Author Archives: USAGOLD

A word on gold’s $23 drop Friday. . . .

OPINION

The opening salvo does not make a battle, let alone a war

The Law of Long-Term Time Preference – Those who plan, invest and execute long-term win. Win-win decisions, looking to the long term with short-term work and sacrifice, are historically the tickets to success in all areas of life – short-term sacrifice for long-term benefits, deferred gratification rather than instant gratification. This is the difference between wealth and poverty, between class and trash. Those who make primarily fear-based, ego-based, selfish, win-lose, lose-lose, emotional and/or short-term decisions as their primary mode of operation in life nearly always end up miserable, often as losers in a comprehensive sense in life. Such people are walking tornadoes to be avoided.” – R.E. McMaster, A Layman’s Guide to Golden Guidelines for Wise Money Management [Link]

Successful investors have a philosophy, usually carefully cultivated, that they rely upon no matter what happens in the markets in the short-run.  Successful investors are rarely shaken by short-term events and, rarer still, guilty of short-term thinking.

USAGOLD has always nurtured the belief that gold should not be purchased principally as a speculative investment, but more as an asset accumulated for long-term asset preservation in the form of coins and bullion.  That, in fact, is a viewpoint it shares with the bulk of its clientele. Thus, if the gold price takes a powder like it did on Friday, the event can be put into its proper perspective even if that sell-off continues.  It is not, after all, the end of the world.  It is not even the end of the gold market. Gold’s adversaries, though, no doubt will seize on the occasion come Monday as if it were in order to advance their own agendas.

In my view, Friday’s downside came the result of confusion over what several financial news outlets called the ‘most important week of the year.’  Japan went dovish.  The European Union went dovish.  China, not to be forgotten, went dovish.  And here is where the confusion lies:  The Federal Reserve went dovish as well with its announcement to open the excess reserve monetary spigot – a policy that could serve as a buffer to reducing its balance sheet even if as it continues to raise rates.

Professional investors, according to a Bloomberg report on Friday, took the announcement as such increasing their long gold positions on the COMEX at midweek. Bloomberg took those funds and institutions to task for their decision. We will see how it all comes out in the wash as we lurch further along this new but treacherous monetary highway.

We should keep in mind that all of this is occurring as the battle lines are being drawn for the escalating trade wars. The actions of the central banks should not be considered in a vacuum. No country wants their currency to stand out like the nail that needs to be hammered, and that includes the United States. Much of what the Trump administration would like to accomplish by way of reducing the trade deficit would be threatened if the dollar were to continue to be “the healthiest horse in the glue factory,” as former Wyoming senator Alan Simpson once colorfully put it.

In short, I would not be surprised to see the Trump administration take steps – perhaps quietly, perhaps not so quietly – to reverse the dollar’s rapid rise since the beginning of 2018, though such a policy of course should not be seen as a given. Who will win out in the currency battle in the larger trade war remains to be seen, but the opening salvo does not make a battle, let alone a war.

Returning to the philosophy among long-term gold investors mentioned at the top of the page, USAGOLD experienced the opposite of what many might have expected on Friday – a noticeable and immediate increase in buying interest on a sharp price break, something we haven’t experienced in a long time.

– Michael Kosares (6-17-2018)

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Gold, dollar react sharply to dovish central banks

DAILY MARKET REPORT

The markets in general today are reacting to the U.S. imposition of high tariffs on $50 billion in imports from China, and a subsequent threat from China that it will retaliate. The gold market in particular, though, is reacting to separate decisions by the Bank of Japan and the European Central bank on monetary policy. The ECB went hawkish on its QE program promising to halt it by the end of the year but it went dovish on interest rates. Japan was even more dovish than the ECB announcing it would keep rates at near zero while continuing to aggressively pursue its quantiative easing program. Meanwhile, the Federal Reserve appears to have become a bit more dovish itself, as reported here yesterday. The net result of all this dovishness has been to send the dollar on a sharp upward trajectory this morning and gold into a tailspin.

The yellow metal is down $18.50 on the day at $1286. Silver, likewise, is down 30¢ on the day at $16.87. The short-term results are in. Let’s see what happens once the markets have had a chance to digest the full implications of what has been a chaotic and volatile past few days.

Quote of the Day
“Significant increases in inflation will ultimately increase the price of gold. Investment in gold now is insurance. It’s not for short-term gain, but for long-term protection. I view gold as the primary global currency. It is the only currency, along with silver, that does not require a counter-party signature. Gold, however, has always been far more valuable per ounce than silver. No one refuses gold as payment to discharge an obligation. Credit instruments and fiat currency depend on the credit worthiness of a counter-party. Gold, along with silver, is one of the only currencies that has an intrinsic value. It has always been that way. No one questions its value, and it has always been a valuable commodity, first coined in Asia Minor in 600 BC.” – Alan Greenspan, former chairman of the Federal Reserve

Chart of the Day

Chart note: The United States Federal Reserve is not the only central bank to build a tenuous balance sheet. In fact, the Bank of Japan has outdone it with its 541,000 billion yen portfolio, or nearly $4.9 trillion (as opposed to the Fed’s $4.1 trillion). Not be deterred by big numbers, the Bank of Japan as of yesterday has pledged to continue building its bond portfolio for the foreseeable future. The United States on the other hand has halted its quantitative easing program and has begun to liquidate its bond holdings.

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DMR–Gold, dollar react sharply to dovish central banks

DAILY MARKET REPORT

The markets in general today are reacting to the U.S. imposition of high tariffs on $50 billion in imports from China, and a subsequent threat from China that it will retaliate. The gold market in particular, though, is reacting to separate decisions by the Bank of Japan and the European Central bank on monetary policy. The ECB went hawkish on its QE program promising to halt it by the end of the year but it went dovish on interest rates. Japan was even more dovish than the ECB announcing it would keep rates at near zero while continuing to aggressively pursue its quantiative easing program. Meanwhile, the Federal Reserve appears to have become a bit more dovish itself, as reported here yesterday. The net result of all this dovishness has been to send the dollar on a sharp upward trajectory this morning and gold into a tailspin.

The yellow metal is down $18.50 on the day at $1286. Silver, likewise, is down 30¢ on the day at $16.87. The short-term results are in. Let’s see what happens once the markets have had a chance to digest the full implications of what has been a chaotic and volatile past few days.

Quote of the Day
“Significant increases in inflation will ultimately increase the price of gold. Investment in gold now is insurance. It’s not for short-term gain, but for long-term protection. I view gold as the primary global currency. It is the only currency, along with silver, that does not require a counter-party signature. Gold, however, has always been far more valuable per ounce than silver. No one refuses gold as payment to discharge an obligation. Credit instruments and fiat currency depend on the credit worthiness of a counter-party. Gold, along with silver, is one of the only currencies that has an intrinsic value. It has always been that way. No one questions its value, and it has always been a valuable commodity, first coined in Asia Minor in 600 BC.” – Alan Greenspan, former chairman of the Federal Reserve

Chart of the Day

Chart note:  The United States Federal Reserve is not the only central bank to build a tenuous balance sheet.  In fact, the Bank of Japan has outdone it with its 541,000 billion yen portfolio, or nearly $4.9 trillion (as opposed to the Fed’s $4.1 trillion). Not be deterred by big numbers, the Bank of Japan as of yesterday has pledged to continue building its bond portfolio for the foreseeable future.  The United States on the other hand has halted its quantitative easing program and has begun to liquidate its bond holdings.

