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Gold holds it own during another volatile day for markets

LATE REPORT

Gold finished down $4.57 today at $1324.44 basically holding its own in a highly volatile market atmosphere following the Fed’s release of minutes from its January meeting.  Silver actually managed to eke out a small gain on the day finishing up 7¢ at $16.48, a gain that might portend good things for both metals going forward. The Dow Jones Industrial average suffered a more than 460-point reversal in the day’s trading to finish 167 point lower on the day, and the yield on the 10-year Treasury moved up steeply to nudge the psychologically important 3% mark.

For a more comprehensive review of the day’s events, we invite you to scroll below. . . . .

Russ Koesterich, portfolio manager for BlackRock’s Global Allocation Team, revealed in a Bloomberg interview recently that the massive asset manager, the largest in the world, had added more gold to its holdings in the wake of the latest stock market drop.  The firm is invested 5% in gold as a “risk mitigant” against rising volatility which he says is going to become “a more permanent feature” of the financial markets. Kosterich is worried about the huge deficits forecast for the future under the new budget regime and consequent rising interest rates and inflation.

Quote of the Day
“The population of the world is increasing at the rate of five thousand four hundred every hour. A small percentage of these people will become gold hoarders, people who are frightened of currencies, who like to bury some sovereigns in the garden or under the bed. Another percentage needs gold fillings for their teeth. Others need gold-rimmed spectacles, jewelry, engagement rings. All these new people will be taking tons of gold off the market every year. New industries need gold wire, gold plating, amalgams of gold. Gold has extraordinary properties which are being put to new uses every day. It is brilliant, malleable, ductile, almost unalterable, and metals except platinum. There’s no end to its uses. But it has two defects. It isn’t hard enough. It wears out quickly, leaving itself on the linings of our pockets, and in the sweat of our skin. Every year, the world’s stock is invisibly reduced by friction. I said that gold has two defects…The other, and by far the major defect, is that it is the talisman of fear. Fear, Mr Bond, takes gold out of circulation and hoards it against the evil day. In a period of history when every tomorrow may be the evil day, it is fair enough to say that a fat proportion of the gold that is taken out of one corner of the Earth is at once buried again in another corner.” – Ian Fleming, Goldfinger


What you need to know before you buy your first ounce of gold
Some initial guidelines from one of America’s top gold experts

If you are new to the concept of gold ownership, you might be looking for a little guidance. We, at USAGOLD, have been in the gold business for a good many years and the one thing that stands out to us in working with so many over the years is how often investors, for one reason or another, get off to a bad start.

That is why we developed a question and answer page many years ago that delves into the subject of GETTING OFF TO THE RIGHT START. We update it regularly as things can change rapidly in the gold and silver markets. The page is linked above and we recommend that newcomers spend the few minutes it takes to get through it. . . .

This page receives considerably high-ranking from Google on a number of important searches and we like to think it’s because of the cause it serves – providing some positive direction to investors trying to get off to a solid start in their pursuit of gold ownership.

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try this phone number or drop us an e-mail:

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Gold pops after Fed indicates more rate hikes ahead

CNBC/Reuters/2-21-2018

“Gold rose on Wednesday as investors reacted to the minutes of the Federal Reserve’s latest policy meeting for an updated outlook on U.S. interest rates. In the Fed’s minutes released Wednesday, the central bank signaled an increase in economic growth and an uptick in inflation as justification to continue to raise interest rates gradually.”

MK note:  It is the emphasis on the word “gradually” that pushed gold higher initially.  As we have posted here in the past, gradual hikes that lag the inflation rate are bullish for gold, bearish for the dollar.  The gold and dollar markets, at the moment, are erratic – unsure how to react to the minutes release.

