Category: all posts

Gold cracks psychological $1250 mark in overnight surge

UPDATE – Gold higher in Asian/European markets, cracks $1250 mark convincingly, carryover on Treas Sec Mnuchin comments that low rates to continue.  Gold headed to three month high and fourth straight weekly gain; silver 9th straight weekly gain (Bloomberg says longest streak of weekly gains for silver since 2006).  General sentiment working in gold and silver’s favor.  Market led by professional investors.  David Einhorn confirms strong gold position in Greenlight Capital citing risk of inflation, Trump uncertainties. Dow futures off 80.

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The Daily Market Report: Gold Remains Generally Well Bid at High-End of Range


USAGOLD/Peter A. Grant/02-22-17

Gold edged higher in early trading to approach the high for the year at 1244.71, but slipped later in the session on some political maneuvering in France that lessened Frexit concerns somewhat. The euro rallied, knocking the dollar off its intraday highs.

In a surprise move, French centrist politician François Bayrou threw his support behind Emmanuel Macron. Whether that will be sufficient to derail Marine Le Pen’s chances remains to be seen. Nonetheless, the market seems to be viewing Frexit risks as being somewhat diminished.

The minutes of the January 31-February 1 FOMC meeting revealed that “many” members of the committee saw a chance for another rate hike “fairly soon.” That leaves March on the table, but it surely is no lock. Gold recovered intraday on the non-event.

Fed Governor Powell expressed that the Fed remains on a gradual tightening path with risks fairly balanced. He went on to say that shrinking the balance sheet should be considered once the Fed funds rate is “well away” from the zero bound. More policy vagueness . . .

This will leave the market to focus on the political and geopolitical risks that have been primarily keeping the yellow metal underpinned. Rate hike expectations will continue to wax and wane on incoming data leading into the March FOMC meeting.

Posted in all posts, Daily Market Report, Gold News, Gold Views |

Gold in the attic

In this month’s issue of News & Views, we do something a bit unusual.  We celebrate USAGOLD’s 20th year on the World Wide Web by reprinting some of our more interesting and timeless short-form treasures from over the years.  We think you will thoroughly enjoy this walk down memory lane.  Newcomers, we hope, will find inspiration here and some very sound reasoning as to why gold should become a part of your long-term portfolio plan. The following is list of vignette titles in the retrospective.  If you are new to USAGOLD and did not receive our latest newsletter issue by e-mail, we invite you to visit some time. . . . . . when you have a moment for quiet contemplation.

√ Gold in five easy lessons

√ Question: When is a billionaire not a billionaire?
Answer: When just about everyone else is a billionaire.

√ Yap stone money inflation

√ What it would take to make the dollar as good as gold

√ Computer software gone mad

√ The PhD standard and what to make of it

√ Nine lessons on investing your money

√ Approaching gold with the right attitude, Part 1

√ Approaching gold with the right attitude, Part 2

√ The ethics of interest rates

√ For gold owners, the inflation-deflation debate is purely academic

√ The seven ages of gold

√ Keynes would be buying gold hand over fist

√ A telephone call from an old client and friend

News & Views / February, 2017/FREE SUBSCRIPTION

Posted in all posts, Author, MK |

Who’s buying all the Treasury paper?

Economica/Chris Hamilton/2-21-2016

“What I’m even more confused about is who, exactly, is buying all the Treasury debt while simultaneously buying all the equity’s (and real estate, and and and)?. . . I’m astounded that somehow the domestic public is able to push equity prices up by over $16 trillion from there ’09 lows while simultaneously buying record quantities of Treasury debt.  The TIC data (Treasury International Capital system) combined with Fed data and further Treasury data show the public is presently purchasing nearly $70 billion a month (average) of still near record low yielding debt?!?  The only previous period that the domestic public bought even 2/3rds the present amount, asset valuations were in free fall from 2008 to 2010 as money rotated from risk to perceived safety.”

MK note:  Confused?  So are we. . . . .

Also. . . .

Why biggest U.S. creditors are selling Treasuries/Bloomberg/2-22-2017

“It’s the biggest pile of debt in the world — the $13.9 trillion U.S. Treasuries market. It’s been built with the help of foreign central banks and investors, who have clamored to buy U.S. government debt through good times and bad. But what happens if they lose their taste for Treasuries? With creditors from Tokyo to Beijing to London having second thoughts, we may be about to find out.”

MK note:  Based on the data, they have already lost their taste for U.S. government debt.  The real question reverts back to the previous article:  Who is buying all this U.S. government debt in a rising interest rate environment?  There is always a kind of built-in demand based on normal day-to-day financial market needs, but when you factor in the huge amount of debt sold in Asia plus the huge on-going needs of the U.S. government we are talking some very big numbers. . .very big supply and very big demand.

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Gold isn’t behaving in practice the way it should in theory

Bloomberg/Eddie Van Der Walt/2-19-2017

“The market worries more ahead of the event than after,” Ole Hansen, head of commodity strategy at Saxo Bank A/S, said by e-mail. “Once the hike was out of the way, a more balanced picture emerged and that together with a reality check of the potential Trump impact did the rest.”

