Author Archives: Daily Market Report

Gold refuses to succumb to oil’s bruising fall yesterday – the ‘worst day of an awful year’ for financial markets

DAILY MARKET REPORT

Gold refused to succumb to pressure from a drop in commodities’ markets yesterday, particularly crude oil which dropped a bruising 6% in yesterday’s trading. Oil has recovered a bit this morning – up almost 2% in early trading. Gold, in fact, is up $5 on the day at $1227. Silver is up 13¢ on the day at $14.49. Yesterday was not a particularly good day for financial markets across the boards. Bloomberg labeled it “the worst day of an awful year” that left “no corner of the market unscathed.” Though few, at least publicly, are prepared to press the panic button on stocks, one would have to say that the worrying trends are beginning to look somewhat entrenched. Gold is trying to rise above it all. This will be the last report until Monday. . . Have a Happy Thanksgiving!

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

Chart of the Day

Chart note: The United States dollar has lost more than 96% of its purchasing power from 1913 to present – a 105 year period. The 2018 dollar is now worth 3.8% the 1913 dollar. Put another way, what the consumer could buy with $1 in 1913, it takes $26 today.

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DMR–Gold refuses to succumb to oil’s bruising fall yesterday – the ‘worst day of an awful year’ for financial markets

DAILY MARKET REPORT

Gold refused to succumb to pressure from a drop in commodities’ markets yesterday, particularly crude oil which dropped a bruising 6% in yesterday’s trading.  Oil has recovered a bit this morning – up almost 2% in early trading.  Gold, in fact, is up $5 on the day at $1227.  Silver is up 13¢ on the day at $14.49. Yesterday was not a particularly good day for financial markets across the boards.  Bloomberg labeled it “the worst day of an awful year” that left “no corner of the market unscathed.” Though few, at least publicly, are prepared to press the panic button on stocks, one would have to say that the worrying trends are beginning to look somewhat entrenched. Gold is trying to rise above it all.  This will be the last report until Monday. . . Have a Happy Thanksgiving!

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

Chart of the Day

Chart note: The United States dollar has lost more than 96% of its purchasing power from 1913 to present – a 105 year period. The 2018 dollar is now worth 3.8% the 1913 dollar. Put another way, what the consumer could buy with $1 in 1913, it takes $26 today.

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Gold inches higher as stock sell-off becomes more entrenched

DAILY MARKET REPORT

Gold inched higher in quiet pre-Thanksgiving trading – up $1 on the day at $1225. Silver is down 2¢ at $14.43. Gold is attempting an interim base in an around the $1220 mark and searching for a good reason to bolt higher. Stocks are the big story this morning with the DJIA set to open 400 points lower. The NASDAQ, led lower by Apple, looks to open almost 2.5% lower.

Gold continues to gather support the result of dovish Fed rumblings, concerns about the dispute between China and the U.S. and weakness in equity markets – weakness that seemingly becomes more entrenched with each passing day. Goldman Sachs surprised market participants prior to today’s open by advising its clients to get defensive and move a portion of their portfolios to cash because it now offers positive inflation-adjusted returns. “Cash,” says Goldman, “will represent a competitive asset class to stocks for the first time in many years.” We have not seen a recommendation based on that particular rationale in a very long time.

Quote of the Day
“At the quarter-century mark of 1925, the great bull market was under way, and Graham*, then 31, developed what he later described as a ‘bad case of hubris.’ During an early-1929 conversation with business associate Bernard Baruch (about whom he disparagingly observed, ‘He had the vanity that attenuates the greatness of some men’), both agreed that the market had advanced to ‘inordinate heights, that the speculators had gone crazy, that respected investment bankers were indulging in inexcusable high jinks, and that the whole thing would have to end up one day in a major crash.’ Several years later he lamented, ‘What seems really strange now is that I could make a prediction of that kind in all seriousness, yet not have the sense to realize the dangers to which I continued to subject the Account’s4 capital.’ In mid-1929, the equity in the ‘Account’ was a proud $2,500,000; by the end of 1932, it had shrunk to a mere $375,000.” – Frank K. Martin, A Decade of Delusions

* Benjamin Grahm, “The father of value investing”, 1894-1976, Security Analysis (1934) with David Dodd, and The Intelligent Investor (1949).

Chart of the Day

Chart courtesy of OPTIONAlpha

Chart note: We guesstimate that we are somewhere between “Euphoria” and “Anxiety” on stocks and “depression” and “hope” on gold and silver. In short, the time might be right for starting to leg-out of stocks and ladder-into gold. The last time we featured this chart in late September, we put stock market sentiment at somewhere between “Thrill” and “Euphoria” and gold somewhere between “Despondency” and “Depression.”
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DMR-Gold inches higher as stock sell-off becomes more entrenched

DAILY MARKET REPORT

Gold inched higher in quiet pre-Thanksgiving trading – up $1 on the day at $1225.  Silver is down 2¢ at $14.43.  Gold is attempting an interim base in an around the $1220 mark and searching for a good reason to bolt higher.  Stocks are the big story this morning with the DJIA set to open 400 points lower.  The NASDAQ, led lower by Apple, looks to open almost 2.5% lower.