UPDATE (1:25pmMT):  Market reaction is emotional, visceral across the boards on what should  have been read as pretty much a non-event.  Shows how unstable, volatile  and erratic the markets really are at this point in time. Many on the professional investor side of the markets will see it as an additional warning (not that the concerns need any more prompting).  Gold now down over $6 on the day, after being up $5. Dollar up.  Stocks down almost 250 from earlier high. The bond market reaction is the most telling.  The 10-year yield is inching toward 3% and we have yet to hear anything on today’s Treasury auction – all in all, probably the more important event of the day.

 

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Silver a top pick in commodities among traders, money managers

ETF Trends/Brenton Garen/2-21-2018

“Heading into 2018, silver was one of the top picks in the commodities complex among traders and money managers. Moreover, unlike gold, silver sees much higher industrial demand. The precious metal enjoys heavy industrial demand that benefits from an expanding global economy. ETF Securities “reiterated its forecast for the precious metal to trade in a range between $19 and 20 an ounce by the end of the year.”

MK note:  And at the current ratio of over 80:1 to gold, silver has the potential to outperform gold.  We have had a steady stream of silver buyers (mostly one-ounce silver American Eagles) at USAGOLD since the stock market breakdown a couple weeks ago.

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Venezuela launches virtual currency, hoping to resuscitate economy

New York Times/Kirk Semple and Nathan Popper/2-10-2018

“‘I just think it’s a desperate move by a regime that is increasingly isolated and has an economy that has spiraled out of its control,’ said Cynthia J. Arnson, director of the Latin American Program at the Woodrow Wilson International Center for Scholars. The Venezuelan government has said the value of the petro will be tied in some way to the value of a barrel of Venezuelan oil. But the Maduro administration has not given many details on how this pricing would work, and many investors have said they would not trust the government to faithfully maintain the link between the petro and the price of oil.”

MK note 1:  In order for any instrument – issued by government or private entity – to be called money, it must fulfill three criteria: It must serve reliably as a medium of exchange.  It must serve dependably as a unit of account. Last, but not least, it must serve uncompromisingly as a store of value. The adverbs are mine and not textbook.

MK note 2: Most of the world’s currencies meet the first two criteria.  It is the last one – store of value – that can be problematic and, in a nutshell, why gold to varying degrees is in demand at every corner of the globe.  Confidence is the final determinant. In the case of the petro, the best thing it has going for it is that it is issued by a government, while the biggest thing it has going against it is that it is issued by a government, specifically the Venezuela government. “With the petro,” says the New York Times, “the confidence of investors is likely to be only as strong as their confidence in the Maduro government.”

MK note 3: Venezuela claims this morning that its $735 billion offer was taken up in short order today which proves once again all one needs to launch a successful enterprise is put the words “crypto” or “blockchain” in the prospectus.  “Wild money” will buy it up in an instant. . . . .

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Fed presidents Kashkari, Kaplan weigh in on inflation

FED WATCH

“‘We can’t make policy based on market blips, up and down,’ [Neel] Kashkari said. The Minneapolis Fed president, one of the most dovish central bankers, said that he has ‘hope’ inflation is picking up after a decade of being below the central bank’s 2% target. ‘We keep saying inflation is right around the corner and then it disappoints us,’ Kashkari said in an interview on Bloomberg Television. Asked if he would be worried that Wall Street would overreact to higher inflation, Kashkari replied: ‘Wall Street overreacts to everything.'” – MarketWatch, 2-21-2018


“The U.S. central bank should continue to raise short-term interest rate target ‘gradually and patiently,’ said Dallas Fed President Rob Kaplan, on Wednesday, in comments delivered ahead of eagerly awaited minutes. The Fed penciled in three rate hikes for this year but a growing number of economists think the Fed will tighten at a faster pace in the wake of the Trump tax cut and building inflation pressures. In an essay published on his regional bank’s website, Kaplan did not define how many rate hikes would be ‘patient.’” – MarketWatch, 2-21-2018

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Gold steady this morning amid potentially unsettling events

EARLY REPORT

Gold is steady this morning and that by itself is an accomplishment given what it is up against the next two days. Gold is trading in the vicinity of $1330 at the present and even on the day.  Silver is up 17¢ at $16.67 and a bit of surprise.  Fed meeting minutes will be released today and tomorrow we have options expiration – two events that in the past have been known to send gold reeling.  Later today and tomorrow Treasury will offer $92 billion in 2-year, 5-year and 7-year notes – a sale that could send gold in either direction depending upon how well the offer is received.