MK note:  Gold continues to climb this morning though in somewhat subdued fashion probably a result of the holiday in the United States.  Ole Hansen’s comments focus on the United States, but it seems that every area of the globe has its own unique concerns driving physical demand.  China has a currency problem, massive debt and capital flight to contend with.  In Europe, investors are worried about the rise of Marine LePen in France and her promise to take France out of the euro, possible debt default in Greece and teetering banks in Italy. In the United States, inflation expectations have begun to influence investment decisions across the boards.  Altogether these singular, localized dimensions form an imposing whole.

Posted in all posts, Author, MK |

Goldman Sachs is majorly bullish on commodities

ETF Daily News/2-16-2017

“Using its sentiment analysis tools, however, Goldman managed to come to these conclusions as early as November—which is the same month the investment bank turned bullish on commodities for the first time in four years. Goldman’s line of reasoning? When business optimism goes up, capital expenditure (capex) also goes up, and when capex goes up, commodities tend to follow. I should add that the bank has historically been neutral on commodities, recommending an overweight position only four times in the last 20 years. So when it does become bullish, investors should pay attention.”

MK note:  The expectation for rising commodity prices, needless to say, rolls into inflationary expectations and helps explain professional money’s big move into gold since the start of the year.  Gold is up over 8% in 2017 while stocks are up only a little over 4%.

Posted in all posts, Author, MK |

BlackRock backs gold to hedge market risk

Bloomberg/Susanne Barton/2-16-2017

“While the stock surge and below-average volatility show investors are more optimistic, markets are underpricing global political risks, said Russ Koesterich, who helps manage the $41 billion BlackRock Global Allocation Fund. He recommends gold as insurance. Looming elections in Europe and political uncertainty in the U.S. are among developments that could shift investor sentiment, Koesterich said. Adding to the threat is the potential impact of Britain’s exit from the European Union and a debt crisis in Greece. Such concerns have helped boost haven demand for gold, which has climbed almost 8 percent this year after posting the worst quarter since 2013.”

MK note:  All of a sudden Greece’s name keeps popping up in the litany of reasons to own gold, and with good reason.  Marine LePen’s, who has a plurality in the upcoming first round of French voting, says she will take France out of the euro, an event that would surely sink both the currency and the European Union.  That is an even bigger and more dangerous threat than what Greece brings to the table.  Given the growing populist mood across Europe, I would think that European money managers might be as interested in gold for portfolio insurance purposes as BlackRock is in the United States.

Posted in all posts, Author, MK |

Alan Greenspan renews gold advocacy, Part 2

“Do something. Help!”

Gold Investor/World Gold Council/2-16-2017

Alan Greenspan, as quoted in the World Gold Council’s interview linked above:

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.

(Pictured below. Lydia gold stater, King Croesus, 561-541 BC, electrum blend silver and gold, ‘heavy’ stater specimens bring upwards of $30,000 in top grades. This specimen is from the British Museum collection and reproduced here with permission.)

MK note:  Gold is not like other assets that depend upon another individual or institution’s performance for value.  It  stands alone and as Greenspan states without mincing words:  “No one questions it value.”  It is for those reasons that gold protects wealth no matter the economic malady visited upon the economy – inflation, hyperinflation, disinflation, stagflation, runaway stagflation and deflation.  It is the ultimate armchair investment – the one asset you can rely upon no matter what happens politically or economically.

Greenspan believes stagflation is in our collective futures and he has made that prediction publicly on several occasions over the past few months.  Here is what he said in the same interview linked above:

As productivity growth slows down, the whole economic system slows down. That has provoked despair and a consequent rise in economic populism from Brexit to Trump. Populism is not a philosophy or a concept, like socialism or capitalism, for example. Rather it is a cry of pain, where people are saying: Do something. Help!

At the same time, the risk of inflation is beginning to rise. In the United States, the unemployment rate is below 5%, which has put upward pressure on wages and unit costs generally. Demand is picking up, as manifested by the recent marked, broad increase in the money supply, which is stoking inflationary pressures. To date, wage increases have largely been absorbed by employers, but, if costs are moving up, prices ultimately have to follow suit. If you impose inflation on stagnation, you get stagflation.

Our mission at USAGOLD is not to take sides politically and, anyone who has frequented these pages over the years will attest to the fact that we tend to shy away from partisan politics. What we do concern ourselves with, however, is the manner in which the policies pursued by politicians and central bankers might affect the investment portfolio.  You might say that our business is the preservation of wealth. Alan Greenspan clearly sees gold and silver as  means to that end.  At the moment the political tide is running in the direction of inflation and inflationary expectations have taken hold of the investment markets, gold included.  The “inflation trade” has played large in gold’s price appreciation thus far this year, and as I mentioned in an earlier post, professional money managers are leading the charge through their purchases in gold ETFs.

Investors last tangled with stagflation in the the decade of the 1970s, and we all know how gold performed during that period.  For the record, here is a chart that shows how gold performed superimposed over the purchasing power of the dollar.  As you can see, while the dollar declined by 85%, gold rose by 17-times.  It tells at a glance the value of diversifying with gold and goes to the heart of the point Dr. Greenspan is making. (The Dow Jones Industrial Average over the same period gained only about 16%.)

