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The Daily Market Report: Gold Defensive on Firmer Dollar and Stocks


USAGOLD/Peter Grant/06-19-17

Gold is edging lower, weighed by a firmer dollar and revived risk appetite, which has driven stocks higher. However, a number of factors continue to offer fundamental underpinnings to the market.

While NY Fed President Dudley reiterated today the optimism expressed in last week’s FOMC statement, one has to wonder if the central bank can really continue tightening with the anticipated fiscal stimulus stalled in Congress.

Senate republicans are acknowledging they are not even close to a deal on healthcare reform. “That impasse has held up work on a budget resolution, which is necessary to move tax reform and the annual appropriations bills,” according to The Hill.

GOP policymakers are reportedly considering cancelling the August recess in the hope of breaking the log-jam. However, the staunch political opposition and the ongoing investigations will continue to generate significant headwinds to the so-called reflation trade.

If the President’s agenda is well and truly dead in the water, and the Fed is committed to their tightening agenda, it seems like the stock market in particular is underestimating the risks to growth. “This is the most hideously overvalued market in history,” said David Stockman in an interview last week. Stockman sees potential for a 35% correction in the S&P 500.

“You want to pay twenty-five times earnings going into a world where the Fed yesterday said ‘we’re going to shrink the balance sheet by $2 trillion over the next several years?’ Where we have a government that is in total chaos. A president that they’re trying to unseat. A debt ceiling that can’t be raised. A tax bill that will never pass…” — David Stockman

Given the risks, it might be prudent to lighten-up on exposure to a grossly overvalued stock market, and reallocate that capital to an undervalued safe-haven. That haven is of course gold.

On top of all that, a U.S. fighter shot down a Syrian MiG yesterday. The Russian Defense Ministry called it a “massive violation of international law” and severely escalated the geopolitical risks in the region by saying they would start viewing U.S.-led coalition jets flying west of the Euphrates River in Syria as “targets.” If a U.S. plane is fired on by Russia or the Syrian military, all heck could break out in a big hurry.

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Pound holds above lows as Brexit talks begin

FT/Michael Hunter/06-19-17

The extent to which the Brexit talks have any day-to-day influence on the market will become clear in the days and weeks ahead, as negotiators from the UK and the EU seek to draw up departure terms while investors look on.

…As trading on day one of the negotiations begins, the pound is 0.1 per cent weaker against the euro at £0.8767, within levels established over the last three sessions. It remains off the seven-month low it touched against the shared currency a week ago, on worries about political instability in Westminster in the run-up to the talks. Against the dollar, sterling is down 0.1 per cent at $1.2781.

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Amazon-Whole Foods deal deflationary?

Mish Talk/6-16-2017

“Amazon bought Whole Foods today. Widespread carnage in the grocery stock prices followed. Jim Cramer called it a major deflationary disruption saying stores cannot compete.”

MK note:  Interesting buzz on Amazon’s Whole Foods prospective acquisition.  Whenever the subject of deflation comes up, I think of gold’s stellar performance in the wake of the last crisis which, in fact, was disinflationary.  Disinflation, in turn, is a close cousin to deflation as discussed in some detail HERE and HERE, along with  gold’s historic relevance in protecting against either or both.

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New Bill Would Require Declaration of Digital Currency Holdings when Entering U.S.

DCEBried//06-15-17

A bipartisan group of Senators introduced a new bill late last month that would require travelers to declare their digital currency holdings at all ports of entry into the United States. Senate bill S.1241 – the “Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017” – was introduced by Iowa Senator Chuck Grassley, and was co-sponsored by Senators Sheldon Whitehouse, John Cornyn, and Diane Feinstein.

The bill includes language that directs the Secretary of the Department of Homeland Security to collaborate with the U.S. Customs and Border Protection agency to develop systems and strategies to identify and “interdict” cryptocurrency assets owned by travelers entering the United States:

“(c) Customs And Border Protection Strategy For Prepaid Access Devices.—Not later than 18 months after the date of enactment of this Act, the Secretary of Homeland Security, in consultation with the Commissioner of U.S. Customs and Border Protection, shall submit to Congress a report—

(1) detailing a strategy to interdict and detect prepaid access devices, digital currencies, or other similar instruments, at border crossings and other ports of entry for the United States; and

(2) that includes an assessment of infrastructure needed to carry out the strategy detailed in paragraph (1).”

Current U.S. law already requires travelers to inform Customs when they are carrying amounts greater than $10,000 – though that requirement does not apply when those holdings consist of overseas funds or precious metals held abroad. Proponents of this bill argue that it is necessary because digital currencies are technically carried with their owners at all times. Some critics have observed that the same can be said of today’s fiat currencies, thanks to the convenient nature of modern electronic banking.