Stay tuned. . . We will keep you updated.

Bloomberg quotes JP Morgan this morning on the prospects for commodities: “Inflation’s back and raw materials stand to benefit. . .which has raised price forecasts for metals. ‘Inflation has come and it should be good for commodities,’ the bank said in a report received on Wednesday. Among signs of the shift, JPMorgan cited stronger U.S. wage numbers as well as recent core consumer price inflation.”

Chart of the Day

Chart note: JP Morgan jumps on the commodities bandwagon.  As go commodities, so goes gold. (Above: Goldman Sachs Commodity Index (GSCI), source TradingEconomics.com
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EWT report expect buyers to appear at current levels

FXStreet/Elliott Wave Forecast Team/2-21-2018

“The 5 waves rally also ended a higher degree Minute wave ((a)) of a zigzag Elliott Wave Structure. Minute wave ((b)) pullback is currently in progress to correct cycle from 2/8 low in 3, 7, or 11 swing. Minute wave ((b)) has reached 1323.39 – 1334.07 area where it could end. As far as pivot at 2/8 low (1306.96) stays intact, expect Gold to extend higher. We don’t like selling the yellow metal and expect buyers to appear at 1330.07 – 1334.15 area for a 3 waves bounce at least.”

MK note:  For those unfamiliar with Elliott Wave analysis this looks like something out of an engineering report.  For those who understand the basics of EWT, this report is not only reassuring, it signals a buying opportunity at current levels. For those with the interest, the link above takes you to the gold chart with annotations.

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Inflation looks poised to bounce back big time

Deutsche Bank sees acyclical price pressures about to turn a corner

Bloomberg/Jeanna Smialek/2-20-2018

“So-called acyclical inflation may be picking up at long last. As a refresher, acyclical prices don’t budge much as unemployment falls, and you can read more on what indexes qualify here. The measures have been low in recent years, holding down overall inflationary pressures and making it harder for the U.S. Federal Reserve to hit its 2 percent inflation goal. But we may be at an inflection point, Deutsche Bank economists write in a research note. A weaker dollar should help boost import price inflation, they write, and health care inflation has been showing a strong uptick.

MK note:  We suspect that if price inflation comes, the degree to which it comes will be a surprise to most Americans, and it will begin at an unexpected source:  import prices.

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Swiss gold exports to China advance sharply during January

Scrap Register/2-21-2018

“Exports to China and Hong Kong picked up by a very considerable 70% year-on-year to total 66 tons, which Commerzbank attributes to higher gold demand ahead of the Chinese New Year Festival. By contrast, January exports to India were only roughly half as high – at a good 14 tons – as they were last January. Last week already saw the Indian Ministry of Commerce report a noticeable decline in gold imports in January. Thomson Reuters GFMS had also talked about weak Indian gold demand.”

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Rough sledding for gold today

LATE REPORT

Gold encountered some rough sledding today, down $15 at $1329.60, pushed down mostly by a stronger dollar.  Silver also had a tough go of it today – off 21¢ at $16.47.  The precious metals traded lower despite cracks showing up in both the stock and bond markets. Though the front end of the Treasury’s auction (mentioned further down the page) went uneventfully and contributed to gold’s downside, the back-end longer-term yields the next two days could become problematic, if demand is off. “We have a barrage of U.S. debt being auctioned off,” Saxo Bank’s Ole Saxon told CNBC, “and if there is less than the required appetite for that mountain of debt, that could weaken the dollar and support gold.”

