The Jakarta Post/News Desk/8-30-2018
“State-owned mining company PT Aneka Tambang (Antam) has said its gold sales jumped significantly in the first half of 2018 as a result of the weakening rupiah. . .“An impact of the dollar strengthening is that people are buying gold. Domestic demand has increased. . .”
USAGOLD note: Indonesia joins a number of emerging countries experiencing greatly increased gold demand among citizens concerned about currency and debt problems. The list, in fact, grows longer by the day.
Chart courtesy of TradingEconomics.com
“Four in 10 Americans are struggling to pay for their basic needs such as groceries or housing, a problem even middle-class households confront, according to a new study from the Urban Institute. Despite the U.S. economy being near full employment, 39.4 percent of adults between 18 and 64 years old said they experienced at least one type of material hardship in 2017, according to the study, which surveyed more than 7,500 adults about whether they had trouble paying for housing, utilities, food or health care.”
USAGOLD note: This articles states that researchers were surprised at these statistics. They weren’t the only ones.
“India is set to overtake China as the biggest source of growth for oil demand by 2024, according to a forecast announced Monday by research and consultancy group Wood Mackenzie. . . India’s expanding middle class will be a key factor, as well as its growing need for mobility, according to Wood Mackenzie.”
USAGOLD note: The rise of the middle class in both economies bodes well for future gold demand.
CNBC/Yen Nee Lee/8-29-2018
“The Indonesian rupiah should stabilize from here on out, the country’s trade minister, Enggartiasto Lukita, told CNBC. The rupiah is one of the worst-performing Asian currencies this year as investors flee emerging markets with current account and fiscal deficits. “
USAGOLD note: A familiar refrain. . .and of the kind that these days inspires a reaction opposite of what is intended.
Image by By Government of Indonesia; Evanc0912 [CC0], via Wikimedia Commons
Financial Times/Joachim Fels/8-27-2018
“Damned if they keep raising, damned if they don’t. Federal Reserve chair Jay Powell and his colleagues face a difficult choice over the next few months — and it is one that could have unpleasant ramifications whatever they decide.”
USAGOLD note: So raise or stay pat after September, that is the question. As of Friday, Powell made it clear that he wants to keep the central bank’s options open, but that, in itself, was interpreted as a dovish tilt. This article does a good job of outlining what the Fed is up against with emphasis on the big build-up in emerging country debt since the financial crisis and the impact it is now having on Fed policy decisions. It also raises the possibility of a pause in raising rates after September.
“While the Indian government’s anti-gold initiatives have dented official gold demand in India, black market sales and imports continue. Silver has been a direct beneficiary of the campaign against gold. Indians prize silver for its beauty and also give it as gifts. It’s not substitute for gold, but it is viewed favorably.”
USAGOLD note: As this article indicates, surging demand for gold and silver in India usually indicates a bottom. It is also worth filing for future reference that India’s people “prize silver.” That attachment could accrue as a positive for the fundamentals in the years to come.
“Materials scientists at Sandia National Laboratories have engineered a platinum-gold alloy believed to be the most wear-resistant metal in the world. It’s 100 times more durable than high-strength steel, making it the first alloy in the same class as diamond and sapphire, nature’s most wear-resistant materials.”
Financial Times/Sam Fleming/8-26-2018
“Moves by US companies to shift the cost of President Donald Trump’s tariffs to their customers risk complicating monetary policy decisions as the Federal Reserve seeks to keep inflation steady, the central bank’s policymakers have warned.”
USAGOLD note: More anectodal evidence of future inflation. . .
“The People’s Bank of China and Federal Reserve delivered a one-two punch to the dollar Friday, spurring the biggest selloff in a month and raising the specter of further weakness ahead.”
USAGOLD note: For those who do not follow this sort of thing closely, the PBoC sets a benchmark rate daily for the yuan as priced in U.S. dollars. It then allows a 2% fluctuation in the yuan’s value thereafter intervening if necessary to enforce its wishes. Expressing its intent as it did on Friday to resume using a “counter-cyclical” factor when pricing the yuan, China’s central bank sent a message to speculators that it does not want excessive volatility in the yuan market. Some analysts saw the PBoC’s policy announcement as one of the factors behind gold’s sharp rise on Friday.
Bloomberg/Shawn Donnan, Mark Niquette and Miao Han/8-24-2018
“The trade war between the U.S. and China is primed to escalate after their governments failed to make progress in two days of talks. The two sides had met with low expectations for this week’s meetings and no further talks had been scheduled, a person familiar with the discussions said. The person, who requested anonymity to discuss the private deliberations, also said Chinese officials had raised the possibility that no further negotiations could happen until after November’s mid-term elections in the U.S.”
USAGOLD note: In a break with past responses to negative U.S.-China trade war news, the yuan is up sharply this morning.
“Trump was not chiding the Federal Reserve for the first time, but his most recent tirade triggered an uproar, both for the unorthodox nature of the remarks from a president and the appearance that he was meddling with the Fed’s independence. But he also hit on the very thought at the top of mind for many a market pro right now — is the Fed going too fast and could it pause?”