Gold continues to gather support the result of dovish Fed rumblings, concerns about the dispute between China and the U.S.  and weakness in equity markets –  weakness that seemingly becomes more entrenched with each passing day. Goldman Sachs surprised market participants prior to today’s open by advising its clients to get defensive and move a portion of their portfolios to cash because it now offers positive inflation-adjusted returns. “Cash,” says Goldman, “will represent a competitive asset class to stocks for the first time in many years.”  We have not seen a recommendation based on that particular rationale in a very long time.

Quote of the Day
“At the quarter-century mark of 1925, the great bull market was under way, and Graham*, then 31, developed what he later described as a ‘bad case of hubris.’ During an early-1929 conversation with business associate Bernard Baruch (about whom he disparagingly observed, ‘He had the vanity that attenuates the greatness of some men’), both agreed that the market had advanced to ‘inordinate heights, that the speculators had gone crazy, that respected investment bankers were indulging in inexcusable high jinks, and that the whole thing would have to end up one day in a major crash.’ Several years later he lamented, ‘What seems really strange now is that I could make a prediction of that kind in all seriousness, yet not have the sense to realize the dangers to which I continued to subject the Account’s4 capital.’ In mid-1929, the equity in the ‘Account’ was a proud $2,500,000; by the end of 1932, it had shrunk to a mere $375,000.” – Frank K. Martin, A Decade of Delusions

* Benjamin Grahm, “The father of value investing”, 1894-1976, Security Analysis (1934) with David Dodd, and The Intelligent Investor (1949).

Chart of the Day

Chart courtesy of OPTIONAlpha

Chart note: We guesstimate that we are somewhere between “Euphoria” and “Anxiety” on stocks and “depression” and “hope” on gold and silver. In short, the time might be right for starting to leg-out of stocks and ladder-into gold. The last time we featured this chart in late September, we put stock market sentiment at somewhere between “Thrill” and “Euphoria” and gold somewhere between “Despondency” and “Depression.”
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DMR

No DMR today.  Please check back though.  We will post an update if anything of interest surfaces.

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Gold ETF buyers return to market

Scrap Register/11-16-2018

“Both central banks and ETF investors tend to be ‘resilient holders’ of gold, Standard says.”

USAGOLD  note:  ETF inflows are an indication of fund and institution buying.

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Gold-Silver COT reports – Friday release

GoldSeek/11-16-2018

[Last week’s report]

[This week’s full report]

USAGOLD note: Given the strong interest in the record COT short positions in gold and silver, we plan to make these GoldSeek reports a regular Friday feature. So please check back on Friday afternoons for the latest reports. We will make a comment or two when warranted.

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Gold surges $11 at COMEX open on Brexit, Powell comments

DAILY MARKET REPORT

Gold surged at the COMEX open this morning – up $11 at $1225. Silver is up 10¢ at $14.40. We detect two principal factors driving today’s trading. One is ominous and clear-cut – UK’s Brexit woes. The other is less concrete but probably more influential in the marketplace – guarded comments from Fed chairman Powell that came off as an early warning that a change of direction might be brewing at the Fed on interest rates. Suddenly the possibility of a “pause” has entered market thinking. Adding to the “pause” argument, CNBC ran a blazing headline this morning: “Cramer says CEOs are telling him off the record the economy has quickly cooled.” Such anecdotal evidence might be what was behind Powell’s remarks two days ago.

As we mentioned yesterday, the unfolding Fed scenario might serve as incentive for traders to begin squaring the enormous short position at the COMEX which requires buying gold contracts as an offset. With a shaky weekend ahead of us, the prudent course of action might be to buy today.

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 note: This interactive chart from the St. Louis Federal Reserve shows the average annual price of gold from 1970 through the present. It demonstrates at a glance gold’s strong performance as a portfolio holding over the long haul and emphasizes its role as a reliable long-term portfolio safe haven.

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DMR-Gold surges $11 at COMEX open on Brexit, Powell comments

DAILY MARKET REPORT

Gold surged at the COMEX open this morning – up $11 at $1225.  Silver is up 10¢ at $14.40.  We detect two principal factors driving today’s trading.  One is ominous and clear-cut – UK’s Brexit woes.  The other is less concrete but probably more influential in the marketplace – guarded comments from Fed chairman Powell that came off as an early warning that a change of direction might be brewing at the Fed on interest rates. Suddenly the possibility of a “pause” has entered market thinking. Adding to the “pause” argument, CNBC ran a blazing headline this morning: “Cramer says CEOs are telling him off the record the economy has quickly cooled.” Such anecdotal evidence might be what was behind Powell’s remarks two days ago.

As we mentioned yesterday, the unfolding Fed scenario might serve as incentive for traders to begin squaring the enormous short position at the COMEX which requires buying gold contracts as an offset.  With a shaky weekend ahead of us, the prudent course of action might be to buy today.