Quote of the Day
“Chinese demand for gold jewelry grew in 2017 despite higher prices for the precious metal as the spread of e-commerce extended retailers’ reach. . .Smartphone apps enabling people to shop from anywhere have also altered habits. Inland residents once had limited opportunities to buy from jewelry sellers concentrated in coastal urban areas. E-commerce has expanded the geographical range stores can draw customers from, making hinterland consumers ‘a new driver’ of the market, [World Gold Council’s Takahiro] Morita said.”


“There are two bubbles: We have a stock market bubble, and we have a bond market bubble. At the end of the day, the bond market bubble will eventually be the critical issue, but for the short term it’s not too bad. . . What’s behind the bubble? Well the fact, that, essentially, we’re beginning to run an ever-larger government deficit . . Debt has been rising very significantly and we’re just not paying enough attention to that.” – Alan Greenspan, on Bloomberg television recently.

The National Debt and Gold

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Gold bears play while Chinese away

Sharps Pixley/Lawrie Williams/2-19-2018

“Arguably Chinese gold demand, which remains high according to almost all accounts, tends to be a stabilising influence on the gold price with the twice-daily Shanghai fixes having their own impact is steadying price rises and falls. Thus when the nation goes on holiday for a week, as it is now for the Chinese (Lunar) New Year which was on the 16th, followed by a week-long holiday, it gives gold bulls and bears around the rest of the world a great opportunity to drive the market in their own preferred direction.”

MK note:  Lawrie Williams offers an interesting take on today’s gold market dynamics – one that emphasizes China’s important role as buyers in the contemporary gold market.  If Chinese banks are not available to hit a low bid on physical metal (which they are now capable of doing as members of the London fix), it provides license for gold bears to drive the price lower at least temporarily without being challenged.  If Williams is right, bargain hunters will see these paper trader induced drops as short-term buying opportunities.

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This week’s Treasury auction schedule

TheStreet/Martin Baccadex/2-19-2018

“A big measure of investor willingness to take down the quarter trillion in debt on offer will be be the market’s ability to hold 10-year yields under 3%, a figure that many analysts have suggested could start the flow of cash from equity funds into fixed income portfolios. While no 10-year notes are on offer this week, $92 billion in 2-year, 5-year and 7-year notes will be auctioned on Wednesday and Thursday after more than $151 billion in short-term Treasury bills are placed in the market on Tuesday.”

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Gold down marginally on mixed cues early, big week for bond market

EARLY REPORT

Gold is down $4 this morning at $1341.50 on mixed cues from the bond and FOREX markets.  Silver is down 2¢ at $16.65.  The dollar is up.  Stocks and bonds are down. The big event this week will be the U.S. Treasury Department’s sale of an unprecedented $258 billion in U.S. sovereign debt.  It comes at a time when bond investors are already jittery about the bond market, as reflected in this morning’s mixed early market session.

“Bid farewell to the bond market bull run,” reported CNBC yesterday, “because the markets are entering a phase not seen in 72 years: A rising rates cycle.” As we move into the Chinese Year of the Dog, and the first stages of what market experts are calling a financial market “regime change,” this sale might be seen as a seminal event. . . .and its first major test. “Bond investors, who have been on edge over signs of growing inflation and a possibly more aggressive Federal Reserve,” reports Reuters, “will have their work cut out for them. . .”

By the way, if my assumptions are correct, by the time Treasury finishes this week’s sale, the national debt will be treading perilously near the $21 trillion mark. At the time of the budget standoff in Congress, the accumulated debt was $20.5 trillion – almost one half trillion will have been added in a little over 10 days. But who’s counting? Deficits don’t matter. . .right?