PG View: Have no doubt, a government that is prepared to ditch $100 bills to impede money laundering and undesirable cash transaction is going to also go after cryptocurrencies.

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Morning Snapshot: Gold extends lower to 3-week lows

USAGOLD/Peter Grant/06-15-17

Gold extended to the downside after the Fed maintained that they’re on track for at least one more rate hike this year. This has prompted a rebound in the dollar and pushed the yellow metal low.

However, any economic optimism the Fed has seems to be unfounded. I think at best, you could call the data uneven, at worst it is reflective of a moribund economy that may be moving toward a tipping point.

The Empire State Index and Philly Fed Index both beat expectations. Initial jobless claims for last week came in below expectations. Industrial production was unchanged in May, below expectations. Both import and export prices came in significantly below expectations, adding credence to the argument that the Fed should really be worried about waning inflation pressures.

While the Fed did indeed lower their inflation projections for this year, they continue to expect the 2% target to be achieved in 2018 and 2019. I wouldn’t be so sure about that . . .

Beyond the economic data, considerable political and geopolitical uncertainty prevails. That suggests the downside in gold is likely limited from here.

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U.S. initial jobless claims -8k to 237k in the week ended 10-Jun, below expectations of 240k.

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ECB buys renminbi for reserves

The Financial Times reports this morning that the European Central Bank gave a “seal of approval” to the Chinese renminbi with a purchase of 500 million euros worth  of the currrency for its reserves – a small transaction but with “huge symbolic significance.”  It is also important symbolically that the ECB sold dollars to purchase the renminbi. This ECB purchase may be the most important development to date with respect to China’s establishing the yuan as a global reserve currency, and a possibly a direct response to the cool relations  between the U.S. and Europe on display at the recent G-7 meeting. – MK

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The Daily Market Report: Gold Retreats, But Risks Abound


USAGOLD/Peter Grant/06-09-17

Gold is poised to close lower on the week, after eking out a new high for the year on Tuesday. Yesterday’s raft of risk events drove safe-haven interest early in the week, but now that all that is behind us, some of those haven trades are getting unwound.

Make no mistake though, risk still abound, on the economic as well as the political and geopolitical fronts. In fact, some of the events that markets seem to be considering safely behind us have generated additional associated risks.

The ECB rather significantly downgraded their inflation outlook through 2019. That is consistent with our Fed’s own rising level of concern about waning inflationary pressures, which undermines one of the central bank’s key tenets for raising rates in the first place. And yet, the Fed is (nearly) fully expected to raise rates further next week, which will arguably amplify price pressures even more.

The Fed’s forward guidance and economic projections are going to be important next week, particularly as they pertain to inflation. Hints of dovishness, whether ascribed to May’s labor market weakness or heightened worries about inflation, could add further weight to the dollar and support for gold.

While the Comey testimony was largely in line with expectations, it did dissipate the cloud over the administration. If anything, President Trump’s political opponents seem to have redoubled their calls for further investigations and hearings.

With that ongoing distraction, there is considerable doubt as to whether the President will be able to meaningfully advance his economic agenda. That suggests that the stock market in particular, may be vulnerable to a retracement of its post-election gains.

When Theresa May called for the snap-election back in April, she declared that “Every vote for the Conservatives will make me stronger when I negotiate for Britain with the prime ministers, presidents and chancellors of the European Union.” The results of the election now in fact put her in a decidedly weaker position. Her conservative party lost 12 seats in Parliament and their majority. The opposition labour party on the other hand gained 29 seats.

The resulting hung Parliament is going to make governing in general more problematic. They may have to entirely rethink their Brexit negotiating strategy, with just 10-days before those talks are slated to begin. I suppose there is some risk that they won’t even have formed a government by then, amid rumblings of possibly another snap-election.

Arguably there is even more uncertainty now than there was on Wednesday. On top of that, legendary investor Jim Rogers is predicting the “worst crash in our lifetime” sometime within the next year-and-a-half!

Rogers suggests such crashes start where you’re not looking. “It could be an American pension plan that goes broke,” said Rogers as a possible example of a flashpoint. I think he would concede that any of the aforementioned situations are potential flashpoints as well.

I encourage gold investors to be proactive rather than reactive. If Rogers is right, and another major market crash is coming within the next 18-months, gold may get really expensive, real quick. That is, if you can get it at all.