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 note:  This interactive chart from the St. Louis Federal Reserve shows the average annual price of gold from 1970 through the present.  It demonstrates at a glance gold’s strong performance as a portfolio holding over the long haul and emphasizes its role as a reliable long-term portfolio safe haven.

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Gold pushes cautiously higher on Powell reference to economic ‘headwinds’ in 2019

Gold cautiously pushed higher again today as a carryover from yesterday’s strong rise. It is up another $3 in early trading at $1214, and up about $15 over the past two days. Although one could point to any number of factors to explain yesterday’s sudden jump higher, the one thing that stands out is Fed chairman Jerome Powell’s remarks that the U.S. economy could face “headwinds” in 2019. In a clear break with previous public posturing, he cautioned that the Fed would be “thinking about how much further to raise rates and the pace at which we will raise rates.”

However one parses the whole of Powell’s speech and Q&A session yesterday, this revelation provides a hint as to what the Fed chairman might be thinking. It is likely to be read as a loosening of the more hawkish rhetoric in weeks past and perhaps an early indication of a shift at the Fed.

Gold, we believe, is responding to that possibility. It, in fact, might inspire some squaring of the record short postion at the COMEX. At the moment the dollar appears to be leaning toward an upward bias based on what is occurring in Europe (the UK and Italy) and continuing wariness on further easing in China. That reaction might eventually take a back seat though to a softening at the Fed. Silver is up 5¢ on the day at $14.19.

* Bloomberg: Powell says solid economy faces headwinds as Fed mulls rates

Quote of the Day
“This is a terrible fiscal situation we’ve got ourselves into. The administration is doing tax cuts and a spending decrease, but he’s doing them in the wrong order. What we need right now is to focus totally on reducing the debt. We’re in a stage where if nothing is changed, we’re about to go from stagnation to stagflation, with a significant rise in inflation and a wholly significant imbalance in the economy, which is very difficult to anticipate at this stage. But the outlook is not exactly terrific.” – Alan Greenspan, 12/2017, CNBC interview

Chart of the Day

Chart note: The St. Louis Federal Reserve recently released this new chart on tax receipts. It shows corporate tax receipts plummeting and taxes on production and imports rising. This might be a new set of circumstances brought about by the Trump administration’s tax cuts and tariff programs. In the aggregate, tax receipts represented by the thick black line are falling at a time when government debt is expected to increase – and by some accounts increase significantly. For a prescient observation as to what all of this might lead to, we refer you to the quote from Mr. Greenspan immediately above.

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DMR–Gold pushes cautiously higher on Powell reference to economic ‘headwinds’ in 2019

DAILY MARKET REPORT

Gold cautiously pushed higher again today as a carryover from yesterday’s strong rise.  It is up another $3 in early trading at $1214, and up about $15 over the past two days.  Although one could point to any number of factors to explain yesterday’s sudden jump higher, the one thing that stands out is Fed chairman Jerome Powell’s remarks that the U.S. economy could face “headwinds” in 2019. In a clear break with previous public posturing, he cautioned that the Fed would be “thinking about how much further to raise rates and the pace at which we will raise rates.”

However one parses the whole of Powell’s speech and Q&A session yesterday, this revelation provides a hint as to what the Fed chairman might be thinking.  It is likely to be read as a loosening of the more hawkish rhetoric in weeks past and perhaps an early indication of a shift at the Fed.

Gold, we believe, is responding to that possibility. It, in fact, might inspire some squaring of the record short postion at the COMEX.  At the moment the dollar appears to be leaning toward an upward bias based on what is occurring in Europe (the UK and Italy) and continuing wariness on further easing in China.  That reaction might eventually take a back seat though to a softening at the Fed.  Silver is up 5¢ on the day at $14.19.

* Bloomberg: Powell says solid economy faces headwinds as Fed mulls rates

Quote of the Day
“This is a terrible fiscal situation we’ve got ourselves into. The administration is doing tax cuts and a spending decrease, but he’s doing them in the wrong order. What we need right now is to focus totally on reducing the debt. We’re in a stage where if nothing is changed, we’re about to go from stagnation to stagflation, with a significant rise in inflation and a wholly significant imbalance in the economy, which is very difficult to anticipate at this stage. But the outlook is not exactly terrific.” – Alan Greenspan, 12/2017, CNBC interview

Chart of the Day

Chart note: The St. Louis Federal Reserve recently released this new chart on tax receipts. It shows corporate tax receipts plummeting and taxes on production and imports rising. This might be a new set of circumstances brought about by the Trump administration’s tax cuts and tariff programs. In the aggregate, tax receipts represented by the thick black line are falling at a time when government debt is expected to increase – and by some accounts increase significantly. For a prescient observation as to what all of this might lead to, we refer you to the quote from Mr. Greenspan immediately above.

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Warren Buffett would buy precious metals again, if he could

Investing.com/Jesse Felder/11-14-2018

“‘But it’s also important to look at his later thesis for buying silver: ‘In recent years, bullion inventories have fallen materially, and last summer Charlie and I concluded that a higher price would be needed to establish equilibrium between supply and demand.’ Currently, we have a very similar situation in gold.”

