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“Long gold: ‘Our sense is that Mr. Trump doesn’t hold any core policy beliefs and is apt to change his mind as he sees fit. This will lead to more political and economy uncertainty,’ which is positive for gold, according to Einhorn.”
MK note: The “Long gold” is wedged-in among the ever-present list of stocks and sector plays. Einhorn is a long-time gold advocate owing to discussions he had with his grandfather when he was a youngster – discussions that stuck even after he became a fabled money manager.
“As the inauguration of Trump draws close, I think people are realizing that potentially this could be a very stormy Presidency and gold may well benefit from that,” said David Govett, an analyst at Marex Spectron Group Ltd. in London. “There is new money at the beginning of each year looking for a home and a lot of this seems to find its way into gold.”
USAGOLD note: Trump calls US$ “too strong” in WSJ interview released late last night. Presidential advisor Scaramucci at Davos conference says “we must be careful of a rising dollar.” CNBC cites safe-haven buying on “hard Brexit.” Gold is up 5.8% in 2017; 7.8% from December cyclical low ($1128). It was up 8.7% in 2016. See chart below for annual returns since 2001.
For more detailed information: The Gold Owner’s Guide to 2017.
“Baring’s Mahon, who bought his exposure through ETFs, says that while 2017 is a watershed, his conviction on the politicization of central banks is one that will play out over several years, making gold a safe bet for the long term.”
“Government officials expect sterling to take another hit when May sets out her vision for leaving the bloc in a speech on Tuesday, and the Treasury is preparing to speak to major banks in London to try to smooth the reaction, said the people, who declined to be named as the plans aren’t public. While Treasury officials often reach out to banks to explain policy, it’s unusual for the prime minister’s office to anticipate a bad market reaction, they said.”
USAGOLD note: Gold upside originating in Asian trading as of this writing. China New Year physical demand also a factor.
by Michael J. Kosares
1. Don’t buy it because you need to make money; buy it because you need to protect the money you already have.
2. Don’t look at price as a barrier; look at it as an incentive.
3. Don’t buy its paper pretenders; buy the real thing in the form of coins and bullion.
4. Don’t fall prey to glitzy TV ads; do your due diligence instead.
5. Don’t allow naysayers to divert your interest; allow yourself the right to protect your interests as you see fit.
Mr. Kosares is the author of The ABCs of Gold Investing – How To Protect and Build Your Wealth with Gold, the widely-read introduction to gold ownership.
“Although the prospects for higher interest rates, a stronger dollar and stronger growth (the latter should be good for equities), mean the opportunity costs of holding Gold are increasing, we do think a lot of the potential bullish outlook for growth has already been discounted by the strength of other markets. In addition, higher interest rates, bond yields and a pick – up in inflation run the risk of leading to a longer lasting correction in the bond market. As such,there may be some rotation out of bonds. Will investors park the money coming out of bonds in dollar denominated equities? Maybe not, given the already strong dollar and US equities. We would not be surprised if some moved into physical Gold since its prices have now corrected. Given the huge size of the global bond market, it would only take a fraction to rotate into the physical Gold market for it to have a big impact on demand for Gold.”
Will the national debt hit $20T before Dow hits 20k?
Coin News Net/1-9-2017
“U.S. Mint distributors spent a good deal of money buying just released 2017-dated American Eagle and Buffalo bullion coins. There was some pent-up demand with popular 2016-dated editions selling out in early December.
First-day sales of 2017 America Silver Eagles hit 3,747,500 coins, marking a 36% increase over the opening day total of 2,756,500 coins for last year’s release. The one-day tally is already higher than half of the monthly totals logged in 2016.
A combined 68,000 ounces in American Gold Eagles sold on Monday, up 13.3% from opening day sales in 2016 of 60,000 ounces.”
MK note: More direct evidence of physical demand. The lion’s share of gold and silver American Eagle bullion coin demand originates in the United States and is taken up by U.S.-based investors.
By the way, we should reiterate our warnings about purchasing bullion coins – proof or business strike – issued by grading services as perfect Proof or Mint State 70 and sold for very high mark-ups by various dealers. Almost all the coins purchased from the Mint and submitted to the grading services would end up in the “69” or “70” categorization. There is nothing special about this though it is endlessly promoted, particularly this time of year at first issue, as out of this world.. . . . . ..NOT SO!
