Author Archives: News

Fed Chairman Powell says he is ‘very worried’ about growing amount of U.S. debt

CNBC/Thomas Franck/1-10-2019

“‘I’m very worried about it,’ Powell said at The Economic Club of Washington, D.C. ‘From the Fed’s standpoint, we’re really looking at a business cycle length: that’s our frame of reference. The long-run fiscal, nonsustainability of the U.S. federal government isn’t really something that plays into the medium term that is relevant for our policy decisions. ‘However, ‘it’s a long-run issue that we definitely need to face, and ultimately, will have no choice but to face,’ he added.”

USAGOLD note:  The forgotten crisis. . . .

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The National Debt and Gold
Here’s why the two have risen together since the 1970s
and why the correlation is likely to continue

[LINK]

“It is a fact that when your national debt gets to the level ours is, that it constitutes an economic threat to the society, and that kind of threat ultimately has a national security consequence for it.” – John Bolton, U.S. National Security Adviser to President Trump

“Last month, as the US midterm elections approached, Deutsche Bank analysts released a calculation that should have made American voters wince. It shows that the US government currently pays $1.43bn each day (yes, day) to service its public debt — 10 times more than any other G7 country (Italy is a distant second in this grim league).” – Gillian Tett, Financial Times

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Germany repatriates about half of its gold reserves

But with Europe stumbling from crisis to crisis, the German public has grown uneasy about keeping the gold abroad. Some even argue the world’s second biggest bullion reserve may be needed to back a new deutschmark, should the euro zone break up.” – Reuters, 2-9-2017

“Germany has a stronger relationship with gold than most nations. The country’s experience with hyperinflation between 1919 and 1923, during the years of the Weimar Republic, is ingrained in the national consciousness. Gold, above all, stands for stability” – Financial Times, 11-10-2017

Germany this year (2017) completed its scheduled transfer of national gold reserves from the New York Fed and the Bank of France.  Germany will now leave 1236 tonnes at the New York Fed and another 432 tonnes in London.  The remainder of its 3378-tonne national holding will be stored in Frankfurt.  The repatriation transfers to Frankfurt were completed three years ahead of schedule.

With respect to the gold left at the Fed, Bundesbank’s Carl-Ludwig Thiele told reporters: “We have a lot of discussions about (U.S. President Donald) Trump, regarding implications on monetary policy, macroeconomics, etc., but we trust the central bank of the U.S.”

Thiele’s confidence in the Federal Reserve brings to mind an old story about Germany’s relationship with the Federal Reserve and the storage of its gold reserves. When Hjalmar Schacht, head of Germany’s central bank in the 1920s, visited the New York Fed he asked to see Germany’s gold stored in its vaults.

“Strong**,” wrote Schacht in a 1955 autobiography, “was proud to be able to show us the vaults which were situated in the deepest cellar of the building and remarked: ‘Now, Herr Schacht, you shall see where the Reichsbank gold is kept.’ ” Storage staff went off to retrieve the gold.  “At length,” Schacht goes on, “we were told: ‘Mr. Strong, we can’t find the Reichsbank gold.’ ”  To which Schacht replied: “Never mind; I believe you when you say the gold is there. Even if it weren’t you are good for its replacement. ”One need presume that nearly 100 years later, the level of trust conveyed by Schacht remains in place.

It is unlikely that Germany would depart the euro anytime soon and back a new Deutschmark with gold.  Having an asset set aside, though, that is detached from erratic national currencies in this day and age is a wise move for the prudent nation-state – just as it is for the prudent private investor.

–– USAGOLD


** New York Fed president at the time, Benjamin Strong

Repost from 2/10/2017, updated October, 2018. The Financial Times article linked at the top of the page tells the fascinating inside story of Germany’s gold repatriation.

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When even US Treasuries are no longer safe havens, market volatility is here to stay

South China Morning Post/Benjamin J. Cohen/1-9-2019

“With equities slumping, exchange-rate volatility increasing and political risks intensifying, financial markets around the world have hit a rough patch. In times like these, international investors generally grow cautious and prioritise safety over returns, so money flees to safe havens that provide secure, liquid investment-grade assets on a sufficiently large scale. But there are no obvious safe havens today. For the first time in living memory, investors lack a quiet port where they can take shelter from a storm.

USAGOLD note:  We would recommend that Mr. Cohen sign-up for our new Introductory Information Packet. (See sign-up in sidebar right)  In it we detail the reasons why gold just might be the “quiet port” he is searching for and how he can go about becoming an owner.