Chart of the Day

Chart notes:  “The Rounding Bottom,” says StockCharts.com, “is a long-term reversal pattern that is best suited for weekly charts. It is also referred to as a saucer bottom, and represents a long consolidation period that turns from a bearish bias to a bullish bias.” Also – “Rounded bottoms—especially when they occur on daily and weekly charts, lasting several months or more—often signal a strong trend change. Trends may last for a long time. In stock and currency markets trends can last five years or more. Therefore, the rounded doesn’t have an accurate long-term price target. Rather, the pattern lets traders know a major new trend could be starting,” says Investopedia.  The rounded bottom on the weekly gold chart is unusually and almost perfectly symmetrical – a two and half year decline to the $1060 low and now a 26-month advance to current levels.  We should keep in mind that the rounding bottom, like any chart analysis, falls into the realm of opinion, not fact, and should be understood as such.
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America’s impending debt crisis: This won’t end well for stocks.

Seeking Alpha/Victor Dergunov/2-19-2018

“Stocks may have found a short-term bottom, but out there on the horizon the next crisis is lurking. Despite the short-term positive indicators surrounding stocks, it is important to keep an eye on the big picture. The U.S.’s enormous spending addiction has created a massive debt bubble that is going to lead the economy to its next financial crisis. Consumer, government, credit card, auto loan, mortgage, student loan and just about any other debt you can think of is at a new record – and it won’t end well.”

MK note:  Rising interest rates are unlikely to help matters.  Increasingly, we are seeing warnings of debt defaults, as with William White’s analysis further down the page.

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Powell seeks to bury era of Fed ‘barons’

Yahoo-Bloomberg/2-15-2018

“Spur-of-the-moment exchanges between the chair and junior staffers would have been largely unthinkable at the Fed a generation ago. Even in recent years, a request for information would often result in a carefully vetted formal presentation that might take weeks to prepare and an hour to deliver. Powell, who spent a dozen years in banking and private equity, has no patience for that, the two current insiders said. Nor does he want staff to over-invest their time in a complex production when all he needs is a substantive and frank discussion with just the right expert – but right now.”

MK note:  Jerome Powell, it seems, intends to run the central bank more like a business and less like the econ department at one of the major universities.  That might end up being a good thing. . .

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Here’s who really matters at the Bank of Japan

Bloomberg/Daniel Moss/2-18-2018

“That’s why the real attention should be on [Masayoshi] Amamiya. Behind the scenes, he’s spent decades at the bank, shaping and implementing policies based on guidance from above. No doubt he’s learned a trick or two and has a massive rolodex. As Toru Fujioka and three Bloomberg News colleagues wrote in an excellent 2016 profile, Amamiya has served governors who have taken very different approaches to economic cycles. Kuroda is but his latest patron. Pragmatism, rather than reflation or monetarism or anything else, has been his trademark.”

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Start preparing for the next financial crisis now

Financial Times/William White/2-18-2018

“Carrying on with current monetary policy brings with it the threat of inflation. And given economists’ lack of understanding of either the level of ‘potential’ or the inflationary process itself, it could easily get out of hand. However, inflation is not the only danger. First, debt ratios have been allowed to rise for decades, even after the crisis began. Moreover, whereas before the crisis this was primarily a problem of the advanced economies, it has since gone global. Second, tolerance of risk-taking threatens future financial stability, as does the narrowing of the profit margins for many traditional financial institutions. Third, the misallocation of real resources by banks and other financial institutions is encouraged by this monetary environment. With markets unable to allocate resources properly, due to the actions of central banks, the likelihood that rising debt commitments will not be honoured has risen sharply.”

MK note:   In other words, in polite terms White* warns that moral hazard and easy money have put both banks and countries in a precarious position. White sees the groundwork being laid for mass defaults rolling through the financial system and no plan in place to counter the problem if and when it occurs.  He goes so far as to say in this Financial Times opinion piece that Dodd-Frank would hinder the Federal Reserve’s ability to provide liquidity, though he skips the details. Whenever the words “financial default” or “rolling bankruptcies” come up, I think about the one asset that is not simultaneously someone else’s liability.