Posted in all posts, Author, MK |

The Daily Market Report: Gold Keeps the Pressure on the Upside


USAGOLD/Peter A. Grant/02-16-17

Gold remains well bid, pressuring the highs for the year that were established last week. While the yellow metal has been unable to break-through to new highs as of this moment, the impetus remains to the upside, particularly with the dollar giving back recent gains.

Gold recovered nicely from yesterday’s intraday losses after Fed Chair Yellen acknowledged during testimony before the House Financial Services Committee that economic growth has been “quite disappointing.” That sort of flew in the face of her previous testimony, which centered on economic optimism, the achievement of Fed goals and the belief that it would be “unwise” to wait too long to raise rates.

“Economic growth has been quite disappointing.” — Janet Yellen

So, that begs the question: Why did we have to wait until she said the words, when the data clearly illustrate the reality. The last time we saw annual growth at 3% or greater was 2005. That’s 12-years ago! Growth last year was just 1.6%. Forecasts for Q1-17 have been revised lower in recent weeks, even as Yellen and her minions preach optimism and the need for multiple rate hikes this year.

While the Fed may be finally generated the inflation they have long sought, real yields out to the 10-year note remain negative. CPI rose to a 2.5% annual rate in January, while the 10-year note is yielding 2.45% today.

With our major creditors dumping Treasuries at an unprecedented rate, the Fed may in reality not need to do anything more to prompt rates higher. Supply is certainly not going to be a problem if fiscal stimulus commences, on top of the pig-through-a-python demographic reality as retiring baby boomers start drawing on already underfunded entitlements.

All of this goes a long way toward explaining why gold is defying widely held beliefs that it can’t rise when stocks are going up, yields are going up and the dollar is going up. In fact, this might be viewed as a signal; that now perhaps more than ever, gold is a critical component of a well diversified portfolio.

Posted in all posts, Daily Market Report, Gold News, Gold Views |

Alan Greenspan renews gold advocacy, Part 1

Gold Investor/World Gold Council/2-16-2017

MK note: Former Fed chairman Alan Greenspan is interviewed in the most recent issue of the World Gold Council’s Gold Investor magazine.  As most of you already know, Greenspan is a long-time advocate of private gold ownership as well as the gold standard.  Some see his chairmanship of the Fed and gold advocacy as contradictory, but in fact, Greenspan always saw the two as complementary.  Here is a very interesting quote taken from the interview:

“When I was Chair of the Federal Reserve I used to testify before US Congressman Ron Paul, who was a very strong advocate of gold. We had some interesting discussions. I told him that US monetary policy tried to follow signals that a gold standard would have created. That is sound monetary policy even with a fiat currency. In that regard, I told him that even if we had gone back to the gold standard, policy would not have changed all that much.”

Many years ago, we catalogued those exchanges between then Texas congressman Paul and Greenspan.  I was among the small group at the time who appreciated the dialogue as friendly intellectual exchanges between two heavyweights and not as contentious arguments.  As I wrote in the preface to the transcripts several years ago, I think both enjoyed and relished the exchanges, and it is interesting that Greenspan would reference the banter between the two in such a telling way so many years later.  Here is what I wrote in that preface:

In putting this page together, I was struck with Dr. Paul’s ability to cut through the political gamesmanship that necessarily comes with being chairman of the Fed to Alan Greenspan, the man and political/economic philosopher. What emerges is a powerful figure conflicted between the practical manager charged with operating within the current fiat monetary system and the philosopher-academic with a “nostalgia,” as he puts it, for the days of the gold standard. Without Dr. Paul’s incisive questioning, I doubt that this aspect of the Greenspan character would have found its way to the public venue and the historical record. Though the relationship appears adversarial at first blush, one also detects a certain amount of mutual respect and interest. Says Dr. Paul of the exchanges: “My questions are always on the same subject. If I don’t bring up the issue of hard money vs. fiat money, Greenspan himself does.”

Let me include one final short story from that preface that I have always appreciated:

In closing, I would like to pass along an anecdote reported by SmartMoney’s Donald Luskin in a 2002 interview of Ron Paul. Paul told Luskin the story of his owning an original copy of “Gold and Economic Freedom,” and asking Greenspan to sign it. While doing so, Paul asked him if he still believed what he wrote in that essay some 40 years ago. That tract, written during Greenspan’s days as a devotee of Ayn Rand, is a strongly worded, no-holds-barred attack on fiat money and the central banks as an engine of the welfare state. It also endorses the gold standard as a deterrent to politicians’ penchant for running deficits and printing money. Greenspan — enigmatic as ever — responded that he “wouldn’t change a single word.”

Perhaps later today, I will be back to comment on one or two more quotes from the Greenspan interview.

From our Gold Classics Library:

Ron Paul-Alan Greenspan transcripts (1997-2005)

Gold and Economic Freedom / Alan Greenspan / 1967

Posted in all posts, Author, MK |

Gold up sharply

Reuters/2-15-2017

Consumer prices post largest gain in nearly four years

“Inflation is trending higher as prices for energy goods and other commodities rebound as global demand picks up.”

MK note: After a minor waterfall drop earlier this morning, gold has rallied sharply off the $1217 low.  Now trading at near $1231.  Not sure what prompted the rally, but one thing we’ve noticed in the trading pattern is that gold is finding significant support on downside corrections.  It comes quickly and usually during the same trading session.