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Gold up firmly in early trading Thursday

We believe that gold’s strong showing since yesterday mid-afternoon is related to Fed chairman Powell’s statement on excess reserves at the end of his press conference opening statement yesterday.

If you are in the catch-up mode, please see the two posts immediately below.  We will have an in-depth Daily Market Report on this and other important developments posted later this morning, so please stop back.

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Gold up firmly in early trading Thursday

We believe that gold strong showing since yesterday mid-afternoon is related to Fed chairman Powell’s statement on excess reserves at the end of his press conference opening statement yesterday.

If you are in the catch-up mode, please see the two posts immediately below.  We will have an in-depth Daily Market Report on this and other important developments posted later this morning, so please stop back.

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Gold drifts sideways as signs of inflation’s return begin to materialize

Gold continues to drift sideways as it awaits, along with the rest of the financial markets, the end of the Fed’s policy meeting and its announcement release early this afternoon. Fed chairman Jerome Powell will hold a press conference shortly thereafter. Trading at $1297 in the early going and up $1.50 on the day, gold is being helped this morning by producer prices which surged .5% in May (a 6% rate annualized). Following on the consumer price report yesterday, which showed retail prices up by nearly 3%, inflation expectations are likely to move to the forefront among financial market participants. Though not likely to alter the Fed’s predetermined course of action, these are the first solid signs that the much-anticipated return of inflation might actually be materializing.

Quote of the Day
“If you ever needed more proof that central banks have crushed these markets, there you have it. The belief that nothing matters other than an inconsequential rate hike some time over a year from now in euro land or whether the Fed will make the ever so bold move of raising the IOER by only 20 basis points speaks volumes. And it isn’t being complimentary. It’s a truly bizarre construct to judge the import and implications of every event through the lens of whether green-pack Eurodollar futures jump or dump half a point. Especially when it’s intermingled for show with nonsense about demographic trends sure to produce a precise outcome 30 years from now. No wonder the smart money is investing in artificial intelligence programs that don’t listen to this tripe.” – Richard Breslow, Bloomberg “Trader Notes”

Chart of the Day

Chart note: We beg your forgiveness if you have seen this chart before, but we think it worth re-posting on a regular basis to demonstrate gold’s strong performance as a portfolio holding over a long period of time – especially for newcomers. It shows the average annual price of gold since 1970. It is meant to dispel the notion that gold is somehow volatile or unpredictable and as a result unreliable as a long-term portfolio safe haven. To the contrary, it shows gold living up to its reputation as precisely the opposite – stable in the face of rapidly changing economic circumstances, predictable in that it reacts directly to those circumstances and reliable in that has performed as advertised over an extended period of time – the extent of the fiat money era that began in 1971.

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DMR–Gold drifts sideways as signs of inflation’s return begin to materialize

Gold continues to drift sideways as it awaits, along with the rest of the financial markets, the end of the Fed’s policy meeting and its announcement release early this afternoon.  Fed chairman Jerome Powell will hold a press conference shortly thereafter.   Trading at $1297 in the early going and up $1.50 on the day, gold is being helped this morning by producer prices which surged .5% in May (a 6% rate annualized).  Following on the consumer price report yesterday, which showed retail prices up by nearly 3%, inflation expectations are likely to move to the forefront among financial market participants. Though not likely to alter the Fed’s predetermined course of action, these are the first solid signs that the much-anticipated return of inflation might actually be materializing.

Quote of the Day
“If you ever needed more proof that central banks have crushed these markets, there you have it. The belief that nothing matters other than an inconsequential rate hike some time over a year from now in euro land or whether the Fed will make the ever so bold move of raising the IOER by only 20 basis points speaks volumes. And it isn’t being complimentary.  It’s a truly bizarre construct to judge the import and implications of every event through the lens of whether green-pack Eurodollar futures jump or dump half a point. Especially when it’s intermingled for show with nonsense about demographic trends sure to produce a precise outcome 30 years from now. No wonder the smart money is investing in artificial intelligence programs that don’t listen to this tripe.” – Richard Breslow, Bloomberg “Trader Notes”

Chart of the Day

Chart note: We beg your forgiveness if you have seen this chart before, but we think it worth re-posting on a regular basis to demonstrate gold’s strong performance as a portfolio holding over a long period of time – especially for newcomers.  It shows the average annual price of gold since 1970. It is meant to dispel the notion that gold is somehow volatile or unpredictable and as a result unreliable as a long-term portfolio safe haven. To the contrary, it shows gold living up to its reputation as precisely the opposite – stable in the face of rapidly changing economic circumstances, predictable in that it reacts directly to those circumstances and reliable in that has performed as advertised over an extended period of time – the extent of the fiat money era that began in 1971.

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Gold listless as we move into the summer doldrums – traditionally the best time of year to buy gold

Gold continued to meander listlessly either side of the $1300 level looking for an incentive to move in one direction or the other. Nothing though seems to materialize of sufficient import to move it off the dime – not even an anti-climactic meeting between the U.S. and North Korea, not even a rancorous G-7 summit meeting, not even the threat of rising inflation, not even the long-term onus of price-elevating trade wars (which I believe we are going to find out are easier to start than to end). . . .So it goes.

Meanwhile, Chris Vermeulen writing for Investing.com today wants us to “Please notice that the recent price lows, originating near the start of 2016 all the way through current price activity, are continually higher. Even the current price rotation, near the right edge of the chart, is still higher than the previous low price rotation near the middle of 2017. Ladies and Gentlemen, we have an uptrend already in place for gold. The ‘rope-a-dope breakout’ that we are suggesting is right around the corner. It’s the potential for a $1370 price break that has been setting up since June 2016.”

It would be even more of a ‘rope-a-dope’ breakout if it launches during the depths of the annual summer doldrums. I distinctly recall the dominant market psychology in the summer of 2009. The financial crisis was in full swing, but gold was stuck in the low $900s and languished there with the usual complaints that it had “lost its luster,” was “no longer a safe haven,” etc etc etc. . . .the usual litany. By the end of August it had moved to the $1000 level – from there it began its ascent to the all-time highs at the $1900 per ounce. As the old saying goes, the best time to buy gold is when everything is quiet.

Note:  If you haven’t taken note of our June special offer, it is worth your attention – old Swiss 20 francs priced competitive with contemporary small-sized bullion coins. Typically, it sells at a premium – sometimes a stiff premium – over other historic pre-1933 gold coins. These kinds of offers don’t come along very often and we have already had strong participation. Our last three offers sold out in a matter of days and, as always, it is first-come, first-served.

Quote of the Day
“Early summer is the weakest time of the year seasonally for gold, silver, and their miners’ stocks. With traders’ attention diverted to vacations and summer fun, their precious-metals interest and investment demand wane considerably. Thus this entire sector, and often the markets in general, suffer a seasonal lull this time of year. But these summer doldrums offer the best seasonal buying opportunities of the year.” – Adam Hamilton, Zeal LLC

Chart of the Day

Chart note: The gold price from January, 2016 to present highlighting the trend’s rising lows referenced in today’s market report.