If someone is trying to sell you on this concept BEWARE. Read here.
Gold prices ended the U.S. day session with good gains Monday, with Comex futures closing at a four-week high close. A weaker U.S. dollar index on this day helped out the precious metals markets bulls. Also, reports said investor monies are again starting to flow into gold exchange traded funds (ETFs) as the year 2017 is just under way. February Comex gold was last up $10.30 an ounce at $1,183.70. March Comex silver was last up $0.171 at $16.69 an ounce.
09-Jan (USAGOLD) — Gold has eked out new 5-week highs above 1185.04, buoyed by a softer dollar and a stock market that refuses to validate all those Dow 20,000 hats. There is also apparently some heightened doubts about the Fed’s call for three more rate hikes this year.
The 10-year yield is down 5 bps point today, which is checking the dollar’s recent rise. FedSpeak today has been generally towing the dot-plot line, but with some caveats. Boston Fed President Rosengren said the timing will depend on incoming data, global conditions and fiscal policy. Atlanta Fed President Lockhart says it’s too early to estimate the likely impact of any fiscal policy on GDP, but he only sees 2% growth.
That to me suggests that growth risks remain, and tighter policy is not going to help alleviate those risks. As we’ve noted repeatedly in recent years, we’re long past due for a recession. Since the Great Depression, the U.S. has suffered thirteen recessions. The periods of economic growth between recessions have been as long as 120-months, and as short as 12-months. The average is just over 59-months. The current recovery has just entered its 91st month.
It remains to be seen what impact President-elect Trumps fiscal policy might have on the economy and that uncertainty was reflected in Lockhart’s speech today. However, an important follow-on question about fiscal spending is where the revenue to pay for it is going to come from.
The likely answer to that is debt. With the national debt fast approaching $20 trillion and interest rates on the rise, there will likely be some repercussions. Will the positives outweigh the negatives. Time will tell.
Anyone wondering how serious China is about stemming the outflows that brought its currency reserves to their lowest since February 2011 need only to look at bitcoin.
The cryptocurrency has plunged more than 18 percent since Jan. 4, as news began to leak that it had attracted the attention of regulators in China.
…What is clear is that, for all the claims of bitcoin being free from the shackles of any central authority, Beijing holds a lot of influence over it.
“In a closed-door meeting in December, Bloomberg reports, Chinese leaders came to the conclusion that piling on debt for short-term growth has become too dangerous. Now they will prioritize stability over growth and reform, and become more flexible about their target of 6.5% growth until 2020.
It seems they had little choice. Capital is leaving the country at a breathtaking rate. Last month, $82 billion left China despite tighter capital controls on individuals and corporations. That, combined with a strong dollar, is pushing the value of the yuan down to levels that are worrying leadership.”
PG View: If China’s growth rate continues to slow, as Xi Jinping continues to consolidate political power, a backlash of some sort becomes increasingly likely. One might also wonder what steps President Xi might take to avoid any such backlash.
“Carver County District Court records show that an asset inventory lists a dozen properties with an estimated value of $25.4 million, as well as about $110,000 in four bank accounts and 67 10-ounce gold bars with a total value of nearly $840,000.”
“My hypothesis is that this 5,000 tonnes decline in above ground gold reserves outside of the Chinese domestic market will make gold rally stronger in a future bull market than it did in previous bull markets. To the extent many investors are uninformed about the shrinking volume of troy ounces available outside of China, their ignorance will boost any price rally coming.”
PG View: Another thorough examination of the supply/demand data and flows, which has led Koos to conclude: “China has enormously diminished above ground reserves outside of the Chinese domestic market without all investors around the world being fully aware. In my humble opinion this will make the price of gold go up turbo charged next time the West shows interest in the metal.” The West may already be taking an interest . . .
“Gold investing sentiment among Western private investors came into 2017 with the strongest end of year reading for five years, according to research by BullionVault.
Demand for the precious metal – which is generally seen as a safe haven investment in times of economic and market uncertainty – also set a four year record by weight in 2016, which confirmed the upturn in sentiment as prices rose across the year.”