We have hinted here before that professional money is supporting this market which has begun to trade an inflationary bias. That bias was confirmed by the .6% gain in consumer prices in December, reported earlier today, and that could be what’s behind gold’s rally.  Of course, chairwoman Yellen is talking an inflationary line with her warnings about another interest rate increase.  As we have mentioned here consistently, the Fed is likely to chase the inflation rate higher rather than attempt to stop it in its tracks. Real rate of return will become an issue particularly among well-heeled, old line money managers, and that is where gold bobs to the surface as an important factor in portfolio allocations.

Gold is up almost 6% thus far this year and 9.2% from its December low of $1128 per ounce.  Do you remember this chart and commentary first posted 12/10/16?

observationgoldtrading2016Click to enlarge

What are we advising now?  The same thing we always advise.  If you do not own gold and silver currently, fix your sights on a percentage of your portfolio you think would make for a proper diversification and then work toward achieving that target.  None of the negative elements in the economy that launched and supported gold’s long-term secular bull market since the early 2000s has been addressed in a meaningful way. They are not likely to be for a long time to come, and watching the way Washington operates buttresses that notion.  If you do not own enough gold and silver to afford adequate protection, add more now while the price is low.

As published in our most recent News & Views newsletter:

Gold in five easy lessons

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.

Posted in all posts, Author, MK |

China gold demand much greater than major analysts tell us

Sharps Pixley/Lawrie Williams/2-15-2016

“This suggests that China ‘consumed’ around 2,000 tonnes of gold in 2016, which equates quite closely to the Shanghai Gold Exchange (SGE) gold withdrawals figure for the year of 1,970 tonnes . . .  This would seem to confirm [Bullion Star’s Koos]Jansen’s oft-made assertion that SGE gold withdrawals are equivalent to total Chinese gold demand – a premise largely dismissed (perhaps without adequate reason) by the major gold consultancies which virtually all put Chinese demand at less than 1,000 tonnes.”

MK note:  This augments my recent posts on the West to East gold pipeline.   At 2000 tonnes China’s consumption equals near two-thirds of global mine production – nothing to sneeze at.  China remains the dragon in the Gold Room.  Lawrie Williams does a good job of outlining the China demand situation in the article above – summarizing Koos Jansen’s latest.

Posted in all posts, Author, MK |

A discreet crossroads for the world’s gold

Swissinfo.ch/Duc-Quang Nguyen/2-10-2017

“As a result, the customs office did not include in the export tallies the more than 2,000 tonnes of gold worth CHF80.5 billion that it said were “exported” in 2016, just slightly more than the Swiss pharma trade’s exports. By comparison, the Swiss gold export was roughly equal to Sri Lanka’s entire annual GDP in 2015 and accounts for about four-fifths of all the gold that the world extracts in a year (about 2,500 tonnes).”

MK note:  Remarkable. We’ve written extensively about the London-Zurich-Hong Kong-Shanghai gold pipeline.  These statistics demonstrate the breadth and depth of the physical gold market.  The ultimate source is London-based gold ETFs and London’s bullion banks.  The reason for the stop in Switzerland on the way to the East is to reconfigure the large 400-troy ounce LBMA good delivery bars to the 32.15 ounce kilo bars traded on the Shanghai and Hong Kong gold exchanges.

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The SPDR gold ETF is up 7% this year, as Trump honeymoon ends

ETF Daily News/2-10-2016

“It is not just in Trump’s case that conventional rules no longer apply, they also appear to have been thrown out the window for precious metals in these first few weeks of 2017, namely that a strong US stock market means weak gold. Instead apparently strong economies, a record breaking stock market and recent highs for gold all seem to be able to exist in one realm of reality.”

MK note:  Though the point is well-taken, that was a quick honeymoon.

A good deal of the buying, as reflected in the strong uptick in ETF volume, is among knowledgeable fund managers.  Pushing that concern, in my opinion, is a growing belief that a coordinated devaluation of the dollar along the lines of the 1985 Plaza Accord might be in our collective futures.  Many of the same circumstances that prevailed then are in place now, i.e., concern in both the U.S. and overseas about an overly strong dollar (including on the part of the Trump administration) and major capital flight in places like China and parts of Europe.

David Marsh, the highly respected advisor on foreign exchange to asset management firms, recently told CNBC that there will be a new “accord” in the next 12 to 24 months. The dollar, he says, is mid-stride in one of its strongest showings since the end of World War II, up 10% or more in each of the past three years. It is doing, he says, “exactly the opposite of what (President Donald) Trump says he wants.” He concludes, “I foresee it will carry on getting stronger for a year or so and then we will have a dollar collapse, just like we did in the early 1980s.”

The next G-7 meeting is scheduled for May in Italy, and with the Trump administration’s penchant for negotiating in full public view, I would suspect that any attempt at a new accord will be front and center with accompanying fireworks in the investment markets rather than something that evolves behind closed doors. We suspect in the meantime that a good many will follow the lead of analysts like David Marsh and get ahead of the potential dollar devaluation. An argument could be made that the recent increases in the gold price and ETF demand are a direct reaction to the possibility of a devaluation.