 

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DMR–Gold listless as we move into the summer doldrums – traditionally the best time of year to buy gold

Gold continued to meander listlessly either side of the $1300 level looking for an incentive to move in one direction or the other.  Nothing though seems to materialize of sufficient import to move it off the dime – not even an anti-climactic meeting between the U.S. and North Korea, not even a rancorous G-7 summit meeting, not even the threat of rising inflation, not even the long-term onus of price-elevating trade wars (which I believe we are going to find out are easier to start than to end). . . .So it goes.

Meanwhile, Chris Vermeulen writing for Investing.com today wants us to “Please notice that the recent price lows, originating near the start of 2016 all the way through current price activity, are continually higher. Even the current price rotation, near the right edge of the chart, is still higher than the previous low price rotation near the middle of 2017. Ladies and Gentlemen, we have an uptrend already in place for gold. The ‘rope-a-dope breakout’ that we are suggesting is right around the corner. It’s the potential for a $1370 price break that has been setting up since June 2016.”

It would be even more of a ‘rope-a-dope’ breakout if it launches during the depths of the annual summer doldrums.  I distinctly recall the dominant market psychology in the summer of 2009.  The financial crisis was in full swing, but gold was stuck in the low 900s and languished there with the usual complaints that it had “lost its luster,” was “no longer a safe haven,” etc etc etc. . . .the usual litany.  By the end of August it had moved to the $1000 level – from there it began its ascent to the all-time highs at the $1900 per ounce.  As the old saying goes, the best time to buy gold is when everything is quiet.

Note:  If you haven’t taken note of our June special offer, it is worth your attention – old Swiss 20 francs priced competitive with contemporary small-sized bullion coins. Typically, it sells at a premium – sometimes a stiff premium – over other historic pre-1933 gold coins. These kinds of offers don’t come along very often and we have already had strong participation. Our last three offers sold out in a matter of days and, as always, it is first-come, first-served.

Quote of the Day
“Early summer is the weakest time of the year seasonally for gold, silver, and their miners’ stocks. With traders’ attention diverted to vacations and summer fun, their precious-metals interest and investment demand wane considerably. Thus this entire sector, and often the markets in general, suffer a seasonal lull this time of year. But these summer doldrums offer the best seasonal buying opportunities of the year.” – Adam Hamilton, Zeal LLC

Chart of the Day

Chart note:  The gold price from January, 2016 to present highlighting the trend’s rising lows referenced in today’s market report.

 

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Gold in the Attic

Every once in a while we rummage around USAGOLD’s creaky old attic and dust-off a golden vignette from our storied past. The following short discussion first appeared in our monthly client letter in September, 2016. It is titled . . . . .

Copernicus on the debasement of money

I recently ran into this interesting quote from Copernicus included in his “Essay on the Coinage of Money” (1526):

“Although there are countless scourges which in general debilitate kingdoms, principalities, and republics, the four most important (in my judgment) are dissension, [abnormal] mortality, barren soil, and debasement of the currency. The first three are so obvious that nobody is unaware of their existence. But the fourth, which concerns money, is taken into account by few persons and only the most perspicacious. For it undermines states, not by a single attack all at once, but gradually and in a certain covert manner.”

Up until I came across this essay a few weeks ago, I was not aware that Copernicus had applied his genius to the insidious effects of currency debasement. This ground-breaking essay probably influenced both John Maynard Keynes (See quote top left) and Thomas Gresham of “bad money drives out good” fame. Ironically both Keynes and Copernicus were referencing currency debasement episodes in Germany. For what might have inspired Gresham, you will need to read the essay. Cobden Center’s Ralph Benko says Copernicus’ essay has been translated into English several times yet those translations remained difficult to obtain for students of the monetary arts and sciences.  It has remained mostly the property of elite historians.” Above we link Edward Rousen’s translation that you might keep company with the knowledgeable elite.

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DMR–Gold, financial markets curiously subdued as complex market realities unfold

Gold pushed over the $1300 mark this morning in subdued trading typical of the annual summer doldrums. It is up $2 on the day $1301, but up $7 from its overnight lows. Silver is 15¢ higher at $16.92 and quietly closing the ratio gap between the two metals (now at 77 to one).

Curiously, the reaction to the obvious breakdown in relations among G-7 countries has been subdued in financial markets thus far this morning. At the same time, if there is any market unease about yesterday’s CNBC report that the Fed might put an early end to interest rate hikes and quantitative tightening, it isn’t apparent on this quiet Monday morning.

Perhaps tomorrow’s meeting between the U.S. and Korean leaders preoccupies market thinking at this juncture. Then again it might all come down to something more basic. Perhaps market players across the spectrum – funds, institutions and private investors – simply need time to sort out the overwhelming complexities of the general unraveling predicted in Strauss and Howe’s Fourth Turning. . . . . . . and how to react to it.

Quote of the Day
“I grew up in a purely urban family. We had no relatives in the country. I’m born in 1944. When I was a baby, my mother could only buy food because she still had some gold coins. Without gold I would have starved. She always told me that. Therefore, this generation already has a certain gold affinity. In extreme times of crisis, this is one of the few things left to be accepted. Gold was the only thing left to the people of the city at that time. Before the silver cutlery was also traded at the farmer.” – Ewald Nowotny, European Central Bank governor

Chart of the Day

Chart note: The currency problem in Turkey has become something of a poster child for a more generalized deterioration occurring in a number of emerging countries. This chart shows gold priced in Turkish lira. The inflation rate as quoted by official sources is just over 12%, but Steve Hanke, economics professor at Johns Hopkins University, estimates the real inflation rate at closer to 39%. The Turkish lira itself is down almost 20% year to date against the dollar and Turkey’s citizens are moving to gold coins and bullion as a preferred store of value.

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DMR–Gold, financial markets curiously subdued as complex market realities unfold

DAILY MARKET REPORT

Gold pushed over the $1300 mark this morning in subdued trading typical of the annual summer doldrums.  It is up $2 on the day $1301, but up $7 from its overnight lows.  Silver is 15¢ higher at $16.92 and quietly closing the ratio gap between the two metals (now at 77 to one).

Curiously, the reaction to the obvious breakdown in relations among G-7 countries has been subdued in financial markets thus far this morning.  At the same time, if there is any market unease about yesterday’s CNBC report that the Fed might put an early end to interest rate hikes and quantitative tightening, it isn’t apparent on this quiet Monday morning.

Perhaps tomorrow’s meeting between the U.S. and Korean leaders preoccupies market thinking at this juncture. Then again it might all come down to something more basic.  Perhaps market players across the spectrum – funds, institutions and private investors – simply need time to sort out the overwhelming complexities of the general unraveling predicted in Strauss and Howe’s Fourth Turning. . . . . . . and how to react to it.

Quote of the Day
“I grew up in a purely urban family. We had no relatives in the country. I’m born in 1944. When I was a baby, my mother could only buy food because she still had some gold coins. Without gold I would have starved. She always told me that. Therefore, this generation already has a certain gold affinity. In extreme times of crisis, this is one of the few things left to be accepted. Gold was the only thing left to the people of the city at that time. Before the silver cutlery was also traded at the farmer.” – Ewald Nowotny, European Central Bank governor

Chart of the Day

 Chart note:  The currency problem in Turkey has become something of a poster child for a more generalized deterioration occurring in a number of emerging countries. This chart shows gold priced in Turkish lira.  The inflation rate as quoted by official sources is just over 12%, but Steve Hanke, economics professor at Johns Hopkins University, estimates the real inflation rate at closer to 39%. The Turkish lira itself is down almost 20% year to date against the dollar and Turkey’s citizens are moving to gold coins and bullion as a preferred store of value.