• William White is former chief economist for the Bank for International Settlements and now chairman of the Paris-based economic and development review committee at the Organisation for Economic Co-operation and Development.
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Regime change: Gold disconnects from real yields amid rising US downgrade risk

NASDAQ/Christopher Vecchio/2-16-2018

“Something changed in recent months, however: the historical relationship between Gold and real yields has broken down. Even as real yields are rising – an environment that one would expect to be poor for precious metals – Gold has been able to advance. This may be another piece of evidence of a regime change across asset classes. The National Bureau of Economic Research says that regime change is ‘the tendency of financial markets to often change their behavior abruptly and the phenomenon that the new behavior of financial variables often persists for several periods after such a change.’

In the case of the the separation between Gold and real yields , it’s rather apparent that behavior has changed abruptly – especially since the passage o f the tax reform bill in Q4’17. Thus explains the divergence and Gold’s appeal: given the trajectory of the US deficit and debt, another US rating’s downgrade this year seems very possible.”

MK note: This opinion piece makes the point that rapidly rising inflation can undermine the real rate of return on fixed income instruments and enhance the appeal of gold.

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Why a new Japanese emperor and the Tokyo Olympics mean a glittering Year of the Dog for gold

The possibility of further falls in stock prices, as well as uncertainty over the strength of the US dollar and over the Brexit process will also add to the lustre of gold this year

South China Morning Post/Enoch Yiu/2-18-2018

‘The Year of the Dog is shaping up to be another good one for investors in gold, who may enjoy price rises of 10 per cent to 15 per cent as Japan buys up the precious metal to commemorate its new emperor and the 2020 Tokyo Olympic Games.”

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India’s gold bar imports jump four-fold

INDIA UPDATE

Scrap Monster/Anil Matthews/2-19-2018

“As per GJEPC [Gems and Jewellery Promotion Council] data, the country imported Rs 2,905.03 crores (USD 456.48 Million) worth of gold bars in January 2018. The imports surged higher significantly when compared with those during the same month a year before. In rupee terms, the gold bar imports have recorded sharp growth of over 320% when matched with the previous year. The increase in dollar terms stood at nearly 350%. It must be noted that the country’s gold bar imports during January 2017 were valued at Rs 690.20 crores (USD 101.38 Million).”

MK note: India is the world’s second largest consumer of gold behind China.

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Olympic medal standings by country

 

 


Gold

Norway – 11
Germany – 10
Netherlands – 6
Canada – 6
United States – 5
France – 4
Sweden – 4
Austria – 4
Korea – 3
Japan – 2
Switzerland – 2
Italy – 2
Slovakia, Czech Republic, Belarus, UK, Poland, Ukraine – 1

Silver
Norway – 9
Germany – 6
Netherlands – 5
Canada – 5
Japan – 5
China – 5
Switzerland – 4
United States – 3
Sweden – 3
Russia – 3
Australia – 2
Austria – 2
Korea – 2
Slovakia – 2
France – 2
Czech Rep – 2
Italy, Belarus, Slovenia – 1

Total Gold, Silver & Bronze

Norway – 28
Germany – 20
Canada – 17
Netherlands – 13
Russia – 11
United States – 10
Japan – 10
France – 10
Austria – 10
Sweden – 7
China – 7
Czech Republic – 6
Italy – 6
UK – 4
Slovakia –3
Australia – 3
Finland – 3
Spain – 2
Latvia, Kazakhstan, Lichtenstein, Slovenia, Ukraine –1

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Goldman Sachs sees red ink everywhere, warns US spending could push up rates and debt levels

CNBC/Javier E. David/2-18-2018

“The U.S. economy won’t be able to count on the pump-priming from tax cuts for very long, Goldman Sachs said on Sunday. Federal spending, rising yields and surging debt needs are a growing worry, the firm said. Deficit spending is approaching ‘uncharted territory’, Goldman said.”