USAGOLD note:  In this interesting retrospective, Jesse Felder applies Munger-Buffet logic from two decades ago  to the present situation and concludes its a good time to buy gold. . . .

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Gold on the fence as global tangle dominates trading

DAILY MARKET REPORT

Gold continues to ping-pong on either side of the $1200 mark unable to make a convincing move up or down. It, in fact, is right at $1200 as we write this report and down $3.50 on the day. Silver similarly is stuck in and around the $14 mark and down marginally on the day.

The precious metals are experiencing headwinds from weakness in both the yuan and euro in recent days.  The situation in Europe – most notably having to do with Brexit and the budget situation in Italy – does not lend itself to quick or easy resolution.  With respect to China, there have been rumblings of lower interest rates and a weakening economy.  That prognosis is balanced in the United States against the prospect of rising inflationary expectations and concerns about stability in financial markets.

“Demand for copper shall be positive next year and in the coming years,” Marcin Chludziński, head of copper mining giant KGHM Polska Miedz SA, told Bloomberg yesterday. “The trade conflict may affect demand to some extent,” he concludes, “but on the other hand China is changing its growth model and starting to accelerate internal consumption in order to rely less on exports and more on its domestic market.”

In an odd break with standard operating procedure, ex-Fed chair Janet Yellen voiced her concerns about the dollar being too strong – a prospect she feels could widen the U.S. trade gap. It seems that much is up in the air at the moment on the global stage and gold is content to remain on the fence as a result – at least for now. That, as always though, is subject to change without notice. . . . . . . .

Quote of the Day
“[T]he object of speculation may vary widely from one mania or bubble to the next. It may involve primary products, especially those imported from afar (where the exact conditions of supply and demand are not known in detail), or goods manufactured for export to distant markets, domestic and foreign securities of various kinds, contracts to buy or sell goods or securities, land in the country or city, houses, office buildings, shopping centers, condominiums, foreign exchange. At a late stage, speculation tends to detach itself from really valuable objects and turn to delusive ones. A larger and larger group of people seeks to become rich without a real understanding of the processes involved. Not surprisingly, swindlers and catchpenny schemes flourish.” – Robert Z. Aliber and Charles P. Kindleberger, Manias, Panics and Crashes – Anatomy of a Typical Financial Crisis (2001)

Chart of the Day

Chart note: As the chart above illustrates, gold does not always react to the start of a crisis as anticipated. As the credit crisis gained momentum in 2008, gold declined as the dollar rose – acting in much the same way it is reacting now to the emerging markets crisis and U.S.-China trade war. It was not until late 2008, when the full extent of the crisis became all too apparent, that it began to move higher. Thereafter, from 2009 to September 2011, it rose to its all-time high of $1895 – a 215% gain in three years.

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DMR–Gold on the fence as global tangle dominates trading

DAILY MARKET REPORT

Gold continues to ping-pong on either side of the $1200 mark unable to make a convincing move up or down.  It, in fact, is right at $1200 as we write this report and down $3.50 on the day.  Silver similarly is stuck in and around the $14 mark and down marginally on the day.

The precious metals are experiencing headwinds from weakness in both the yuan and euro in recent days.  The situation in Europe – most notably having to do with Brexit and the budget situation in Italy – does not lend itself to quick or easy resolution.  With respect to China, there have been rumblings of lower interest rates and a weakening economy.  That prognosis is balanced in the United States against the prospect of rising inflationary expectations and concerns about stability in financial markets.

In an odd break with standard operating procedure, ex-Fed chair Janet Yellen voiced her concerns about the dollar being too strong – a prospect she feels could widen the U.S. trade gap.  It seems that much is up in the air at the moment on the global stage and gold is content to remain on the fence as a result – at least for now. That, as always though, is subject to change without notice. . . . . . . .

Quote of the Day
“[T]he object of speculation may vary widely from one mania or bubble to the next. It may involve primary products, especially those imported from afar (where the exact conditions of supply and demand are not known in detail), or goods manufactured for export to distant markets, domestic and foreign securities of various kinds, contracts to buy or sell goods or securities, land in the country or city, houses, office buildings, shopping centers, condominiums, foreign exchange. At a late stage, speculation tends to detach itself from really valuable objects and turn to delusive ones. A larger and larger group of people seeks to become rich without a real understanding of the processes involved. Not surprisingly, swindlers and catchpenny schemes flourish.” – Robert Z. Aliber and Charles P. Kindleberger, Manias, Panics and Crashes – Anatomy of a Typical Financial Crisis (2001)

Chart of the Day

Chart note: As the chart above illustrates, gold does not always react to the start of a crisis as anticipated. As the credit crisis gained momentum in 2008, gold declined as the dollar rose – acting in much the same way it is reacting now to the emerging markets crisis and U.S.-China trade war. It was not until late 2008, when the full extent of the crisis became all too apparent, that it began to move higher. Thereafter, from 2009 to September 2011, it rose to its all-time high of $1895 – a 215% gain in three years.