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Fitch sends U.S. triple-A rating warning

Reuters/1-9-2019

“‘If this shutdown continues to March 1 and the debt ceiling becomes a problem several months later, we may need to start thinking about the policy framework, the inability to pass a budget… and whether all of that is consistent with triple-A,’ Fitch’s global head of sovereign ratings James McCormack said on Wednesday in London.”

USAGOLD note:  When Standard & Poor’s lowered its credit rating of the United States from AAA to AA+ on August 5, 2011, it set off a strong rally in the gold price.  On August 4, the price stood at $1662.  Within four days it was trading at over $1800.  By August 21st it had hit its all-time highs of over $1900 per ounce.

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Huge cosmic explosions that produce platinum, silver and gold may be more common than previously thought

Newsweek/Aristos Georgiou

“‘A kilonova is a flash of light produced by the radioactive debris of a neutron star collision,’ Troja said. ‘During the collision a lot of neutron-rich stuff is spewed into space at a velocity that is 20-30 percent the speed of light. In these extreme conditions something very special happens: neutron star matter turns into gold, silver, platinum, uranium… all the metals heavier than iron are forged in these cosmic collisions.'”

USAGOLD note:  I would not be surprised to see the Wall Street anti-gold crowd use this discovery as a justification to short gold on the COMEX [smile].


NASA image, Spitzer Space Telescope Cassiopeia A – supernova remnant, public domain/WikiMedia Commons


Repost from 10-18-2018

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The shady origins of gold refined in Switzerland

SwissInfo.ch/Riccardo Franciolli/1-8-2019

“Most of the gold in the world passes through Switzerland. This is a business worth CHF70-90 billion ($70-90 billion) depending on the year. Gold arrives here in unrefined form, and leaves the country in all its glittering purity. Sometimes, though, it is of highly dubious provenance. The government recognises the risk, which is why it recently issued a report on the subject. This report raises concerns over the exploitation of mine workers, and makes several recommendations to Swiss firms active in the field.”

USAGOLD note:  An interesting inside look at Switzerland’s flourishing gold bullion business.

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$1 trillion fleeing London because of Brexit

Bloomberg/Silla Brush/1-7-2019

“Banks, insurers and money managers are planning to move about 800 billion pounds ($1 trillion) of assets from the U.K. to the rest of Europe as Brexit uncertainty takes its toll, according to a survey conducted by EY.”

USAGOLD note: $1 trillion is not small potatoes.  The City of London will take a hit, but other money centers will be major beneficiaries.  With London also being the global center for global trade, one has to wonder how the gold market will be affected.

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Former Fed Chairman Paul Volcker thinks ‘we’re in a hell of a mess’

CNBC/Jeff Cox/10-23-2018

“When Volcker looks around now, he sees ‘a hell of a mess in every direction,’ including a lack of basic respect for government institutions, a current Fed that seems to be following a completely arbitrary benchmark and a ‘swamp’ in Washington run by plutocrats.”

USAGOLD note:  Volcker has always been known for speaking his mind plainly and usually with deep insight.  In that single sentence, though, he seems to have outdone himself. . . .and pretty much summed things up.


Image by European People’s Party (EPP Congress Bonn) [CC BY 2.0 (https://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons [Edited]

Repost from 10-24-2018

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The super rich of silicon valley have a doomsday plan

Bloomberg/Olivia Carville

“Years of doomsday talk at Silicon Valley dinner parties has turned to action. In recent months, two 150-ton survival bunkers journeyed by land and sea from a Texas warehouse to the shores of New Zealand, where they’re buried 11 feet underground. Seven Silicon Valley entrepreneurs have purchased bunkers from Rising S Co. and planted them in New Zealand in the past two years, said Gary Lynch, the manufacturer’s general manager. At the first sign of an apocalypse — nuclear war, a killer germ, a French Revolution-style uprising targeting the 1 percent — the Californians plan to hop on a private jet and hunker down, he said.”

USAGOLD note:  We bring attention to this article to show the level of concern about economic, social and political instability among very rich, self-made, independently-minded entrepreneurs.  The placidity of the moment can give way to chaos in a heartbeat as anyone who has studied history – or lived through a Venezuela-type moment – will attest.  The odds of society having to deal with a breakdown at this level are slim, as these occurrences are rare.  It is the many levels of danger short of the ultimate unraveling that truly need to be hedged, bridged, survived.  Anyone who has thought their way through the problem will find their way to gold – the most effective and practical insurance policy against the dangers outlined in this article and the one that buys time. . . .that most valuable of commodities.