MK note:   Goldman Sachs is beginning to sound like USAGOLD.

Related:  The Federal Debt and Gold – Why the two have risen in tandem since the 1970s, part of our Safe Haven Introductory Information Packet for prospective clients.
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China vows to strike back as US talks tariffs on Chinese steel and aluminium

TRADE WARS

South China Post/Sidney Leng/2-17-2018

“China vowed on Saturday to retaliate after the US Department of Commerce proposed hefty tariffs on imports of Chinese aluminium and steel, with observers warning of further tit-for-tat trade action between the world’s two biggest economies. . . Observers said more confrontation loomed over trade between the two countries and Beijing could respond by limiting imports of American agricultural products.”

MK note:  No mention of selling U.S. Treasuries.

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Why Silicon Valley billionaires are prepping for the apocalypse in New Zealand

The Guardian/Mark O’Connell/2-15-2018

“In 2016, Sam Altman, one of Silicon Valley’s most influential entrepreneurs, revealed to the New Yorker that he had an arrangement with Thiel whereby in the eventuality of some kind of systemic collapse scenario – synthetic virus breakout, rampaging AI, resource war between nuclear-armed states, so forth – they both get on a private jet and fly to a property Thiel owns in New Zealand. . .”

“Everyone is always saying these days that it’s easier to imagine the end of the world than the end of capitalism. Everyone is always saying it, in my view, because it’s obviously true. The perception, paranoid or otherwise, that billionaires are preparing for a coming civilisational collapse seems a literal manifestation of this axiom. Those who are saved, in the end, will be those who can afford the premium of salvation. And New Zealand, the furthest place from anywhere, is in this narrative a kind of new Ararat: a place of shelter from the coming flood.”

MK note:  Although written with a sustained aura of disdain, this article tells why Peter Thiel and other like-minded Silicon Valley luminaries have chosen New Zealand as the ultimate “bug-out” destination. I read this article on the same day we learned Thiel had moved his business operations from San Francisco to Los Angeles “to escape the stifling political conformity of Silicon Valley,” as the Wall Street Journal tells it.  The New Zealand movement among new economy entrepeneurs evokes Galt’s Gulch, the Colorado escape to which the protagonists in Ayn Rand’s Atlas Shrugged ultimately fled. Given what Thiel believes possible, and his libertarian leanings, it would be difficult to exclude him from the ranks of gold owners.

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Doug Casey on why gold could go hyperbolic

Casey Research/2-18-2018

“Well, these things usually move in a hyperbolic curve. They start out slowly. Then, they accelerate. Same type of thing we saw with cryptocurrencies. I think gold will do the same, although not to the same extent. My prediction by the end of this year is that gold will hit $2,000. In 2019, $3,000. In 2020, $4,000. By the time this bull market peaks, gold could reach $10,000. But I hate to say things like that…because it sounds so outrageous. But look at the number of dollars in existence ($3.635 trillion in the M-1 money). Divide that by the 260 million ounces of gold the U.S. Government is supposed to own, and you get a gold price of $13,982/ounce.”

MK note:  Casey sees a major surge in the gold price coincident with rising commodities.

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The stock market’s new ‘wall of worry’ is built on inflation and rate fears

MarketWatch/Anora M. Gaudino/2-18-2018

“‘Seasoned investors will be watching for the retests of the lows. For now, we just added a new wall of worry to climb and that is inflation,’ said Krosby. . .Interestingly, fears of rising inflation and higher borrowing costs—whether rational or irrational—were blamed for triggering the stock market selloff in the first place. ‘We are no longer in the Goldilocks environment, when bad news was good news. Now, the good news is seen as bad news. The market is trying to figure out whether the growth in earnings will keep up with the pace of inflation,’ Krosby said.”

MK note:  ‘Toto, I’ve a feeling we’re not in Kansas anymore.’