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Technically speaking: Major markets are all flashing warning signs

Real Investment Advice/Lance Roberts/11-13-2018

“The ongoing deterioration in the markets continues to confirm, as I wrote back in April, the bull market that started in 2009 has ended. However, we will likely not know for certain until we get into 2019, but therein lies the biggest problem. Waiting for verification requires a greater destruction of capital than we are willing to endure.”

USAGOLD note:   Lance Roberts is waving the warning flag on the current stock market . . .His emphasis on the potential for capital destruction is well-taken.

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Gold consolidating at $1200, looking to regain its footing

DAILY MARKET REPORT

Gold looks to be consolidating around the $1200 mark in early trading with the combined effects of last week’s Fed meeting and election now behind us. The stock market’s initial reaction to last week’s events was euphoric. Now with yesterday’s more than 600 point drop/reality check, and a weak open this morning, it looks to be having second thoughts. Gold plummeted initially. Now though it is attempting to regain its footing and muster support at the $1200 level.

China’s yuan keeps getting in the way of those aspirations – down sharply again today after a price rally failed in overnight trading. Financial markets are jittery about China with an economic slowdown and potentially lower interest rates worrying investors. Reuters reports Hong Kong bargain-hunters returning to the gold market the past few days.

As it stands, gold and silver are both level on the day at $1202 and $14.04 respectively.

Quote of the Day.
“The world hasn’t seen inflation in a decade now. But it’s coming. And while the Fed is raising rates to combat inflation, there’s zero chance it hits the perfect mix to keep markets chugging along. Remember, we’ve already seen the stock market and real estate panic crash in response to a small interest rate hike. And I think there’s more pain ahead as inflation really starts to work its way into the economy. With inflation looming, I’d want to own some gold.” – Simon Black, Sovereign Man

Chart of the Day

Chart courtesy of TradingEconomics.com

Chart note:Producer prices for final demand in the US,” says TradingEconomics, “rose by 0.6 percent in October 2018, following a 0.2 percent advance in September and easily beating market expectations of 0.2 percent. It was the biggest monthly gain in producer prices since September 2012 mainly boosted by a jump in costs for energy (2.7 percent vs -0.8 percent in September) and trade services (1.6 percent vs 0.1 percent). Prices also rose for foods (1 percent vs -0.6 percent) and transportation and warehousing services (0.6 percent vs 1.8 percent).”

 

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DMR–Gold consolidating at $1200 looking to regain footing

DAILY MARKET REPORT

Gold looks to be consolidating around the $1200 mark in early trading with the combined effects of last week’s Fed meeting and election now behind us. The stock market’s initial reaction to last week’s events was euphoric. Now with yesterday’s more than 600 point drop/reality check, and a weak open this morning, it looks to be having second thoughts.  Gold plummeted initially.  Now though it is attempting to regain its footing and muster support at the $1200 level.

China’s yuan keeps getting in the way of those aspirations – down sharply again today after a price rally failed in overnight trading. Financial markets are jittery about China with an economic slowdown and potentially lower interest rates worrying investors. Reuters reports Hong Kong bargain-hunters returning to the gold market the past few days.

As it stands, gold and silver are both level on the day at $1202 and $14.04 respectively.

Quote of the Day.
“The world hasn’t seen inflation in a decade now. But it’s coming. And while the Fed is raising rates to combat inflation, there’s zero chance it hits the perfect mix to keep markets chugging along. Remember, we’ve already seen the stock market and real estate panic crash in response to a small interest rate hike. And I think there’s more pain ahead as inflation really starts to work its way into the economy. With inflation looming, I’d want to own some gold.” – Simon Black, Sovereign Man

Chart of the Day

Chart courtesy of TradingEconomics.com

Chart note:Producer prices for final demand in the US,” says TradingEconomics, “rose by 0.6 percent in October 2018, following a 0.2 percent advance in September and easily beating market expectations of 0.2 percent. It was the biggest monthly gain in producer prices since September 2012 mainly boosted by a jump in costs for energy (2.7 percent vs -0.8 percent in September) and trade services (1.6 percent vs 0.1 percent). Prices also rose for foods (1 percent vs -0.6 percent) and transportation and warehousing services (0.6 percent vs 1.8 percent).”

 

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There’s something behind this market sell-off that no one is talking about: The strong dollar

CNBC/Patti Domm/11-12-2018

“Stocks investors are spooked about a lot of things, and the strong dollar biting into earnings growth is now one of them. The dollar index, which measures the greenback versus a basket of other currencies, jumped 0.7 percent on Monday to 97.58, a 17-month high. As the dollar rose, the Dow Jones Industrial Average lost 602 points to 25,387, and the S&P 500 was down nearly 2 percent to 2,726.”

USAGOLD note:  So gold isn’t the only market reeling from the strong dollar . . . As Credit Bulletin’s Doug Noland consistently reminds us – the problems at the periphery are making their way to the core.