Posted in all posts, Author, MK |

Germany brings its gold stash home sooner than planned

Reuters/Andreas Framke/2-9-2017

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

MK note:   Germany has completed its transfer from the New York Fed and 91 tonnes still need to be transferred to Frankfurt from the Bank of France.  Germany will now leave 1236 tonnes at the New York Fed and another 432 tonnes in London.  The remainder of its 3378 tonne national holding will be stored in Frankfurt.  The repatriation transfers to Frankfurt were completed three years ahead of schedule.

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

The irony here is that when Hjalmar Schacht, head of Germany’s central bank in the 1920s visited the New York Fed, he asked to see Germany’s gold stored in its vaults.  “Strong**,” wrote Schacht in a 1955 autobiography, “was proud to be able to show us the vaults which were situated in the deepest cellar of the building and remarked: ‘Now, Herr Schacht, you shall see where the Reichsbank gold is kept.’ ”  Storage staff went off to retrieve the gold.  “At length,” Schacht goes on, “we were told: ‘Mr. Strong, we can’t find the Reichsbank gold.’ ”  To which Schacht replied: “Never mind; I believe you when you say the gold is there. Even if it weren’t you are good for its replacement.”  One need presume that nearly 100 years later, the level of trust conveyed by Schacht remains in place.

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

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

Posted in all posts, Author, MK |

The Daily Market Report: Gold Turns Mildly Corrective


USAGOLD/Peter A. Grant/02-09-17

Gold turned mildly corrective following a much better than expected wholesale sales print for December. The data seem to have inspired some renewed confidence in the U.S. economy and hence rate hike expectations have edged higher as well.

Stocks surged to new record highs and the dollar firmed as well. Stocks got an additional boost from President Trump’s comment that he will have something “phenomenal” to announce on corporate taxes within the next several weeks.

The downside has been contained by former resistance around the 1230.00 level thus far. Again, I continue to be impressed by gold’s resilience in the face of ongoing stock market gains.

In light of the recent gains, gold was probably due for a corrective pullback. We’ll be watching for heightened buying interest on this dip, with haven buying likely to remain a stiff tailwind.

Posted in all posts, Daily Market Report, Gold News, Gold Views |

China’s Currency Policy Approaches Breaking Point

Bloomberg/Junheng Li/02-07-17

In his first few weeks in office, President Donald Trump has ordered the U.S. to withdraw from the Trans-Pacific Partnership and confirmed his intention to renegotiate the North American Free Trade Agreement. The consensus is that it won’t be long before he turns his focus to China, which he calls a currency manipulator.

China can weather such criticism, for now. But if Trump’s threats of trade sanctions and 45 percent tariffs become real, the economic impact for the world’s second-biggest economy would be meaningful and could upend financial markets, potentially leading to a global recession. With economic growth already slowing and capital fleeing the nation, China’s $11 trillion economy is operating from a position of weakness.

…Although China may be nearing the point where a significant devaluation of the currency would make sense, there are obvious reasons that the authorities would want to avoid a sharp weakening of the yuan anytime soon.

Posted in all posts, Currency Wars |

The Daily Market Report: Gold Continues to Trend Higher


USAGOLD/Peter A. Grant/02-08-17

Gold continues to trend higher, driven by a robust haven bid and the strong technical setup. The yellow metal hit another 3-month high at 1244.71, helped by a softer dollar, stock and yields.

Adrian Ash of BullionVault notes that last month was the best January performance since 2012, and the “fastest 1-month price jump since last summer’s Brexit shock.” February is off to a roaring start as well. The yellow metal is up nearly 8% YTD.

USAToday outlines some of the fundamentals driving the price of gold:

Economic policy uncertainty in the U.S. under President Trump. Political anxiety surrounding the populist movement in Europe and elsewhere. Ongoing stimulus from global central bankers. Angst over rising inflation. The U.S. dollar falling in value versus foreign currencies. — USAToday

 

Despite two rate hikes over the past 14-months — the only two in more than a decade — Fed policy remains extremely accommodative as well. U.S. economic date continues to be rather erratic, perpetuating doubts about the underlying true health of the economy.

The Atlanta Fed cut their Q1 GDP forecast to 2.7% from 3.4%, citing weaker personal consumption expenditures and fixed investment growth:

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 2.7 percent on February 7, down from 3.4 percent on February 1. The forecasts for first-quarter real personal consumption expenditures growth and real private fixed investment growth fell from 3.8 percent to 3.1 percent and 8.0 percent to 5.8 percent, respectively, following the data releases on February 2 and 3. — Atlanta Fed

This comes on the heels of sub-2% print for Q4-16 GDP. The chart below plots the Atlanta Fed’s GDPNow forecasts against actual GDP. No great shakes on the growth front . . .

And then this chart came across my Twitter feed yesterday, with the simple caption “Uh-oh.” Presented in this light, even the much ballyhooed labor market is not looking all that healthy.

As we’ve repeatedly mentioned, this recovery is getting very long in the tooth. And whether a recession is just around the corner, or whether it will be forestalled further by debt-fueled fiscal stimulus, gold can be considered critical portfolio diversification in either circumstance.