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Alan Greenspan’s critical warning on the economy

NewsMax/Peter Reagan/2-8-2018

“Greenspan believes that the ever-increasing government deficit is behind the current bubbles facing the markets. Expressing his concerns about the national debt and budget deficit, he claimed the federal debt to GDP ratio is so unsustainable, it’s becoming even greater now than it was during World War II. He says this will result in inflation and a rise in interest rates, warning:  “We are dealing with a fiscally unstable long-term outlook in which inflation will take hold.”

Greenspan also revealed that he also doesn’t have much confidence in when this situation will be fixed, expressing surprise over many recent government proposals that don’t have any source of funding: ‘I think we’re getting to the point now where the breakout is going to be on the inflation upside. The only question is when.'”

MK note: I will remind everyone that two days before the stock and bond market breakdowns Greenspan was on Bloomberg television warning of two bubbles – one in stocks, the other in bonds. He sees the one in bonds as the more critical.  I doubt he would say today that somehow the danger has passed.  The Reagan article is about two weeks old, but I thought it a particularly good summation of Greenspan’s position and worth posting today – particularly for new visitors to USAGOLD.

 

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Gold: Another month, another test of key resistance, but this time with a difference

Seeking Alpha/John Rubino/2-18-2018

“Where in January, the speculators were ragingly bullish, this time around they’ve been chastened a bit by the subsequent smack-down and are now a little better balanced. The latest COT report, released on Friday afternoon, shows speculators actively cutting their net long positions while commercial traders – who are usually on the other side of speculators’ mood swings – are going less short. . .Add it all up and ‘risk-off’ has a reasonable shot at becoming the dominant theme of the next few years (at least), which is traditionally great for precious metals. So when and if gold finally breaks through $1,360, it will have serious wind at its back.”

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Slow day for gold but a decent week, and so far – a solid year

LATE REPORT

Gold had a difficult time mustering support today despite a run of news bolstering the inflation thesis. (Please scroll below for details.) It finished the day at $1347.00, off $6.30.  Silver had a similarly lackluster day losing 21¢ and finishing at $16.63.  Gold had a good week with a $31 gain.  Silver finished the week 30¢ higher.  The year thus far has been a mixed bag for the two primary investment precious metals:  Gold is up 3.4% and silver is down 1.7%.

Over in StockMarketLand, it was a see-saw day with the Dow Jones Industrial Average showing a gain of 267 at one point before finishing the day up only 19 – a less than convincing end to the week.  One analyst likened buying stocks in the current environment to picking up “dollars in front of a steamroller” – an appropriate mental image, we thought. Tonight’s Quote of the Day takes a similar tack and supports the notion the more things change, the more they stay the same.

To get the full flavor for the week just passed, we invite you to take a leisurely stroll through the posts immediately below.  Much happened. Much was said. Much still needs to be sorted out. . . . . .

Quote of the Day
“At the quarter-century mark of 1925, the great bull market was under way, and Graham*, then 31, developed what he later described as a ‘bad case of hubris.’ During an early-1929 conversation with business associate Bernard Baruch (about whom he disparagingly observed, ‘He had the vanity that attenuates the greatness of some men’), both agreed that the market had advanced to ‘inordinate heights, that the speculators had gone crazy, that respected investment bankers were indulging in inexcusable high jinks, and that the whole thing would have to end up one day in a major crash.’ Several years later he lamented, ‘What seems really strange now is that I could make a prediction of that kind in all seriousness, yet not have the sense to realize the dangers to which I continued to subject the Account’s4 capital.’ In mid1929, the equity in the ‘Account’ was a proud $2,500,000; by the end of 1932, it had shrunk to a mere $375,000.” –  Frank K. Martin, A Decade of Delusions

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

February, 2018 Edition
Gold and the Law of Attraction
Trade-currency wars likely to inspire major global gold demand
The other inflation hedge – Silver
–– AND MORE ––


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