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USAGOLD’s Mobile Website

Who says you can’t take it with you?
In fact, you can take the gold market everywhere you go.

Prices. News. Opinion. Charts.
And you can order gold and silver
on your phone anytime!

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Gold cautious going into Fed Week

Gold continued to cautiously hover in the neighborhood of $1300 per ounce as the G-7 meeting in Quebec kicks off today and we prepare for Fed Week – a time typically challenging time for the precious metals. This time around, however, with so many problems in the global economy – all front and center at the same time – it might be a different story. We won’t go to the trouble of running once again through a well-known litany. If you do want some details, though, simply scroll through the posts below and you will be up to speed in a matter of minutes.

We thought the Wile E. Coyote reference yesterday from Ben Bernanke particularly apt under the circumstances, though a bit of a surprise that he would be so candid. Rather than 2020 as the date to mark on your calendar as he suggests, we see the potential for the “cliff event” anytime between now and then – and we believe it will have the distinct look and feel of one of Nicholas Taleb’s black swans.

Quote of the Day
“It was significant that we didn’t see any bears at either venue despite doing a 7.30am, 13 mile valley floor hike! I’m sure the absence of fellow bears was a significant countertrend sign. I learned something else on my trip worth sharing. We took the Yosemite Tram tour of the valley floor and the ranger gave a very interesting talk about fire. Until 1970 Yosemite Parks was extinguishing regular small-scale fires to prevent property damage. The resultant rise in dense small tree growth meant that although fires were less frequent, they quickly got out of control. Since 1970 they have allowed more fires to burn, resulting in less damage. . . It is therefore reasonable to argue that the US has already faced a ‘normal’ tightening cycle and any additional rate hikes are taking us into territory not seen in recent times. This already may be enough for the Fed to have broken something.” – Albert Edwards, SocGen (with thanks to ZeroHedge)

Chart of the Day


Chart note: As currency and sovereign debt repayment problems mount among emerging countries and the list of problem countries grows longer by the day, investors living in those countries might be tempted seek shelter in either the U.S. dollar or yellow metal. As this chart illustrates, the better option since the turn of the century has been gold. In twelve of the last 18 years, including 2016 and 2017, gold has outperformed the dollar and sometimes by a spectacularly wide margin. Cumulatively, there is no comparison even when gold’s strong correction in 2013 is taken into account. Recent history’s verdict is clear. When it comes to safe-haven investing, gold remains on the throne and “king dollar” is the failed usurper.

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DMR–Gold cautious going into Fed week

Gold continued to cautiously hover in the neighborhood of $1300 per ounce as the G-7 meeting in Quebec kicks off today and we prepare for Fed Week – a time typically challenging time for the precious metals.  This time around, however, with so many problems in the global economy – all front and center at the same time – it might be a different story.  We won’t go to the trouble of running once again through a well-known litany. If you do want some details, though, simply scroll through the posts below and you will be up to speed in a matter of minutes.

We thought the Wile E. Coyote reference yesterday from Ben Bernanke particularly apt under the circumstances, though a bit of a surprise that he would be so candid.  Rather than 2020 as the date to mark on your calendar as he suggests, we see the potential for the “cliff event” anytime between now and then – and we believe it will have the distinct look and feel of one of Nicholas Taleb’s black swans.

Quote of the Day
“It was significant that we didn’t see any bears at either venue despite doing a 7.30am, 13 mile valley floor hike! I’m sure the absence of fellow bears was a significant countertrend sign. I learned something else on my trip worth sharing. We took the Yosemite Tram tour of the valley floor and the ranger gave a very interesting talk about fire.  Until 1970 Yosemite Parks was extinguishing regular small-scale fires to prevent property damage. The resultant rise in dense small tree growth meant that although fires were less frequent, they quickly got out of control. Since 1970 they have allowed more fires to burn, resulting in less damage. . . It is therefore reasonable to argue that the US has already faced a ‘normal’ tightening cycle and any additional rate hikes are taking us into territory not seen in recent times. This already may be enough for the Fed to have broken something.” – Albert Edwards, SocGen (with thanks to ZeroHedge)

Chart of the Day


Chart note:  As currency and sovereign debt repayment problems mount among emerging countries and the list of problem countries grows longer by the day, investors living in those countries might be tempted seek shelter in either the U.S. dollar or yellow metal.  As this chart illustrates, the better option since the turn of the century has been gold.  In twelve of the last 18 years, including 2016 and 2017, gold has outperformed the dollar and sometimes by a spectacularly wide margin.  Cumulatively, there is no comparison even when gold’s strong correction in 2013 is taken into account.  Recent history’s verdict is clear. When it comes to safe-haven investing, gold remains on the throne and “king dollar” is the failed usurper.

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Gold trading steady under interesting circumstances

Gold started well in Europe then dropped once again at the New York open, in fact, succumbing to the old habit of trading down in advance of Federal Reserve Open Market Committee meetings. So it is that gold appears to be suffering from another one of its periodic bouts of price schizophrenia – this time reacting to Italy in European trading and Fed policy in New York trading. Gold is steady at $1298 while silver is flexing some muscle – up 19¢ at $16.89 and perhaps signaling the past few trading session what might be in store for gold.

There is an interesting development progressing quietly in the background that could have future implications for gold. In fact, it might be what caused the dollar to drop so abruptly the past few days. According to front page article in this morning’s Financial Times, top EU economic officials are signaling an end to the central bank’s quantitative easing program. The end to Europe’s bond buying program would at the very least put Europe and the United States on the same page as far as monetary policy goes (if not in the same paragraph or sentence). It is also likely strengthen the euro against the dollar. Japan which has stayed strangely quiet in the meantime on the global trade brouhaha, finds itself in the same position as the emerging countries in that it does not want to do anything to encourage capital flight. That translates to taking steps to keep the yen from dropping precipitously.

So we have this cross-Atlantic, cross-Pacific influence that helped drive up the dollar over the past few months, now moving in the direction of driving the dollar lower. Here is what it looks like on the dollar index chart (which by the way also shows a strong head and shoulders topping formation that traders might be eyeing). There is a reason I go to the trouble of laying out this scenario. It could evolve over the weeks and months ahead as a strong positive for the gold market. As I said above, it may be why we have seen a sudden reversal in the dollar.

Chart courtesy of TradingEconomics.com

Quote of the Day
“SGE’s [Shanghai Gold Exchange’s] transaction volume ranks among the top exchanges globally, buoyed by the tremendous capacity of China’s gold market, and is a reflection of China’s economic progress in the past 40 years. Accompanied by its economic growth, the country now has the world’s largest middle class – which is pushing the demand for gold and gold investment products. Chinese people have a culture of gold consumption and investment, so there is immense market potential as wages and GDP continue to grow, and living standards continue to rise.” – Wang Zhenying, President of the Shanghai Gold Exchange (SGE).