Many of our clients seem to recognize that stocks are likely overextended again. Recent physical demand has been centered on taking profits off the table in the stock market and bolstering physical gold positions as a means of preserving wealth.

Save

Posted in all posts, Daily Market Report, Gold News, Gold Views |

Gold analog

MK note:  Our old friend, Ron Griess (Thechartstore.com) sent along this chart today for re-posting to the site.  His comments are worth noting.

Posted in all posts |

Doomsday prep for the super-rich

The New Yorker/Evan Osnos/1-30-2017

“Survivalism, the practice of preparing for a crackup of civilization, tends to evoke a certain picture: the woodsman in the tinfoil hat, the hysteric with the hoard of beans, the religious doomsayer. But in recent years survivalism has expanded to more affluent quarters, taking root in Silicon Valley and New York City, among technology executives, hedge-fund managers, and others in their economic cohort.”

MK note:  Everyday on this page we report on the reasons why gold ownership makes a great deal of sense to ordinary investors.  In doing so, we have always taken exception to the mainstream media’s portrayal of the ordinary gold owner as “the woodsman in the tinfoil hat”. . . .etc, etc, etc.  I would think that many among the media are utterly amazed that people like Steve Huffman (Reddit, CEO), Peter Thiel (PayPal founder) and the long roster of other luminaries mentioned in this article have been identified as “preppers” in one capacity or another.

They would probably be even more amazed to find that a good many of this same group are likely to be gold and silver owners as well. As such, they take their place alongside a wide range of Americans who own gold – physicians and dentists, nurses and teachers, plumbers, carpenters and building contractors, business owners, attorneys, engineers and university professors (to name a few.) In other words, gold ownership is pretty much a Main Street endeavor. One Gallup poll a few years ago found that 34% of American investors rated gold the best investment “regardless of gender, age, income or party ID. . .” In that survey, investors rated gold higher than stocks, bonds, real estate and bank savings.

Posted in all posts, Author, MK |

China stocked up on Swiss gold as turbulent year came to a close

South China Morning Post/Wendy Mu/2-5-2017

“China’s gold imports from Switzerland soared at the end of last year when Beijing was struggling to defend the yuan and incoming US President Donald Trump was casting grave doubts about Sino-US economic ties. The Swiss Federal Customs Administration said in January that its gold bullion exports to China rose to 158 tonnes in December from 30.6 tonnes in November, according to GoldSeek.com, a website for gold investors.”

MK note:  Contrary to reports towards the end of last year, flows through the  London-Zurich-Hong Kong-Shanghai gold pipeline are strong and steady.  This article tells why. . . . .

Posted in all posts, Author, MK |

A Trump devaluation and global currency war?

What it could mean for gold.

by Michael J. Kosares

“But the chaotic start to the administration and what many see as its protectionist agenda have amplified fears of not only currency wars but a fully fledged trade confrontation that could be disastrous for the world economy.” Financial Times 2/2/2016

MK note:  [OPINION] President Trump and National Trade Council head Peter Navarro have launched verbal assaults on the Japanese yen, Chinese yuan and the euro labeling all three undervalued the result of deliberate currency policies in the three countries.  “With his statement [Mr Navarro] has in fact fired the next salvo in the currency war the US administration is currently conducting against the rest of the world,” says Ulrich Leuchtmann of Germany’s Commerzbank.

The fact of the matter is that the United States can no longer devalue the dollar as effortlessly (with the stroke of pen) as if the world were still on a dollar-based gold standard.  In such a system, the United States could, and did, devalue the dollar by simply raising the official benchmark price of gold (1971,1973).

Now to carry out a true devaluation of the dollar against other currencies, it needs co-operation from the issuers of those currencies.  Since that is not about to happen without considerable persuasion, the Trump administration will be left with tariffs and import taxes of one kind or another in order to achieve its goals with respect to U.S. trade imbalances.  The end result will be a de facto devaluation of the dollar within the United States against goods and services, not necessarily against other currencies (as discussed here last week).

Since so many commodities are bought and sold in dollar terms, the price inflation will be exported to nations around the globe and injected into their economies.  As noted in our clipped quote, there is considerable concern about the global trading system, but what that translates to in each of these nation states is a potential economic slowdown coupled with possible inflation.  When you start thinking about the situation along these lines, it is not difficult to understand how Alan Greenspan came to the conclusion that we are headed for another period of stagflation, perhaps even runaway stagflation, reminiscent of the 1970s (when Ronald Reagan made famous the Misery Index, the combination of inflation and unemployment). Needless to say, under such inflation-driven circumstances, both gold demand and gold prices are likely to rise, both here and abroad, as they did in the 1970s.

Markets move on sentiment and expectations. At the moment, the sentiment is confused as most are having a hard time getting a clear read, but those who understand the power of market expectations have begun to load up on gold. You see the evidence in revived ETF demand (up roughly 1.2 million ounces in January) as well as demand from Asia, particularly China.   Much of the market action and movement over the past several days has occurred during Chinese and European market hours, including last night. Today’s London morning benchmark was posted at $1224.05 – up about $12 from the trading level just before the posting.