USAGOLD opinion: Powell has made a dovish comment or two over the past few months that largely escaped interpretation as such. When he talks about an “asymmetric” rate policy, for example, it might be interpreted as keeping the interest rate below the inflation rate thus promoting a negative real rate of return. That in itself is inflationary, but the markets have ignored the overture. “I think his comments are important. They’re taking the tack that at the moment, ‘our policy has to stay pristine and independent from political interference,’ but the other thing is, what if he’s [i.e., the president] right?” said [Mitsubishi Financial Group’s Chris] Rupkey. “What if rates are having a harmful effect on the prospects for growth here.” Too, there is the overall effect of Fed policies on third world countries and, in conjunction with that, big banks in the developed economies.
“Just when you thought investors have given up on gold, the Chinese swooped in….Bullion has been shunned by American speculators recently, with money managers boosting their net-short position to a record for a fourth straight week. As a stronger dollar and prospects for rising interest rates turn off U.S. buyers, the trend is turning halfway around the world. Chinese investors are picking up bargains in gold as the yuan weakens, while the Shanghai Composite Index slipped last week to its lowest close since 2016.”
USAGOLD note: Traditionally, China buys a falling market and America, except for those who like to run ahead of the crowd, buys a rising market. This is an interesting article highlighting strong gold demand from Chinese investors concerned about the country’s economy and under-performing equity markets.
“‘We’re going to put a 25 percent tax on every car that comes into the United States from the European Union,’ Trump said at a campaign rally in West Virginia.”
USAGOLD note: So much for the cooling of trade tensions with Europe. . . . .
Financial Times/Sam Fleming/8-21-2018
“On the surface, the economic backdrop to Jay Powell’s first Jackson Hole address as Federal Reserve chairman could hardly look much more benign.”
USAGOLD note: It is what’s running below that placid surface that has the financial markets’ attention. My guess is that Friday’s speech will be a carefully-crafted tightrope walk of the kind to which we have become accustomed from Fed chairs. The president, for his part, has vowed to not go quietly into the good night on interest rates. . . . . . . .
Scrap Monster/Paul Plouis/8-21-2018
“The gold bar imports by the country skyrocketed by 450% in July this year, says the most recent trade statistics published by India’s Gems and Jewellery Export Promotion Council (GJEPC). The cumulative imports during the initial four months (Apr ’18 to July ’18) of the current fiscal year too were up significantly by over 300% when compared with the corresponding period last year.”
USAGOLD note: India’s gold jewelry imports declined by almost 40% over the same period. The corresponding jump in bar demand leads us to the conclusion that Indian citizens are buying gold for investment purposes the result of concerns about the rupee and India’s debt position. India’s demand could be the first tangible sign of growth in general investment demand for gold among emerging nation states affected by the trade wars, domestic currency weakness and concerns about external debt.
Image by Reserve Bank of India / Pdpics [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0) or GODL-India (https://data.gov.in/sites/default/files/Gazette_Notification_OGDL.pdf)], from Wikimedia Commons
“The dollar slipped to its low of the day after President Donald Trump again criticized the Fed for raising interest rates and said it should do what’s good for the country. The comment was viewed as a ‘red line’ for markets since it encroached on the independence of the Fed, said one strategist. Trump’s comments come just four days ahead of the important Fed symposium at Jackson Hole where Fed Chair Jerome Powell is set to speak.”
USAGOLD note: Much depends on Jerome Powell’s reaction to the president’s remarks and that is an unknown at this point in time. Most certainly theories will abound between now and when the Fed chairman speaks in Jackson Hole on Friday.
“U.S. President Donald Trump said on Monday he was ‘not thrilled’ with Federal Reserve Chairman Jerome Powell for raising interest rates and accused China and Europe of manipulating their respective currencies.”
USAGOLD note: Looks like the president just confirmed the Hamptons’ comments (scroll below) and upped the ante.
Bloomberg/Jennifer Jacobs and Saleha Mohsin/8-20-2018
“President Donald Trump said he expected Jerome Powell to be a cheap-money Fed chairman and lamented to wealthy Republican donors at a Hamptons fundraiser on Friday that his nominee instead raised interest rates, according to three people present.”
USAGOLD note: Somehow I think this Bloomberg report is more important than the average run of news on an average day. Somehow, too, I think there was a major miscommunication between the Fed chairman and the president early-on in their association.
“But financial markets could react badly if Mr Trump again criticises the Fed and attempts to interfere in its decision making. A repeat of the remarks he made about the Fed in July could alarm investors. Those investors might fear that presidential pressure could cause the central bank to fall behind in fighting inflation.” – Barry Eichgengreen in this morning’s Financial Times (Editorial)
Bloomberg/Christopher Condon and Piotr Skoliminski/8-20-2018
“Summer break for central bankers ends this week when their leaders gather Friday and Saturday for the Federal Reserve’s annual policy symposium in Jackson Hole, Wyoming. With Fed Chairman Jerome Powell set to deliver a Friday morning speech, investors will be looking for clarity on several issues, from the likely path of interest rates and balance sheet policy to Powell’s take on emerging-market turmoil.”