Chart of the Day

Chart courtesy of GoldChartsRUs.com

Chart note: Few know that seasonality can play a significant role in gold’s price behavior. As you can readily see in the chart above, the gold price often flattens, or increase sless, during the summer months. It doesn’t always work out that the price trends higher in the second half of the year, but it does enough of the time that veteran gold investors often time their purchases during the so-called “summer doldrums” when gold historically has changed hands at bargain prices. The fall and winter months by contrast bring with them a predisposition to higher prices that usually stretches into the early part of the following year.

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Posted in dailyquotes |

DMR–Gold trading steady under interesting circumstances

Gold started well in Europe then dropped once again at the New York open, in fact, succumbing to the old habit of trading down in advance of Federal Reserve Open Market Committee meetings.  So it is that gold appears to be suffering from another one of its periodic bouts of price schizophrenia – this time reacting to Italy in European trading and Fed policy in New York trading. Gold is steady at $1298 while silver is flexing some muscle – up 19¢ at $16.89 and perhaps signaling the past few trading session what might be in store for gold.

There is an interesting development progressing quietly in the background that could  have future implications for gold.  In fact, it might be what caused the dollar to drop so abruptly the past few days.  According to front page article in this morning’s Financial Times, top EU economic officials are signaling an end to the central bank’s quantitative easing program. The end to Europe’s bond buying program would at the very least put Europe and the United States on the same page as far as monetary policy goes (if not in the same paragraph or sentence).  It is also likely strengthen the euro against the dollar. Japan which has stayed strangely quiet in the meantime on the global trade brouhaha, finds itself in the same position as the emerging countries in that it does not want to do anything to encourage capital flight.  That translates to taking steps to keep the yen from dropping precipitously.

So we have this cross-Atlantic, cross-Pacific influence that helped drive up the dollar over the past few months, now moving in the direction of driving the dollar lower.  Here is what it looks like on the dollar index chart (which by the way also shows a strong head and shoulders topping formation that traders might be eyeing).  There is a reason I go to the trouble of laying out this scenario.  It could evolve over the weeks and months ahead as a strong positive for the gold market.  As I said above, it may be why we have seen a sudden reversal in the dollar.

Chart courtesy of TradingEconomics.com

Quote of the Day
“SGE’s [Shanghai Gold Exchange’s] transaction volume ranks among the top exchanges globally, buoyed by the tremendous capacity of China’s gold market, and is a reflection of China’s economic progress in the past 40 years. Accompanied by its economic growth, the country now has the world’s largest middle class – which is pushing the demand for gold and gold investment products. Chinese people have a culture of gold consumption and investment, so there is immense market potential as wages and GDP continue to grow, and living standards continue to rise.” – Wang Zhenying, President of the Shanghai Gold Exchange (SGE).

Chart of the Day

Chart courtesy of GoldChartsRUs.com

Chart note:  Few know that seasonality can play a significant role in gold’s price behavior.  As you can readily see in the chart above, the gold price often flattens, or increase sless, during the summer months. It doesn’t always work out that the price trends higher in the second half of the year, but it does enough of the time that veteran gold investors often time their purchases during the so-called “summer doldrums” when gold historically has changed hands at bargain prices.  The fall and winter months by contrast bring with them a predisposition to higher prices that usually stretches into the early part of the following year.

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Posted in Today's top gold news and opinion |

Gold inching higher on minor short-covering, bargain hunting and capital flight problems in India

Gold inched back toward the $1300 level in early U.S. trading today – up $2.00 at $1299. Silver is up 17¢ at $16.68. The timing on the upticks, coincident the last few days with the COMEX open, gives the appearance of some minor short-covering, but it remains to be seen if it indicates a more conclusive turn among the big speculators. Gold could also be attracting some interest from price-conscious bargain hunters. Recent developments in India could also be at play in the gold market. Yesterday, the Royal Bank of India made public its concern about the Fed’s quantitative tightening programming and the stronger dollar. Today it hiked rates to stem capital flows out the country. India’s gold-conscious citizenry is unlikely to take such signals from its central bank lightly – the same mindset that inspires capital flight also inspires gold acquisitions.

Quote of the Day
“I’m in the inflation camp. I think it’s coming. I have thought this for a while. People have looked all over for it as if looking for a lost sock or a hairpin: Where did it go? Where is that thing? But I do believe that the central bankers who have been kind of begging for inflation will be surprised at the generosity of the inflation gods over what they will ultimately be handed.” – James Grant, Grant’s Interest Rate Observer

Chart of the Day

Chart note: This chart illustrates the solid real rate of return gold has delivered against goods and services in twelve of the past sixteen years. In seven of those years, gold’s appreciation significantly outstripped the inflation rate. With gold currently trading at cyclical lows, you can now combine hedging the worst-case scenario with the extra advantage of securing an asset that is generally viewed as undervalued. This chart reinforces gold’s role as an alternative savings vehicle for the times.

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Posted in dailyquotes |

DMR–Gold inching higher on minor short-covering, bargain hunting and capital flight problems in India

Gold inched back toward the $1300 level in early U.S. trading today – up $2.00 at $1299. Silver is up 17¢ at $16.68.  The timing on the upticks, coincident the last few days with the COMEX open, gives the appearance of some minor short-covering, but it remains to be seen if it indicates a more conclusive turn among the big speculators.  Gold could also be attracting some interest from price-conscious bargain hunters.  Recent developments in India could also be at play in the gold market.  Yesterday, the Royal Bank of India made public its concern about the Fed’s quantitative tightening programming and the stronger dollar.  Today it hiked rates to stem capital flows out the country.  India’s gold-conscious citizenry is unlikely to take such signals from its central bank lightly – the same mindset that inspires capital flight also inspires gold acquisitions.

Quote of the Day
“I’m in the inflation camp. I think it’s coming. I have thought this for a while. People have looked all over for it as if looking for a lost sock or a hairpin: Where did it go? Where is that thing? But I do believe that the central bankers who have been kind of begging for inflation will be surprised at the generosity of the inflation gods over what they will ultimately be handed.” – James Grant, Grant’s Interest Rate Observer

Chart of the Day

Chart note:  This chart illustrates the solid real rate of return gold has delivered against goods and services in twelve of the past sixteen years. In seven of those years, gold’s appreciation significantly outstripped the inflation rate. With gold currently trading at cyclical lows, you can now combine hedging the worst-case scenario with the extra advantage of securing an asset that is generally viewed as undervalued. This chart reinforces gold’s role as an alternative savings vehicle for the times.

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Posted in Today's top gold news and opinion |

DMR–Gold hovers, 2018 Year of the Doldrums for investment markets thus far

Gold continued to hover in the mid-$1290s lacking any clear motivation to strike out in either direction – up or down. Gold owners might be a somewhat disappointed with their favorite precious metal being stuck in the doldrums. The angst, though, might be somewhat relieved when it sinks in that all the markets have been stuck in the doldrums for much of 2018.

The Dow Jones Industrial Average is down 2.6% on the year. Bonds have come down with a resounding thud. Commodities, which have received much attention thus far this year, have not responded in kind – up only 1.4% on the year. The dollar has been the star performer among primary assets, but even so the gains have been less than inspiring – up 2.8% on the year. Gold, as it turns out, is just one among many non-starters for 2018 with a paltry .7% gain thus far on the year.

So we should see 2018 for what it has been for most investments during its first five months – the Year of the Doldrums.