Repost from 9-5-2018

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Yen flash crash: What happened and why

Financial Times/Eva Szalay/1-3-2019

“With 2019 barely begun, investors and traders in the $5.1tn-a-day foreign exchange market are trying to decipher a sudden and violent move in a series of currencies that unfolded early on Thursday in Asian trading.”

USAGOLD note:  FT goes on to run through a list of possible causes, rejects them, then settles on “algorithmic” origins coupled with the “depletion of human trading experience.”  Why is it that this sounds like a refrain and basic analysis we are going to hear repeated increasingly in the weeks and months ahead? As we have mentioned on several occasions in the past, hedging the potential for software to go awry is as powerful an argument for gold ownership as the myriad of others we have brought to your attention over the years.

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Gold barrels into 2019 as growth concerns spur demand for haven

Bloomberg/Jake Lloyd-Smith and Krystal Chian/12-30-2018

“‘For gold prices, I think there is upside to be seen in 2019,’ Jingyi Pan, market strategist at IG Asia Pte., told Bloomberg TV on Monday, citing prospects for fewer tightening moves from the U.S. central bank. ‘It does look like one where we will see a slackening of expectations in Fed hikes.’”

USAGOLD note:  What has been odd about this year’s annual turn of the year predictions’ blitz is the absence of negative analysis – hardly a negative word heard from either Wall Street  or the gold space.

Repost from 1/2/2019

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Yen’s best new year in a decade shifts playing field in Japan

Bloomberg/Masaki Kondo/1-3-2019

“The yen has surged 2.5 percent against the dollar from the close of trading on Dec. 28 to 5 p.m. in Tokyo on Thursday, set for the biggest advance during any Japanese new-year-holiday break since 2008, data compiled by Bloomberg show.”

USAGOLD note:  As shown in the charts below, sharp increases in the value of the yen against the U.S. dollar in recent years have been accompanied by equally sharp increases in the dollar price of gold. The two are seen among global traders as safe-haven plays.

 

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Tabakovic: NBS buying gold, has over 20 t in reserve

Tanjug Exactly/12-31-2018

“When asked if she would listen to the advice of Serbian President Aleksandar Vucic, who has suggested the NBS should be buying gold, ]National Bank of Serbia Governor Jorgovanka Tabakovic] responded: ‘Of course’, adding that the NBS was already doing so and that security was important.”

USAGOLD note:  Serbia adds its name to the growing list of central banks/nation states purchasing gold for safe-haven purposes.  Vucic is concerned about a “new economic crisis breaking out at the end of 2019 or in 2020.”

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2018 ends in a sea of red. . . . .

Amidst a sea of red for 2018, stock market volatility comes out the clear winner in what many will see as appropriate for a year that will be remembered as one that most would like to forget. Bitcoin came out at the bottom of the list – down 43.65%. Gold, in a victory of sorts, finished down only 4.21% on the year.  Silver by contrast was down 11.82% and the Dow Jones Industrial Average was down 6.53%.

52-Week Futures Performance Leaders
Courtesy of barchart.com

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National debt under Trump is surging at its fastest pace since 2012

Bloomberg/Alexandre Tanzi/12-12-2018

“If this year’s growth rate is sustained through the end of the year, it would be the biggest jump in percentage terms since the last year of President Barack Obama’s first term, at a time when the economy needed fiscal stimulus in the aftermath of the financial crisis. As of Monday, the nation’s debt stood at a record $21.9 trillion.”

USAGOLD note:  For many years, Americans  erroneously were led to believe that the national debt did not matter because we owed it to ourselves.  That all changed when analysts began to point out that the growing expenditure for interest on the national debt necessarily was coming out of tax revenues.  In short, the debt matters because the interest rate payments matter – now nearly the equivalent of what the nation spends on national defense, i.e., $610 billion in 2017 (compared to $521 billion paid in interest). Needless to say two factors will impact that number in 2019 – first, the rapid growth in additions to the aggregate national debt and the rising overall interest rate paid on the total.  Note the spike in interest payments in the chart below for 2017.  The 2018 number is yet to be posted at the St. Louis Federal Reserve.