USAGOLD note: Should be an interesting gathering of the central banking elite this year amidst some beautiful mountain scenery and for many an extreme change of climate in the global economy.
(Image: Jackson Lake, Jackson Hole, Wyoming)
Financial Times/Andrew Edgecliffe-Johnson/8-19-2018
“Cost inflation has been a recurring theme of US second-quarter earnings announcements from companies in industries as diverse as retail and industrial equipment. Executives have pointed to a combination of higher freight and labour costs with increased prices for raw materials, some of which has been driven by the Trump administration’s tariffs on imported steel and aluminium, and by other countries’ retaliatory tariffs on US goods.”
USAGOLD note: This article offers the latest in the way of anecdotal evidence that inflation is gathering momentum. The price increases reported are likely to begin showing up in government reports as we move into fourth quarter of the year. As reported in this article, producers of well-known products have begun passing along price increases to retail consumers.
Bloomberg/Peter Martin, Dandan Li, Brendan Scott, and Bill Faries/8-16-2018
“In government offices and think tanks, universities and state-run newsrooms, there is an urgent debate underway about what many here see as the hidden motive for Washington’s escalating trade war against President Xi Jinping’s government: A grand strategy, devised and led by Trump, to thwart China’s rise as a global power.”
USAGOLD note: This lengthy article explores the possibility that the trade war is part and parcel of something much larger. If it is, we might want to prepare for a much longer and protracted set of economic circumstances than originally anticipated most notably the potential for higher prices without the hope of an early settlement to belay the inflationary process.
Financial Times/Jamie Smythe/8-16-2018
“Robert A Johnson, head of the Institute for New Economic Thinking, a US think-tank, told a 2015 audience at Davos he knew hedge fund managers all over the world who were ‘buying airstrips and farms in places like New Zealand’ because they thought they needed a bolt-hole in case rising inequality provokes a revolt.'”
USAGOLD note: An “inequality revolt”, I am fairly certain, is only one of a litany of concerns New Zealand property owners are entertaining – particularly with the worldwide currency and debt issues now on the front burner. Some are not as indifferent as others about the current state affairs. This article under an innocuous headline reveals much deeper concerns among those who spend a good deal of time thinking about these things.
“A Chinese delegation led by vice commerce minister Wang Shouwen will travel to the United States for trade talks in late August, China’s Ministry of Commerce said on Thursday.”
USAGOLD note: At the time this announcement came public, gold was tracking down in early Asian trading. It reversed abruptly on the news from the $1170 level. The Chinese yuan also reversed course. The visit reportedly is at the invitation of the United States.
Financial Times/Adam Samson/8-15-2018
“A wide gauge of emerging market equities has dropped by one-fifth from its January highs, leaving it in a bear market amid rising global volatility.”
USAGOLD note: And it could be more “the end of the beginning than the beginning of the end,” to borrow a phrase from Mr. Churchill.
Pew Research Center/Drew Silver/8-7-2018
“But despite the strong labor market, wage growth has lagged economists’ expectations. In fact, despite some ups and downs over the past several decades, today’s real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago. And what wage gains there have been have mostly flowed to the highest-paid tier of workers.”
USAGOLD note: How price inflation has been contained all these years in one, simple chart courtesy of Pew Research Center.
Financial Times/Jamie Powell/8-14-2018
“‘He told everyone the truth. But no one listened. Until now.’ Over the past decade, you may have read a variation of this headline.”
USAGOLD note: Economist Tim Lee predicted the crisis in Turkey. In conjuction with it, he also predicts “there will be a series of financial seizures” that will ultimately end-up in European and American financial markets. This Financial Times piece builds on a New York Times’ article over the weekend about Tim Lee under the headline “Turkey’s Financial Crisis Surprised Many. Except This Analyst.” “Turkey,” he says, “is the canary in the coal mine.”
“As of June 30, Dalio’s Bridgewater Associates maintained its 3.9 million shares in SPDR Gold Shares, the largest bullion-backed ETF, and 11.3 million in iShares Gold Trust, the second-largest, according to a regulatory filing.”
USAGOLD note: Some people buy gold as a speculation. Others buy it as a long-term hedge. Like us, Dalio puts himself and Bridgewater, the world’s largest hedge fund, in the latter category.
Image by Grameen America (https://vimeo.com/247028348) [CC BY 3.0 (https://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons [Edited]
“Morgan Stanley, State Street Corp. and Wells Fargo & Co. are some of the prognosticators saying the greenback is near its peak after gaining around 5 percent since mid-April. Currency jawboning by U.S. President Donald Trump, shifting growth expectations outside America, and tweaks to central-bank policies are among the bearish factors that could drive the greenback lower in the coming months, analysts said. For JPMorgan Private Bank, U.S. growth may have peaked with last week’s gross domestic product print.”
USAGOLD note: Somehow we missed this article at the end of July . . . . . .