Quote of the Day
“Speculative bubbles have occurred throughout history. These episodes are characterized by a continuous sharp rise in the price of a particular asset or group of related assets, leading to further price increases driven by new speculators seeking profits through even higher prices. These higher prices are driven by the potential profits to be made through trading, rather than the earning capacity or economic value of the asset. These speculative manias then come to abrupt and dramatic endings, as expectations change and buyers quickly become sellers, in mass. The consequences are often disastrous, with the ensuing crash inflicting financial pain on the region or country involved. Euphoria turns to despair as the mandatory readjustment that takes place in the economy creates massive worker dislocation and great numbers of bankruptcies.” – Douglas French, Early Speculative Bubbles and Increases in the Supply of Money

Chart of the Day

Chart note: Since gold’s secular bull market began in the early 2000s, silver has kept up with its sibling metal in fits and starts. Presently, at a ratio of just under 79 to 1, silver is greatly undervalued relative to gold. The gap between the two metals, as you can see in the chart, has become accentuated in recent months leading some to think silver is overdue for a catch-up rally. There is precedent for such a rally. Silver trailed gold in 2009-2010 then spiked to close the ratio to 32 to 1 in 2011. In early 2016 it again trailed gold then sharply accelerated beginning in April of that year to close the gap. Silver enthusiasts are hoping for similar performance in 2018, and we have seen some signs of a make-up rally. The ratio’s interim peak came in March of this year at 81 to 1.

 

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Posted in dailyquotes |

Gold hovers, 2018 Year of the Doldrums for investment markets thus far

Gold continued to hover in the mid-$1290s lacking any clear motivation to strike out in either direction – up or down. Gold owners might be a somewhat disappointed with their favorite precious metal being stuck in the doldrums.  The angst, though, might be somewhat relieved when it sinks in that all the markets have been stuck in the doldrums for much of 2018.

The Dow Jones Industrial Average is down 2.6% on the year.  Bonds have come down with a resounding thud. Commodities, which have received much attention thus far this year, have not responded in kind – up only 1.4% on the year.  The dollar has been the star performer among primary assets, but even so the gains have been less than inspiring – up 2.8% on the year.  Gold, as it turns out, is just one among many non-starters for 2018 with a paltry .7% gain thus far on the  year.

So we should see 2018 for what it has been for most investments during its first five months – the Year of the Doldrums.

Quote of the Day
“Speculative bubbles have occurred throughout history. These episodes are characterized by a continuous sharp rise in the price of a particular asset or group of related assets, leading to further price increases driven by new speculators seeking profits through even higher prices. These higher prices are driven by the potential profits to be made through trading, rather than the earning capacity or economic value of the asset. These speculative manias then come to abrupt and dramatic endings, as expectations change and buyers quickly become sellers, in mass. The consequences are often disastrous, with the ensuing crash inflicting financial pain on the region or country involved. Euphoria turns to despair as the mandatory readjustment that takes place in the economy creates massive worker dislocation and great numbers of bankruptcies.” – Douglas French, Early Speculative Bubbles and Increases in the Supply of Money

Chart of the Day

Chart note: Since gold’s secular bull market began in the early 2000s, silver has kept up with its sibling metal in fits and starts. Presently, at a ratio of just under 79 to 1, silver is greatly undervalued relative to gold. The gap between the two metals, as you can see in the chart, has become accentuated in recent months leading some to think silver is overdue for a catch-up rally. There is precedent for such a rally. Silver trailed gold in 2009-2010 then spiked to close the ratio to 32 to 1 in 2011.  In early 2016 it again trailed gold then sharply accelerated beginning in April of that year to close the gap. Silver enthusiasts are hoping for similar performance in 2018, and we have seen some signs of a make-up rally.  The ratio’s interim peak came in March of this year at 81 to 1.

 

 

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Posted in Today's top gold news and opinion |

DMR–Gold pushes higher in early trading, G-7 this week

Gold pushed higher in early trading today – up $5.50 at $1297 – as trade war concerns began to slowly seep into investor thinking. Silver is up 12¢ at $16.52. National leaders from the G-7 will meet in Quebec this week amidst a contentious atmosphere unlike anything seen in recent years. The dollar is down this morning giving impetus to gold’s upside.

Meanwhile, concerns continue to mount that Italy and its massive sovereign debt could trigger a general crisis for the euro and the European Union and beyond. Carmen Reinhart, a Harvard economist who specializes in crisis analysis, warns of how problems with the euro can have a wider, contagion effect: “Farther afield,” she says in Project Syndicate article, “the weakness in the euro has translated into dollar strength, which means a sustained beating for emerging markets, particularly those with US dollar debt. The flight to quality that accompanies outbreaks of financial turbulence is reinforcing a shift away from some of the riskier asset classes of which emerging markets are a part. International equity markets have not been exempt from contagion.”

Quote of the Day
“However, the media credits or lambastes the president of the day as though he and he alone is in charge of the country. Whatever happens is treated as his accomplishment or failure. And, typically, presidents play into this—taking personal credit for perceived accomplishments within the country and disavowing blame for perceived failures. At present, the conservative media is emphasising low unemployment as an achievement, just as the liberal media did during the Obama Administration. And yet, since the Clinton Administration, the unemployment figures have been consistently fudged. Those who work only part-time are defined as ’employed.’ Those who have given up pursuing employment are removed from the unemployment equation. If those numbers were plugged back in, US unemployment would be in the double-digits—during both the Obama and Trump presidencies.” – Jeff Thomas, Mises Institute

Chart of the Day

Visualization courtesy of HowMuch.net

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Posted in dailyquotes |

DMR–Gold pushes higher in early trading, G-7 this week

Gold pushed higher in early trading today – up $5.50 at $1297 – as trade war concerns began to slowly seep into investor thinking.  Silver is up 12¢ at $16.52. National leaders from the G-7 will meet in Quebec this week amidst a contentious atmosphere unlike anything seen in recent years.  The dollar is down this morning giving impetus to gold’s upside.

Meanwhile, concerns continue to mount that Italy and its massive sovereign debt could trigger a general crisis for the euro and the European Union and beyond.  Carmen Reinhart, a Harvard economist who specializes in crisis analysis, warns of how problems with the euro can have a wider, contagion effect: “Farther afield,” she says in Project Syndicate article, “the weakness in the euro has translated into dollar strength, which means a sustained beating for emerging markets, particularly those with US dollar debt. The flight to quality that accompanies outbreaks of financial turbulence is reinforcing a shift away from some of the riskier asset classes of which emerging markets are a part. International equity markets have not been exempt from contagion.”

Quote of the Day
“However, the media credits or lambastes the president of the day as though he and he alone is in charge of the country. Whatever happens is treated as his accomplishment or failure. And, typically, presidents play into this—taking personal credit for perceived accomplishments within the country and disavowing blame for perceived failures. At present, the conservative media is emphasising low unemployment as an achievement, just as the liberal media did during the Obama Administration. And yet, since the Clinton Administration, the unemployment figures have been consistently fudged. Those who work only part-time are defined as ’employed.’ Those who have given up pursuing employment are removed from the unemployment equation. If those numbers were plugged back in, US unemployment would be in the double-digits—during both the Obama and Trump presidencies.” – Jeff Thomas, Mises Institute

Chart of the Day

Visualization courtesy of HowMuch.net

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Posted in Today's top gold news and opinion |

Gold pushes lower but physical demand is up globally including in the United States

Gold pushed lower in early trading – down $5.50 at $1294.50 – on a strong non-farm payrolls report. Silver is up 4¢ at $16.48.