Repost from12/13/2018

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Oil jumps 9% in surprise rebound after Christmas Eve rout

Investing.com/12-26-2018

“Has New Year salvation for oil come early? U.S. West Texas Intermediate crude rebounded forcefully on Wednesday as markets reopened from the Christmas holiday, surging 9% to recoup all of what it lost just before the break and more.”

USAGOLD note:  Odd that oil would jump so tellingly on the same day as stocks and near the end of the year.  It raises the prospect of short-covering – perhaps for both markets.

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Global chaos makes gold a holiday winner for hedge funds

Bloomberg/Joe Deaux/12-21-2018

“Forget frankincense or myrrh — chaos in global markets makes gold the holiday asset hedge funds are getting behind. . . . As financial anxieties heighten, investors have poured about $1.56 billion into exchange-traded funds backing precious metals over the past month, the biggest inflows among commodity ETFs. Open interest for gold futures is also on the rise.”

USAGOLD note:  Gold ETF holdings have been on the rise for quite some time as hedge funds move out of stocks and bonds and into other investments. There is a massive amount of capital liquidity on the books of funds and institutions looking for a home. Increasingly, it looks like gold and the rest of the commodities complex will be a destination for at least portion of it.  What analysts sometimes overlook is how paltry the supply of physical gold in the face of building cash tsunami.

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‘The worst is yet to come’: Experts say a global bear market is just getting started

CNBC/Yen Nee Lee/12-25-2018

“Bear markets — typically defined as 20 percent or more off a recent peak — are threatening investors worldwide. In the U.S., the Nasdaq Composite closed in a bear market on Friday and the S&P 500 entered one on Monday. Globally, Germany’s DAX, China’s Shanghai Composite and Japan’s Nikkei have also entered bear market levels.”

USAGOLD note:  Not what stock investors will want to hear as we wind up 2018 and head into the new year. The Christmas Eve 650-point plunge will likely be remembered as emblematic of the worst December stock market since the Great Depression – and, as you can see from below, the disaster was not confined to the United States alone, but a global event.

Charts courtesy of TradingEconomics.com

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Swiss gold exports to Asia climb further in November

Scrap Register/12-21-2018

“‘Gold exports to India nearly tripled month-on-month, while exports to China and Hong Kong soared by just shy of 60%,’ [Commerzbank] added.”

USAGOLD note:  China’s general economy might have slowed in recent months, but its appetite for gold has not.

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Dollar set for biggest weekly drop in 10 months

Reuters/Saikat Chatterjee/12-21-2018

“The dollar consolidated overnight losses on Friday and is set for its biggest weekly drop in 10 months as the threat of a U.S. government shutdown and lower bond yields on the back of concerns of slowing economic growth weigh.”

USAGOLD note:  Quietly, while all eyes have been on global stock markets, the value of the dollar has been falling against its major competitors.

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The big story overnight was the dollar and gold

Charts courtesy of TradingEconomics.com

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Gold ETF holdings hit the highest level since July

Scrap Register/12-20-2018

“U.S. President Donald Trump again ‘trashed convention’ and urged the Fed to not hike rates, SP Angel continues. ‘Global [ETF] assets expanded more than 10 tons to the highest since July, with investors seeking havens as equities founder, and expectations of hikes in 2019 recede,’ SP Angel added. ‘Gold snapped a six-month losing run in October, held its ground in November, and then gained this month as investors position themselves for 2019 by adding to worldwide holdings in ETFs,’ noted.”

USAGOLD note:  Among funds and institutions, the safe-haven trade in gold manifests itself – the other side of the interest rate coin.

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The year in money

Bloomberg/12-19-2018

“Trade disputes, exploding global debt and volatile stock markets were just the beginning. Here are the numbers behind the defining moments for global markets and economies in 2018.

USAGOLD note:  An interesting retrospective from Bloomberg on trends and events from this past year.  Some things you knew, other you probably didn’t. . . . . . . .

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Chinese treasury holdings tumble to lowest since May 2017

BloombergQuint/Andrew Mayeda and Katherine Greifeld/12-18-2018

“China’s holdings of notes, bills and bonds dropped for a fifth straight month to $1.14 trillion in October, from $1.15 trillion in September, according to data from the Treasury Department released on Monday. That’s the lowest level since May 2017. China remains the biggest foreign creditor, followed by Japan, whose holdings slipped by $9.5 billion to $1.02 trillion.”

USAGOLD note:  Bloomberg reports the latest installment in a process that has been in motion for quite some time.  China’s holdings are down over 4% on the year; Japan’s are down just under 7% – an eye-opener.