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Gold continues push in southerly direction

DAILY MARKET REPORT

Gold continued to push in a southerly direction early today in a continuation of last week’s Fed-related downside. It is off $4.50 this morning at $1205. Silver is 8¢ lower at $14.07. Most of gold’s downside came during Asian trading hours in response to China’s yuan. The weakness carried over to the New York open and gained momentum as the dollar index opened at 18-month highs. With little in the way of news, today’s trading looks technically oriented at this juncture. Thus far, it has been a slow day for economic and market news. We will update if anything of interest surfaces here at our Online Daily Newsletter.

Quote of the Day
“[James] Grant makes the point that the debt has been increased and decreased on a regular basis but never until today was there a view that the deficit didn’t matter and could be increased indefinitely. He points out that it took the United States 193 years to accumulate its first trillion dollars of federal debt. And amazingly, that it will add that much in the current fiscal year alone.” – James Rickards, Daily Reckoning

Chart of the Day

Chart note: In the article linked above, James Rickards goes on to quantify the established danger zone for the debt to GDP ratio, which according to economists Ken Rogoff and Carmen Rinehart begins at 90%. The current debt to GDP ratio for the United States is 106%.


Subscription recommendation: James Grant’s Interest Rate Observer

 

 

 

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DMR-Gold continues push in southerly direction

DAILY MARKET REPORT

Gold continued to push in a southerly direction early today in a continuation of last week’s Fed-related downside. It is off $4.50 this morning at $1205.  Silver is 8¢ lower at $14.07.  Most of gold’s downside came during Asian trading hours in response to China’s yuan.  The weakness carried over to the New York open and gained momentum as the dollar index opened at 18-month highs.  With little in the way of news, today’s trading looks technically oriented at this juncture. Thus far, it has been a slow day for economic and market news.  We will update if anything of interest surfaces here at our Online Daily Newsletter.

Quote of the Day
“[James] Grant makes the point that the debt has been increased and decreased on a regular basis but never until today was there a view that the deficit didn’t matter and could be increased indefinitely. He points out that it took the United States 193 years to accumulate its first trillion dollars of federal debt. And amazingly, that it will add that much in the current fiscal year alone.” – James Rickards, Daily Reckoning

Chart of the Day

Chart note:  In the article linked above, James Rickards goes on to quantify the established danger zone for the debt to GDP ratio, which according to economists Ken Rogoff and Carmen Rinehart begins at 90%.  The current debt to GDP ratio for the United States is 106%.


Subscription recommendation: James Grant’s Interest Rate Observer

 

 

 

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

The next financial crisis

Mises Institute/Daniel Lacalle/11-10-2018

“When the biggest bubble is sovereign debt the crisis we face is not one of the massive financial market losses and real economy contagion, but a slow fall in asset prices, as we are seeing, and global stagnation. The next crisis is not likely to be another Lehman, but another Japan, a widespread zombification of global economies to avoid the pain of a large re-pricing of sovereign bonds, that leads to massive tax hikes to pay the rising interests, economic recession and unemployment.”

USAGOLD note: In the interest of equal time, Daniel Lacalle says disinflation, not inflation, will be the culprit in the next financial breakdown. Gold, to the surprise of its critics, did very well in the during the disinflationary crisis that began in 2007-2008 reaching its all-time high in mid-2011 at over $1800 per ounce.  Disinflation, though, is only one of the maladies against which gold serves as a shelter.  History has shown it to protect its owners against economic stormy weather of all descriptions – inflation, deflation, disinflation, stagflation and hyperinflation.

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Posted in Today's top gold news and opinion |

Gold suffering after-effects of Fed announcement

DAILY MARKET REPORT

Gold is suffering the after-effects of yesterday’s Fed announcement – one in which the central bank essentially pledged to stay the course on interest rates for the foreseeable future. Gold is down $12.00 on the day at $1211. Silver is down 22¢ at $14.24. A weaker yuan is also a factor in gold’s pricing this morning. Most of the damage was done during European trading hours where the weak euro/strong dollar sentiment continues to weigh on financial markets. Meanwhile, back in the United States, core producer prices registered a .6% gain, or 7.2% annualized – the largest increase since 2012 and something of a vindication for the Fed’s interest rate stance.

Quote of the Day
“I think we’re getting to the point now where the breakout is going to be on the inflation upside. The only question is when.” – Alan Greenspan, February 2018

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 is having an off-year thus far in 2018 – down 4.6% while the dollar is up almost 6%. Given the performance record, though, contrarian investors might see the present disparity as a buying opportunity.

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Posted in dailyquotes |

DMR-Gold suffering after-effects of Fed announcement

DAILY MARKET REPORT

Gold is suffering the after-effects of yesterday’s Fed announcement – one in which the central bank essentially pledged to stay the course on interest rates for the foreseeable future.  Gold is down $12.00 on the day at $1211.  Silver is down 22¢ at $14.24.  A weaker yuan is also a factor in gold’s pricing this morning.  Most of the damage was done during European trading hours where the weak euro/strong dollar sentiment continues to weigh on financial markets.  Meanwhile, back in the United States, core producer prices registered a .6% gain, or 7.2% annualized – the largest increase since 2012 and something of a vindication for the Fed’s interest rate stance.

