spread the truth in hopes the liberty movement reaches critical mass so it can force Congress to make the changes necessary to avert disaster. Since the crisis will result in a rejection of the dollar’s world reserve currency status, individuals should consider alternatives such as gold and other precious metals.” – Ron Paul, 8/27/2018

Chart of the Day

Chart note: To learn why this chart is important to current and prospective gold owners, please see: Gold: A reverse bubble in search of a pin – The victim could quickly find itself the beneficiary.

 

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Posted in dailyquotes |

DMR–Gold turns sharply lowly on Chinese ambassador’s yuan comments over weekend

DAILY MARKET REPORT

Gold took a sharp turn below the $1200 mark in Asia overnight that carried over to early trading in New York. The metal is down $10 on the day at $1191. Silver followed suit – down 41¢ on the day at $14.08.  The bulk of the damage came from a drop in the yuan.

FOREX markets’ concerns about the yuan took a turn for the worse over the weekend.  Tui Tiankai, China’s ambassador to the United States gave a speech in which he stated that “On what to do next, for China it is very clear. I wish to advise people to give up the illusion that another Plaza Accord could be imposed on China. They should give up the illusion that China will ever give in to intimidation, coercion or groundless accusation.”

The Plaza Accord was an agreement among major industrial countries in 1985 to drive down the value of the dollar against other currencies, particularly the Japanese yen.  Cui’s comments were reported in Xinhua, China’s official press organ. The market reaction has been swift and gold is not the only casualty. The Dow is down 120. Bond yields are climbing and commodities across the boards, with the exception of oil, are taking a hit.

How much of this is posturing on the part of China and how strongly the Trump administration is likely to react to the statement are both open questions.  The president has already made it clear that he would like the Fed’s cooperation in driving the dollar lower, so there is no doubt that the currency situation is at the top of his agenda.

Quote of the Day
“If we are lucky, the next Fed-caused downturn will cause only a resurgence of 1970s-style stagflation. The more likely scenario is the type of widespread economic chaos not seen in America since the Great Depression. The growth of cultural Marxism, the widespread entitlement mentality, and the willingness of partisans of various sides to use force against their political opponents suggests that this economic crisis will result in civil unrest that will be used to justify new crackdowns on individual liberty. Those who understand the causes of, and cures for, our current predicament have two responsibilities. First, prepare a plan to protect your family when the crisis occurs. Second, do all you can to spread the truth in hopes the liberty movement reaches critical mass so it can force Congress to make the changes necessary to avert disaster. Since the crisis will result in a rejection of the dollar’s world reserve currency status, individuals should consider alternatives such as gold and other precious metals.” – Ron Paul, 8/27/2018

Chart of the Day

Chart note:   To learn why this chart is important to current and prospective gold owners, please see:  Gold: A reverse bubble in search of a pin – The victim could quickly find itself the beneficiary.

 

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

Gold pushes higher in Asia, backs off in London-New York on mixed news

Gold pushed higher in overnight Asian markets reaching $1208 before backing off just after the London Fix. In the early New York trading it is priced at $1202, still up $2 on the day despite a sharp rally in the U.S. dollar. Silver is level at $14.57. Supporting gold overnight were currency and debt problems in a host of emerging nation states with Argentina and Turkey the most visibly pressed. Argentina raised interest rates to 60% yesterday, a 15% rise. Keeping a lid on the gold price was news of U.S. intentions to impose tariffs on a another $200 billion in Chinese imports.

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 courtesy of TradingEconomics.com

Chart note: The Argentina peso and Turkish lira are the center of attention in foreign exchange markets today. Both have roughly halved in value since the beginning of the year. Yesterday Argentina pushed interest rates to 60% – a 15% rise. Turkey’s interest rate is at 17.75%. Wall Street investors are concerned about the potential for a contagion along the lines of the late 1990s Asian financial crisis that nearly resulted in a global economic meltdown. This time around the debts are much larger and the dangers much more widespread geographically. Though concern mounts among financial market participants with each passing day, the White House uncharacteristically has remained mum on the situation and the Federal Reserve has only made passing mention.

 

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