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Corporate America gives out a record $1 trillion in stock buybacks

CNNBusiness/Matt Egan/12-17-2018

“Corporate America celebrated the first full year under the new tax law by rolling out a record-setting $1 trillion of stock buybacks. US companies, led by Lowe’s (LOW) and AbbVie (ABBV), rewarded shareholders by unveiling $34.4 billion in buybacks last week, according to TrimTabs Investment Research. That lifted repurchase announcements above $1 trillion for the first time ever, TrimTabs said, exceeding the prior record of $781 billion set in 2015.”

USAGOLD note: So what happens when corporate buybacks fade from the marketplace?  With corporations feeding $1 trillion in buy-backs into the market, a plausible argument can be made that the market has been artificially juiced by capital injections having little to do with the value and future earnings of companies, but much to do with the power of this application of financial engineering.

Related:  The corporate bond bubble is bursting/SafeHaven/Michael Pento/12-18-2018

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How much gold does China have? A lot more than you think

MoneyWeek/Dominic Frisby/12-12-2018

“Next time the international money system comes under stress – and that time may not be far away – where the gold is, and who owns it, could be of great importance. You may think gold is an antiquated asset, irrelevant to a modern digital world. China clearly doesn’t. Since the global financial crisis, China has been accumulating gold at a staggering pace.”

USAGOLD note:  This article by Dominic Frisby gets your attention and keeps it.  It also comes to an interesting conclusion centering around the self-explanatory chart from our old friend, Nick Laird (GoldChartsRUs) immediately below.  China – people, banks and government – is quietly accumulating itself into a very good financial position – over 14,000 tonnes cumulatively as of 2015.  The pool has grown even larger over the last three years.

Chart courtesy of GoldChartsRUs


Repost from 12-18-2018

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The stock market is on pace for its worst December since the Great Depression

CNBC/Michael Sheetz/12-17-2018

“Both the Dow Jones Industrial Average and the S&P 500 are on pace for their worst December performance since 1931, when stocks were battered during the Great Depression. The Dow and S&P 500 are down 7.8 percent and 7.6 percent this month, respectively.

USAGOLD note:  Gold, by contrast, is up 2.2% in the first eighteen days of December.  Both gold and the Dow Jones are down about 4% for 2018.

Related: 
Jeffrey Gundlach: ‘I’m pretty sure this is a bear market’/CNBC/Michael Sheetz/12-17-2018

Ron Paul:  May be ‘worse than 1929’/CNBC/Stephanie Landsman/12-16-2018

 

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Fed’s Powell poised to set rates policy tone for 2019

Financial Times/FT reporters/12-16-2018

“Wednesday’s meeting of Federal Reserve policymakers is their last of 2018 and, arguably, the most important. They are widely expected to raise rates for the fourth time this year to a range of between 2.25 and 2.50 per cent, but is what they signal for next year that should help shape asset allocation decisions for 2019.”

USAGOLD note:  It is remarkable the degree to which the “tone” has changed over the last roughly 20 days – since Jerome Powell’s course-altering speech before the Economic Club of New York (11-28-2018).  Over the past several years, Fed Week has been a down week for gold.  This time, though, with significant danger lurking in the economy everywhere we look, it could be different.

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Gold-Silver COT reports – Friday release

GoldSeek/12-10-2018

Last week’s full report

This week’s report

For more detail please see:
Gold speculators pushed their bullish bets higher this week/CountingPips/12-15-2018
Silver speculators sharply lifted their bets into a new bullish position/CountingPips/12-15-2018

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Fate of $1 trillion in risky U.S. loans may be in Japan’s hands

Bloomberg/Cecile Gutscher and Tracy Alloway/12-14-2018

“Years of low yields spurred investors to pour money into leveraged loans – credit extended to companies with the weakest balance sheets. Such assets were pitched as a haven for those worried about the prospect of rising interest rates, and were often repackaged into so-called collateralized loan obligations, or CLOs, with credit enhancements to protect investors.”

USAGOLD note:  More on the dangerous CLO situation Janet Yellen brought to public attention earlier in the week.  Now we learn that the counter-party risks go beyond the United States to Japan, and no doubt to banks in other countries that chose to push aside the risks in the pursuit of greater short-term returns.  Yellen warned that the CLO had structural similarities to subprime loan portfolios at the root of the 2007-2008 credit crisis. (See repost below.) It all sounds very familiar. . . . . . .

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