Quote of the Day
“I think we’re getting to the point now where the breakout is going to be on the inflation upside. The only question is when.” – Alan Greenspan, February 2018

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 is having an off-year thus far in 2018 – down 4.6% while the dollar is up almost 6%.  Given the performance record, though,  contrarian investors might see the present disparity as a buying opportunity.

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

South African gold ouput plunges most since 2015 in September

Bloomberg/Rene Vollgraff/11-8-2018

“Producers in South Africa, which operate some of the world’s deepest and most labor intensive mines, have been forced to reduce output and cut thousands of jobs as they struggle to contain operating costs. The continent’s most-industrialized economy fell into its first recession in almost a decade in the second quarter.”

USAGOLD note:  One would think that containing operating costs is not a peculiarity to South Africa alone.  With prices at current lows, mines are being pressed on the revenue side of the equation as well.

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Posted in Today's top gold news and opinion |

Infrastructure spending rises up US political agenda

Financial Times/Kiran Stacey and Andrew Edgecliffe-Johnson/11-8-2018

“Under plans he unveiled this year, the government would spend more than $200bn over the next 10 years repairing parks, building roads and improving public transport. That bill died as campaign politics took over, with the administration becoming distracted by other matters and the Democrats unwilling to give the president a victory so close to the vote.”

USAGOLD note:  Some detail on a subject raised in yesterday’s DMR . . . .

 

 

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Posted in Today's top gold news and opinion |

The failure of globalization and the return of inflation

Spectator/Mark Asquith/11-8-2018

“If globalization is rolled back, as now looks likely, inflation will return. The 1970s was the last time that Western inflation ran hot. Globalization killed that inflation. To imagine what reversing globalization may look like now, recall what happened in the 40 years since.”

USAGOLD note:  We have alluded to the possibility of tariff-driven inflation in the past on this page.  Rising import prices – the result of deglobalization, e.g., the U.S.-China trade war – will filter ultimately to consumers.  This will not be a monetary inflation but a political inflation and a different animal from anything we have encountered in the recent past.  As such, we are entering uncharted territory – one in which politics could outweigh monetary policy. Asquith does an excellent job outlining the potential problems and concludes that “the long-term trend may well be inflationary.”

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Gold drifts marginally lower in advance of Fed announcement

Gold drifted marginally lower in advance of today’s FOMC results to be announced later in the day. Following that announcement, we should get a read on gold’s true intentions – up, down or sideways. As it is, gold is $1 lower at $1225. Silver is down 11¢ at $14.46.

The markets, it appears, are still sorting out how the elections might affect the economy. The one immediate development that stands out on the economic front, though, is Trump/McConnell’s reach across the political divide on the possibility of a bipartisan infrastructure bill. Though the bulk of Americans might agree that such a program would be good for the country, the downside would be adding even more fiscal stimulus to an already strong economy leaning towards inflation. If one thing stands out from this election it is that neither side is interested in anything approaching genuine fiscal discipline.

Quote of the Day
“The best thing is, don’t play the game, because it is pros against you. We spend hundreds of millions of dollars a year to get an edge, and others do that too. So it’s very difficult for the individual investor to assume that he [or she] can pick something better. The best thing you can do is know how to have a balanced portfolio … because you ain’t going to win that game.” – Ray Dalio, Bridgewater Associates, speaking at the Harvard Kennedy School’s Institute of Politics

Chart of the Day

Chart note: Gold gets its share of press, not all of it good. In recent months, the financial media has hammered away at the mistaken notion that gold does not do well in a rising interest rate environment. Nothing could be further from the truth as revealed in our Chart of the Day. Since the Fed started raising interest rates in late 2015, gold has been in a sustained uptrend punctuated with bouts of weakness. The Fed funds rate has gone from .12% in November 2015 to 2.25% now. Gold simultaneously has gone from $1062 to $1225 for a gain of 15% – even at the current lows – during the initial stages of this rate raising period.

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Posted in dailyquotes |

DMR-Gold drifts marginally lower in advance of Fed announcement

DAILY MARKET REPORT

Gold drifted marginally lower in advance of today’s FOMC results to be announced later in the day.   Following that announcement, we should get a read on gold’s true intentions – up, down or sideways.  As it is, gold is $1 lower at $1225. Silver is down 11¢ at $14.46.

The markets, it appears, are still sorting out how the elections might affect the economy.  The one immediate development that stands out on the economic front, though, is Trump/McConnell’s reach across the political divide on the possibility of a bipartisan infrastructure bill.  Though the bulk of Americans might agree that such a program would be good for the country, the downside would be adding even more fiscal stimulus to an already strong economy leaning towards inflation. If one thing stands out from this election it is that neither side is interested in anything approaching genuine fiscal discipline.