Traders in the gold market continue to focus on the data and its potential effect on interest rate policy while pushing trade and geopolitical concerns to the background. What they might be ignoring at their peril though is the Trump administration’s potential reaction to the problem of the strong dollar. At some point, the White House will need to address to what degree the strong dollar is undercutting its push to boost U.S. exports, and what form that will take is anyone’s guess.

Weak currencies across the globe are fueling renewed interest in gold coins and bullion as investors move to preserve assets against domestic currency deterioration. Gold prices have risen sharply against a number of major currencies over the past few weeks including the euro, the British pound, the yuan as well as a number of emerging country currencies including the Mexican peso.

In the United States, American Eagle gold coin sales registered a strong rebound in May – up 433% from April, according to a Reuters report. As mentioned here earlier in the week, in the era of algo-driven markets, the things that would make gold demand rise, do not always translate to the things that would make the price rise. In the longer run though, physical demand necessarily gets factored into the pricing equation.

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

Chart of the Day

Chart note: Gold’s performance since 2000 illustrates an investment particularly suited for the times. After 12 straight years of positive returns (2001-2012), we had one sideways year (2014) sandwiched between two years of declines (2013 & 2015). Over the last two years (2016-2017), gold has once again delivered positive returns – a performance many gold market analysts view as a harbinger of things to come. Not a bad track record after all is said and done during times of rapid, and often unexpected changes in the financial markets and the economy.

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Posted in dailyquotes |

DMR–Gold pushes lower but physical demand is up globally including in the United States

Gold pushed lower in early trading – down $5.50 at $1294.50 – on a strong non-farm payrolls report.  Silver is up 4¢ at $16.48.

Traders in the gold market continue to focus on the data and its potential effect on interest rate policy while pushing trade and geopolitical concerns to the background.  What they might be ignoring at their peril though is the Trump administration’s potential reaction to the problem of the strong dollar, as mentioned in the post immediately below on the on-going G-7 meeting.  At some point, the White House will need to address to what degree the strong dollar is undercutting its push to boost U.S. exports, and what form that will take is anyone’s guess.

Weak currencies across the globe are fueling renewed interest in gold coins and bullion as investors move to preserve assets against domestic currency deterioration.  Gold prices have risen sharply against a number of major currencies over the past few weeks including the euro, the British pound, the yuan as well as a number of emerging country currencies including the Mexican peso.

In the United States, American Eagle gold coin sales registered a strong rebound in May – up 433% from April, according to a Reuters report.  As mentioned here earlier in the week, in the era of algo-driven markets, the things that would make gold demand rise, do not always translate to the things that would make the price rise. In the longer run though, physical demand necessarily gets factored into the pricing equation.

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

Chart of the Day

Chart note:  Gold’s performance since 2000 illustrates an investment particularly suited for the times. After 12 straight years of positive returns (2001-2012), we had one sideways year (2014) sandwiched between two years of declines (2013 & 2015).  Over the last two years (2016-2017), gold has once again delivered positive returns – a performance many gold market analysts view as a harbinger of things to come. Not a bad track record after all is said and done during times of rapid, and often unexpected changes in the financial markets and the economy.

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Posted in Today's top gold news and opinion |

NEWS & VIEWS
Forecasts, Commentary & Analysis on the Economy and Precious Metals
Celebrating our 45th year in the gold business

June, 2018


‘Mphm!’
How cultivating a little disdain and a healthy gold diversification
can help you cope with the times

The June issue of News & Views is now out to subscribers.  This month we depart from our usual fare of charts, tables and numbers to offer something a bit more philosophical.

[LINK]

[FREE SUBSCRIPTION sign-up]

If you appreciate analysis that is a bit off the beaten track and concentrates on the long term merits of gold and silver ownership, you might appreciate receiving our monthly newsletter on an on-going basis. It is offered free-of-charge as a service to our regular clientele and an incentive to prospective clients.

Source: The Strand, November, 1921


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Posted in ClientInsights |

Gold continues to bounce around the $1300 mark, looking like it has aspirations of going higher

DAILY MARKET REPORT

Gold continued to bounce around the $1300 mark this morning as a run of government reports reflected mostly benign economic circumstances. At the moment, it is up $2.50 on the day at $1305 and looking like it has aspirations of going higher. If it does, it would not be without proper cause as there is more than the average number of economic threats rattling around the markets. The dollar, too, has suddenly veered south over the past two days.

Commodities continue to move quietly higher, though it has not been a good day for oil thus far – down over 1.5% on the day. By way of an update, the closely watched CRB is up 15% over the past year. Gold, by contrast, is up only 3% over the past year leaving much room for improvement. Gold tends to track commodities over extended periods. The divergence at the end of the plot lines in the chart below is telling. . . . .

Chart courtesy of tradingeconomics.com

Quote of the Day

” . . . I suspect a staggering amount of ‘carry trade’ leverage has accumulated globally over this protracted speculative cycle. ECB policies have clearly spurred leveraged speculation throughout euro zone bond markets, especially the unsound periphery. Eastern Europe as well? There is surely massive leverage in U.S. Credit, most likely having played a prevailing role in the booming investment-grade corporate marketplace. We’re in the stage of the cycle where things look good. In the U.S., in particular, the New Era and New Paradigm mentality has taken deep root. The economy appears robust, bolstered by fantastic technological advancement and scientific development. The underlying instability of finance goes unrecognized; the global nature of Bubble Dynamics unappreciated. Meanwhile, markets again this week provided confirmation of the Unfolding Instability Thesis.” – Doug Noland, Credit Bubble Bulletin

Chart of the Day

Chart courtesy of Advisor Perspectives

Chart note: There are a couple of things unsettling about this chart. First is the sheer amount of investor margin debt present in the current stock market – over $650 billion. Second is the correlation between the growth of that debt and ascent of the S&P 500. With that amount of leverage in the stock market and the influence it has on price levels, if and when the margin calls arrive, the tumble could be fast and extreme. FINRA (Financial Industry Regulatory Authority) warns that “many investors may underestimate the risks of trading on margin and misunderstand the operation of, and reason for, margin calls.” Shades of 1929.

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Posted in dailyquotes |

Gold continues to bounce around the $1300 mark, looking like it has aspirations of going higher

DAILY MARKET REPORT

Gold continued to bounce around the $1300 mark this morning as a run of government reports reflected mostly benign economic circumstances. At the moment, it is up $2.50 on the day at $1305 and looking like it has aspirations of going higher.  If it does, it would not be without proper cause as there is more than the average number of economic threats rattling around the markets.  The dollar, too, has suddenly veered south over the past two days.

Commodities continue to move quietly higher, though it has not been a good day for oil thus far – down over 1.5% on the day.  By way of an update, the closely watched CRB is up 15% over the past year.  Gold, by contrast, is up only 3% over the past year leaving much room for improvement.  Gold tends to track commodities over extended periods.  The divergence at the end of the plot lines in the chart below is telling. . . . .