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Previous posts on this subject (for those who would like to delve a little deeper):

Post series: The myth of the strong dollar policy, Part One

Post series: The myth of the strong dollar policy, Part Two

Some initial thoughts on the new ghosts of inflation past

Trump is waving adios to the longstanding ‘strong dollar policy’

 

 

Posted in all posts, Author, MK |

Week in Review (Video) – February 1, 2017

Posted in all posts, USAGOLD TV |

Here’s a Glimpse of the Global Trade Carnage From a U.S. Border Tax

Bloomberg/Jeff Black/02-01-17

Whether or not a border tax proposed by Republican congressional leaders helps U.S. President Donald Trump pay for his Mexico border wall, it would have a radical impact on global trade patterns.

Deutsche Bank AG economists Robin Winkler and George Saravelos have calculated the amount of trade with the U.S. that countries stand to lose if they face a 20 percent penalty at the border. Mexico is the obvious biggest loser, but Canada and Asian manufacturing economies including Vietnam, Malaysia and Thailand would also be in line for a big hit.

Posted in all posts |

Post series: The myth of the strong dollar policy, Part Two

Myth: The strong dollar policy means that the U.S government will do everything in its power to make the U.S. currency as good as gold.

Reality (as defined at Wikipedia):  “The strong dollar policy is the United States economic policy based on the assumption that a strong exchange rate of the United States dollar is in the interests of the United States and the whole world. It is said to be also driven by a desire to encourage foreign bondholders to buy more Treasury securities. The United States Secretary of the Treasury occasionally states that the US supports a strong dollar. Since the implementation of this policy, the dollar has declined substantially. Despite this, the policy keeps inflation low, encourages foreign investment, and maintains the currency’s role in the global financial system.”


Whenever a U.S. secretary of Treasury utters the words “strong dollar policy,” the question immediately should be asked: “Strong against what?” As outlined in the Wikipedia definition immediately above, the intent of the policy is to make the dollar strong in terms of other currencies, not against goods and services, and for that reason, it is generally misunderstood.

In terms of purchasing power, the dollar is by far worse off today than it was 21 years ago when Robert Rubin first uttered those words as Treasury Secretary (and taken thereafter as self-explanatory). For certain, there have been periods when the dollar has strengthened against a broad basket of currencies, but to apply former senator Alan Simpson’s famous description of the U.S. economy to the dollar: “It is the healthiest horse in the glue factory.”

To illustrate the point I have three charts for you.

The first tells the long-term story on the U.S. dollar since 1913 and passage of the Federal Reserve Act which established the Federal Reserve System as the central bank of the United States and Federal Reserve notes, i.e., the dollar, as the national currency. The results in terms of the dollar’s purchasing power are worth noting. Since 1913, the U.S. dollar has lost 96% of its purchasing power when measured against the Consumer Price Index.


The second tells the long-term story on the U.S. dollar since 1971, the year the United States went off the gold standard, freed the dollar to float against other national currencies and ushered in the fiat dollar international monetary system. Since 1971, the U.S. dollar has lost 83.6% of its purchasing power when measured against the Consumer Price Index. Simultaneously, gold has appreciated 3428%. (at $1200/oz)

The third tells the story on the U.S. dollar since 1995, the year then Treasury Secretary Robert Rubin first used the phrase “strong dollar policy.” Since 1995, the U.S. dollar has lost almost 40% of its purchasing power when measured against the Consumer Price Index – a period by most accounts of generally benign inflation.  Simultaneously, gold has appreciated 317%. (at $1200/oz)

Posted in all posts, Author, MK |

Post series: The myth of the strong dollar policy, Part One

Myth:  The strong dollar policy means that the U.S government will do everything in its power to make the U.S. currency as good as gold.

Reality:  The strong dollar policy is a rhetorical device used by Secretaries of the Treasury historically to keep the markets guessing about U.S. policies that will affect its relative value to other currencies and thereby encourage the flow of foreign capital into U.S. Treasuries (and finance U.S. deficits).


Here is the definition of the strong dollar policy per Wikipedia (emphasis added):

“The strong dollar policy is the United States economic policy based on the assumption that a strong exchange rate of the United States dollar is in the interests of the United States and the whole world. It is said to be also driven by a desire to encourage foreign bondholders to buy more Treasury securities. The United States Secretary of the Treasury occasionally states that the US supports a strong dollar. Since the implementation of this policy, the dollar has declined substantially. Despite this, the policy keeps inflation low, encourages foreign investment, and maintains the currency’s role in the global financial system.”

Note that the strong dollar policy is not based on the purchasing power of the dollar with respect to goods and services, the criteria by which most ordinary Americans judge the strength and stability of the dollar.  So when incoming secretary of the Treasury Steven Mnuchin says he is (or is not) in favor of the strong dollar policy, he is talking about a world of relative, not absolute, values.  Most of the major currencies are depreciating against goods and services and that could be documented by anyone who took the time to do so, but since 2011 it has appreciated against other major currencies.

Wikipedia is correct in explaining that a truly strong dollar would encourage dollar-denominated bond purchases, but that is only within the realm of relative currency values. Even then, the dollar is not always strong against all currencies all the time – another fact of economic life that can be easily documented if one were to take the time to do so.  As a matter of fact, as we have shown on numerous occasions, the dollar, when measured by the Dollar Index, is in general long-term decline, which is another way of saying it is in long-term decline against other major currencies.