Quote of the Day
“The best thing is, don’t play the game, because it is pros against you. We spend hundreds of millions of dollars a year to get an edge, and others do that too. So it’s very difficult for the individual investor to assume that he [or she] can pick something better. The best thing you can do is know how to have a balanced portfolio … because you ain’t going to win that game.” – Ray Dalio, Bridgewater Associates, speaking at the Harvard Kennedy School’s Institute of Politics

Chart of the Day

Chart note: Gold gets its share of press, not all of it good. In recent months, the financial media has hammered away at the mistaken notion that gold does not do well in a rising interest rate environment. Nothing could be further from the truth as revealed in our Chart of the Day. Since the Fed started raising interest rates in late 2015, gold has been in a sustained uptrend punctuated with bouts of weakness. The Fed funds rate has gone from .12% in November 2015 to 2.25% now. Gold simultaneously has gone from $1062 to $1225 for a gain of 15% – even at the current lows – during the initial stages of this rate raising period.

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

Markets, including gold, letting the dust settle from the mid-term elections

As trading opens in U.S. financial markets, it seems the prevailing attitude is to let the dust settle from the mid-term elections and take some time to put the results into perspective. Gold pushed higher overseas, leveled, then gave up its gain before the New York market opened. The stock market’s reaction has been equally non-commital though the Dow is up 125 at the moment. Reactions in the FOREX and bond markets thus far have been low-key as well. In general, it looks like investors are taking a breather this morning, though that could all change as we move along. We remind our readers that, though the election is behind us, the Federal Reserve Open Market Committee meeting is upon us. Proceedings start today and end tomorrow and that could be contributing to gold’s tepid performance thus far today. Fed meetings – even those like this one which is expected to be low-profile – have been known to act as a drag on the gold price.

Quote of the Day
“Simple: Prices remain distorted by the long-term effects of the QE era. The blind central bank binging on corporate debt of the QE era continues to distort because prices have not yet fully adjusted downwards. (Liquidity is also stalled by technical reasons, like market making being regulated out of existence – a story for another day..) The smart buyers aren’t going to buy bonds at these levels – they are waiting for the correction. Inflation hovers in the background, and who wants to buy at rates that would leave holders with a real negative return? Anyone prepared to buy at current levels is making an implicit bet central banks will step back into distort the market again by keeping rates artificially low…” – Bill Blain, Blain’s Morning Porridge (10-23-2018)

Chart of the Day

Chart note: Last week national security advisor John Bolton focused attention on the national debt saying that it was “a threat to the society.” The national debt now stands at $21.7 trillion and $1.2 trillion has been added thus far in 2018. “And that kind of threat,” he added, “ultimately has a national security consequence for it.” This article is a bit vague as to what that “national security consequence” might be. An obvious one, though, is that interest payments eat up what might otherwise be spent on the national defense. Perhaps that is what has Mr. Bolton worried – particularly with interest rates on the rise. As you can see, there is a strong relationship between growth in the national debt and gold – one that goes all the way back to the early 1970s.

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Posted in dailyquotes |

DMR-Markets, including gold, letting the dust settle from the mid-term elections

DAILY MARKET REPORT

As trading opens in U.S. financial markets, it seems the prevailing attitude is to let the dust settle from the mid-term elections and take some time to put the results into perspective.  Gold pushed higher overseas, leveled, then gave up its gain before the New York market opened.  The stock market’s reaction has been equally non-commital though the  Dow is up 125 at the moment.  Reactions in the FOREX and bond markets thus far have been low-key as well. In general, it looks like investors are taking a breather this morning, though that could all change as we move along.  We remind our readers that, though the election is behind us, the Federal Reserve Open Market Committee meeting is upon us. Proceedings start today and end tomorrow and that could be contributing to gold’s tepid performance thus far today. Fed meetings – even those like this one which is expected to be low-profile –  have been known to act as a drag on the gold price.

Quote of the Day
“Simple: Prices remain distorted by the long-term effects of the QE era. The blind central bank binging on corporate debt of the QE era continues to distort because prices have not yet fully adjusted downwards. (Liquidity is also stalled by technical reasons, like market making being regulated out of existence – a story for another day..) The smart buyers aren’t going to buy bonds at these levels – they are waiting for the correction. Inflation hovers in the background, and who wants to buy at rates that would leave holders with a real negative return? Anyone prepared to buy at current levels is making an implicit bet central banks will step back into distort the market again by keeping rates artificially low…” – Bill Blain, Blain’s Morning Porridge (10-23-2018)

Chart of the Day

Chart note:  Last week national security advisor John Bolton focused attention on the national debt saying that it was “a threat to the society.”  The national debt now stands at $21.7 trillion and $1.2 trillion has been added thus far in 2018.  “And that kind of threat,” he added, “ultimately has a national security consequence for it.” This article is a bit vague as to what that “national security consequence” might be. An obvious one, though, is that interest payments eat up what might otherwise be spent on the national defense. Perhaps that is what has Mr. Bolton worried – particularly with interest rates on the rise.  As you can see, there is a strong relationship between growth in the national debt and gold – one that goes all the way back to the early 1970s.

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