Chart courtesy of tradingeconomics.com

Quote of the Day

” . . . I suspect a staggering amount of ‘carry trade’ leverage has accumulated globally over this protracted speculative cycle. ECB policies have clearly spurred leveraged speculation throughout euro zone bond markets, especially the unsound periphery. Eastern Europe as well? There is surely massive leverage in U.S. Credit, most likely having played a prevailing role in the booming investment-grade corporate marketplace. We’re in the stage of the cycle where things look good. In the U.S., in particular, the New Era and New Paradigm mentality has taken deep root. The economy appears robust, bolstered by fantastic technological advancement and scientific development. The underlying instability of finance goes unrecognized; the global nature of Bubble Dynamics unappreciated. Meanwhile, markets again this week provided confirmation of the Unfolding Instability Thesis.” – Doug Noland, Credit Bubble Bulletin

Chart of the Day

Chart courtesy of Advisor Perspectives

Chart note:  There are a couple of things unsettling about this chart.  First is the sheer amount of investor margin debt present in the current stock market – over $650 billion.  Second is the correlation between the growth of that debt and ascent of the S&P 500.  With that amount of leverage in the stock market and the influence it has on price levels, if and when the margin calls arrive, the tumble could be fast and extreme. FINRA (Financial Industry Regulatory Authority) warns that “many investors may underestimate the risks of trading on margin and misunderstand the operation of, and reason for, margin calls.” Shades of 1929.

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Posted in Today's top gold news and opinion |

Gold steady in dollar terms, but up sharply in the euro since mid-May

DAILY MARKET REPORT

Gold is steady this morning at $1301 balancing a calmer Europe, at least for the moment, with a sharp drop in the dollar. Though the price remains range bound in dollar terms in and around the $1300 level, it has been a different story in euro terms. Since mid-May, when investors first began to worry about events in Italy, the price is up nearly 4% from €1090 per ounce to €1130 early yesterday. The Trump administration is forging ahead full force on $50 billion worth of tariffs on Chinese imports. Tensions are once again heating up in the Middle East.

In its most recent Market Report, Degussa, the Swiss gold refinery, sums up nicely why demand for gold is likely to remain strong in the months and years to come:

“What does it mean for gold’s value proposition? First, gold does not appear to be expensive at the current price. In fact, there is reason to assume that it is (to borrow a term from the investment world) undervalued. Second, gold – if you look at it as a form of money – offers a hedge against the vagaries of the fiat money world. It cannot be debased by central banks’ money printing, and it does not carry a default or counter-party risk. Reflected upon from this perspective, gold certainly has not lost its shine for the long-term oriented investor. This becomes clear once the investor realizes that gold is not an investment instrument but a form of money – in fact, the best and most honest kind of money available.”

Those vagaries have become all too apparent over the past few days – particularly if you happen to take residence in Europe.

Quote of the Day
“[T]he trigger for a crisis could be anything if the system as a whole is unstable. Moreover, the size of the trigger event need not bear any relation to the systemic outcome. The lesson is that policymakers should be focused less on identifying potential triggers than on identifying signs of potential instability.This implies that paying attention to macroeconomic “imbalances” may pay bigger dividends than trying to assess financial instability through highly disaggregated “risk maps” of the sort currently being encouraged by the G20 and the IMF. The latter are not only expensive to monitor, but potential rupture points in the financial fabric can change rapidly in real time.Perhaps more important, serious economic and financial crises can have their roots in imbalances outside the financial system.” – William White, chairman of the Paris-based economic and development review committee at the Organization for Economic Co-operation and Development.

Chart of the Day


Chart courtesy of tradingeconomics.com

Chart note: Italy’s political crisis spilled over to its bond market yesterday spiking the yield on its 10-year bond to over 3%. Since the beginning of May, when concerns about Italy’s political stability began to make headlines, the yield on its 10-year bond has gone from 1.77% to 3.16% as of yesterday. The market stabilized last night, but few see the crisis as passing its high point. Bloomberg cited Swedbank’s Par Magnusson and Filip Andersson as saying in a report to clients that “The Italian house is on fire, and it will spread if someone doesn’t pull out the fire extinguisher soon. Italy may become severely injured, but the EMU may die.” The euro suffered a major setback yesterday declining .75% against the U.S. dollar to $1.153 while all of Europe seemed to go into crisis mode overnight. Italy sneezes. Europe catches a cold. . . .or maybe worse.

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Posted in dailyquotes |

Gold steady in dollar terms, but up sharply in the euro since mid-May

DAILY MARKET REPORT

Gold is steady this morning at $1301 balancing a calmer Europe, at least for the moment, with a sharp drop in the dollar. Though the price remains range bound in dollar terms in and around the $1300 level, it has been a different story in euro terms. Since mid-May, when investors first began to worry about events in Italy, the price is up nearly 4% from €1090 per ounce to €1130 early yesterday.  The Trump administration is forging ahead full force on $50 billion worth of tariffs on Chinese imports. Tensions are once again heating up in the Middle East.

In its most recent Market Report, Degussa, the Swiss gold refinery, sums up nicely why demand for gold is likely to remain strong in the months and years to come:

“What does it mean for gold’s value proposition? First, gold does not appear to be expensive at the current price. In fact, there is reason to assume that it is (to borrow a term from the investment world) undervalued. Second, gold – if you look at it as a form of money – offers a hedge against the vagaries of the fiat money world. It cannot be debased by central banks’ money printing, and it does not carry a default or counter-party risk. Reflected upon from this perspective, gold certainly has not lost its shine for the long-term oriented investor. This becomes clear once the investor realizes that gold is not an investment instrument but a form of money – in fact, the best and most honest kind of money available.”

Those vagaries have become all too apparent over the past few days – particularly if you happen to take residence in Europe.

Quote of the Day
“[T]he trigger for a crisis could be anything if the system as a whole is unstable. Moreover, the size of the trigger event need not bear any relation to the systemic outcome. The lesson is that policymakers should be focused less on identifying potential triggers than on identifying signs of potential instability.This implies that paying attention to macroeconomic “imbalances” may pay bigger dividends than trying to assess financial instability through highly disaggregated “risk maps” of the sort currently being encouraged by the G20 and the IMF. The latter are not only expensive to monitor, but potential rupture points in the financial fabric can change rapidly in real time.Perhaps more important, serious economic and financial crises can have their roots in imbalances outside the financial system.” – William White, chairman of the Paris-based economic and development review committee at the Organization for Economic Co-operation and Development.

Chart of the Day


Chart courtesy of tradingeconomics.com

Chart note: Italy’s political crisis spilled over to its bond market yesterday spiking the yield on its 10-year bond to over 3%. Since the beginning of May, when concerns about Italy’s political stability began to make headlines, the yield on its 10-year bond has gone from 1.77% to 3.16% as of yesterday. The market stabilized last night, but few see the crisis as passing its high point. Bloomberg cited Swedbank’s Par Magnusson and Filip Andersson as saying in a report to clients that “The Italian house is on fire, and it will spread if someone doesn’t pull out the fire extinguisher soon. Italy may become severely injured, but the EMU may die.” The euro suffered a major setback yesterday declining .75% against the U.S. dollar to $1.153 while all of Europe seemed to go into crisis mode overnight. Italy sneezes. Europe catches a cold. . . .or maybe worse.

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Posted in Today's top gold news and opinion |