Thus, the Wikipedia definition is correct on that score as well.  Once again, here is that chart, with apologies to those who have seen it before.  Note too that gold by comparison is in a long term uptrend against the dollar (and most other currencies as well), making it a productive hedge and long-term alternative for private portfolio managers without a political or economic bias.  If you are interested in long-term wealth preservation, you should simultaneously be interested in gold.  The strong gold reality counteracts the strong dollar rhetoric, and that fact by itself, explains why historically American central bankers with few exceptions dislike gold.  As the economic philosopher Joseph Schumpeter put it, “The modern mind dislikes gold because it blurts out unpleasant truths.”

Stay tuned.  Part Two to follow. . . . . .

Posted in all posts, Author, MK |

Morning Snapshot: Gold weighed by stock gains and firmer dollar

USAGOLD/Peter A. Grant/01-26-17

Gold remains under pressure after stocks stole the limelight yesterday with the Dow’s clearance of the 20,000 threshold. The dollar is firming today as well, which has added some additional pressure to the yellow metal.

The December advance trade deficit came in above expectations at -$65 bln as recent dollar strength continues to adversely impact the balance of trade. Initial jobless claims jumped more than expected last week and continuing jobless claims rose to 2.1M, also above expectations. The Chicago Fed National Activity Index firmed to 0.14 in December.

Later this morning look for new home sales, LEI and M2. Tomorrow is advance Q4 GDP and durable orders.

Posted in all posts, Gold News, Gold Views, Snapshot |

Trade war between China and the U.S. is a lose-lose: state media

Reuters/Sue-Lin Wong/01-25-17

A trade war between China and the United States would harm both countries, the overseas edition of the state run People’s Daily said on Wednesday, reflecting concerns over the protectionist, and anti-China stance taken by new U.S. President Donald Trump.

“If a trade war developed between the two countries, both China and the U.S. would be negatively impacted,” the newspaper said in a commentary.

“In the end neither side would win, it would bring harm to other countries and that harm would be brought to others without benefits to the U.S. or China.”

Posted in all posts |

Morning Snapshot: Gold firm near recent highs

USAGOLD/Peter A. Grant/01-24-17

Gold remains well bid near the 9-week high that was established yesterday at 1220.12. The yellow metal is showing good resilience after both yields and the dollar firmed somewhat earlier in the session. Gains in the dollar have faded after December existing home sales for December disappointed.

The greenback was initially buoyed by weakness in the the British pound after the UK Supreme Court ruled that Parliament would have to vote to invoke Article 50. That is still expected to happen, although the timing of the whole Brexit process is somewhat in question with minority parties already threatening to attach amendments to the bill and perhaps erect other roadblocks to passage.

Just another layer of uncertainty in an already very uncertain world . . .

Posted in all posts, Gold News, Gold Views, Snapshot |

Update: Beware 2017 MS70 U.S. Buffalos (Gold) and MS70 Eagles (Gold and Silver)

January 23, 2017
by Jonathan Kosares

For many years now we’ve published warnings against the purchase of MS70 ‘encapsulated’ US Gold and Silver Eagles and Gold Buffalos. And with the start of another year, the mint has begun to release coins dated 2017, and just as we have every year since 2006, we are on the eve of yet another massive industry-wide marketing push of these coins. So the time has come again for us to issue our annual warning.

Stay away from these overpriced products that have the potential to significantly damage you as the buyer, while lining the pockets of the seller/dealer. “First-Strike”, “Early Release”, “Flawless”, “225th Anniversary”, are among the many misleading, overstated, and valueless descriptions that will soon populate a number of dealer sites. Putting it bluntly: These coins aren’t special, they aren’t unique, they aren’t rare, and they most certainly are not worth the massive premium most retailers will attempt to charge.

PCGS population numbers for these coins over the past several years (linked below) are especially telling. Of the coins submitted, 99.6% of the one ounce gold American Eagle business strikes submitted for review graded either Mint State 69 or Mint State 70 — the two highest grades at the services. As for the silver American Eagle one ounce coins, 99.5% of submissions made the top grades of Mint State 69 and Mint State 70, and a similar percentage of proof silver Eagles made the top grades of Proof 69 and Proof 70. In fact, in recent years, the number of MS70 rated coins has actually begun to vastly outnumber even those graded MS69 – typically at a rate of nearly 5:1 (follow links below):

Buffalo Graded Coin Population PCGS
US Gold Eagles Graded Coin Population PCGS
US Silver Eagles Graded Coin Population PCGS

As a closing thought, we have offered this same advice before: If you’d like to have your Gold and Silver Eagles and Gold Buffalos graded, simply purchase the bullion coins from us at our competitive rate, and then submit them yourself. At just $15 per coin to have them graded, you’ll save thousands of dollars compared to buying them from a dealer. Now of course, you don’t need to do any of that, as the grade itself for these types of coins is, for all intents and purposes, worthless, but the point remains. And last, be especially on guard if you are pursuing an IRA or 401K rollover, as these products are a primary sales tool for outfits who claim to ‘specialize’ in such transactions.

For more information, please see our past post on this subject.

Posted in all posts, Author, JK |