05-Jan (USAGOLD) — Gold extended to the upside, setting new 5-week highs as safe-haven demand rises. That safe-haven demand is spilling over into the bond market and the resulting drop in yields is weighing on the dollar, providing an additional tailwind to the yellow metal.
With resistance at 1181.43 negated, attention has shifted to the $1200 level ahead of tomorrow’s all-important jobs report. Expectations are that nonfarm payrolls rose 175k in December and the unemployment rate will tick higher to 4.7%. Today’s ADP employment survey miss suggests there may be some downside risk for payrolls.
The U.S. stock market seems to be struggling to maintain upside momentum as investors experience diminished risk appetite. A number of notable analysts are warning of a significant stock market correction in 2017. See the post that Mike put up earlier today.
Hayman Capital’s Kyle Bass is warning that “global markets are at the beginning of a tectonic shift from deflationary expectations to reflationary expectations.” In a year-end letter to investors, he went on to say, “the enormity of the apparent disequilibrium is breathtaking.”
There are certainly opportunities in such an environment, but there are risks as well, and the latter can be considerable. Bass asks, “What happens to economies at maximum leverage when interest rates begin to rise?” Nothing good. That’s for sure.
Mr. Bass might pose the same question regarding highly leveraged corporations. Here too, the implications of higher rates in a reflationary environment may well prove devastating. The smart money seems to be taking this opportunity to bolster their hedges and the safe-haven components of their portfolios.
MK note: With the DJIA down about 120 this morning, this is probably a good time to get this link on the board. London-based Mr. Smithers is a highly respected commentator on global financial markets, and this forecast from him on the U.S. stock market quite frankly took me by surprise. He is a regular contributor to Financial Times.
MK note: These two headlines were posted less than 24-hours apart on CNBC. [sigh]
04-Jan (USAGOLD) — Gold has extended to the upside, setting a new 4-week high at 1167.90. The yellow metal is getting a boost from the resurgent physical demand from both China and India, as well as a slowing of outflows from gold-backed ETFs.
“Physical demand from China and India is quite strong at the moment,” NAB analyst Vyanne Lai told Reuters. China and India are the two largest consumers of gold in the world.
Gold tends to get a seasonal boost this time of year from Asian buyers ahead of the Lunar New Year. Pressure on the yuan may further amplify this demand.
In addition, the recent efforts in India to crack down on the underground economy has resulted in a serious cash shortage and may be contributing to reinvigorated interest in gold. Going back to late-2015, the Modi government had also been attempting to exact greater control over the gold market, by imposing an excise tax and encouraging utilization of the Gold Monetisation Scheme and government issued gold bonds. There were rumors late in the year that the government would also seek to limit household gold holdings.
However, the cash shortage and perhaps the unspoken longer-term goals of all this government intervention may be overriding any concerns about holding the world’s most recognized safe-haven asset. Keep in mind, the “war on cash” is not only occurring in India; and I fear it is a war that is just getting started.
I think this is also driving demand for the crypto-currency bitcoin, which is up dramatically over the past several months; trading at a 3-year high above $1,000. But make no mistake, bitcoin is not an effective safe-have.
Dan McCrum, writing for the FT yesterday, likened bitcoin to a pyramid scheme:
As a phenomenon bitcoin has all the attributes of a pyramid scheme, requiring a constant influx of converts to push up the price, based on the promise of its use by future converts. So the ultimate value for bitcoin will be the same as all pyramid schemes: zero. — Financial Times
A bitcoin, existing as a series of ones and zeros on your computer is no substitute for actual physical gold that you can hold in your hand. The same can be said for real gold versus the dollars that exist in your bank or brokerage account.
That is also very much true for the gold that is alleged to back any ETF holdings you might have. There is no substitute for the real thing.
Reversal, resurgence and renewal on the road to the new year
by Michael J. Kosares
A review of and outlook for the gold and silver markets in 2017 . . . . .
“There’s an old saying in the business realm that if you watch the pennies the dollars will take care of themselves. Likewise, if you build your portfolio on solid principles for the long-run, you will be well-positioned should the short run provide benefits. The best analysis, it follows, concerns itself not with what is likely to occur in the coming 365-day period (although it can be somewhat helpful), but with societal issues that will have a lasting impact on the political economy. “
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