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In gold we trust – 2017

by Ronald-Peter Stoferle and Mark J. Valek, Incrementum

“The highly normal is becoming abnormal.”
Claudio Borio, Bank for International Settlements

“We believe that the monetary tsunami created in the past years, consisting of a flood of central bank money and new debt, has created a dangerous illusion: the illusion of a carefree present at the expense of a fragile future. The frivolity displayed by many investors is for example reflected by record-low volatility in equities, which have acquired the nimbus of being without alternative, and is also highlighted by the minimal spreads on corporate and government bonds. Almost a decade of zero and negative interest rates has atomized any form of risk aversion.”

With that Stoferle and Valek set the stage for their widely anticipated annual review of the international gold market. We invite you to explore their analysis, prospects and conclusions at the link below:

In gold we trust 2017


* Incrementum offers a complimentary subscription for upcoming gold reports, as well as gold-chartbooks at:  https://ingoldwetrust.report/en/

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June 2017 Special Offer

Update (6/7/17, 5:10 pm MT):  U.S. $5 Liberties over half sold out.  Strong response.


U.S. $5 Liberties
Time to buy. Premiums have fallen to all-time lows. Limited availability. 

“In recent weeks, the premium on pre-1933 $5 Liberty gold coins in AU/Uncirculated condition has fallen to an all-time low, prompting us to recommend them for bulk purchase for the first time in over a decade. . . .  (MORE)


Gold American Eagles (1 oz)

Discounted $7 per one ounce coin.  200 available.  Free shipping at 10 or more ounces purchased. . . . . (MORE)


Please call the ORDER DESK to reserve your order.
First-come, first-served.

1-800-869-5115
Extension #100

You also pay by credit card by going to either of the two links posted above.

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Week in Review (Video) – June 6, 2017

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What the markets are telling us five months into the year . . . . .

Wall Street, the financial media and a good many investment analysts are down on gold and silver.  It is difficult to understand why.

As of Friday’s closes,

– the Dow Jones Industrial Average is up 7.30% thus far in 2017

Gold is up 11.12%

Silver is up 10.37%

– the Dollar is down 3.52% (based on the Dollar Index –  Major currencies)

Commodities are down 5.9% (based on the Bloomberg Commodity Index)

All of which tells us that, as of June 2, 2017, gold and silver are still being purchased as hedges against disinflation and overall financial system risks as has been the case since the turn of 21st century.  At the moment, we can also throw in dollar weakness as a factor, though it is difficult to know whether or not that weakness is temporary or something with staying power.

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Five Big Reasons Why People Are Still Skeptical About Bitcoin

Bloomberg/Lily Katz/05-30-17

Bitcoin’s astronomical rally has cryptocurrency bulls feeling vindicated. Not so fast, skeptics say.

The digital currency’s more than 100 percent surge in the past two months looks eerily familiar, argue the bears, pointing to November 2013, when the price quintupled in short order to top $1,000 for the first time. By Valentine’s Day it was worth around half that, and spent the better part of the next two years languishing below $500.

…There are an estimated 700 rivals, according to Ron Quaranta, chairman of the Wall Street Blockchain Alliance.

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Why gold is up today . . .

Up $10 as this is posted.

A Wall Street Journal article published this morning might have inspired new  fund/institutional buying.  The WSJ is often used by the Fed to channel messages to the market and this looks like one of those articles. It suggests that a rate hike might be on hold for September although the June hike is still a likelihood.  The article cited political wrangling in Congress and a possible government shutdown as primary reasons for putting September on hold.  Another aspect of the Fed’s agenda – unwinding the balance sheet – was also covered. It seems the board is leaning toward retiring its holdings gradually as debt instruments mature rather than any sort of wholesale dumping. The go-slow approach is meant, according to the WSJ, as an attempt to ward off a future “taper tantrum” in the bond market.  Gold apparently likes the new agenda, or at the very least, likes the fact that the Fed has decided to be cautious on both rates and the balance sheet.  MK

Here’s a Barron’s take on the Wall Street Journal article: Will Political Wrangling Alter The Fed’s Rate Hike And Taper Timeline – Uncertainty in Washington may shake up the central bank’s plans beyond June.

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Morning Snapshot: Gold retreats modestly after setting 5-week highs

USAGOLD/Peter Grant/05-30-17

Gold hit a 5-week high at 1270.45 in overseas trading, before dipping back into the range. With the fundamentals and technicals still generally supportive, shirt term dips will likely viewed as buying opportunities.

U.S. data out this morning shows that home prices continued to appreciate at a solid pace in March, but broader inflationary pressures are waning. The Case-Shiller home price index for 20-cities gained +1.0% in March, above expectations. Meanwhile, core PCE eased to 1.5% y/y in April; the third consecutive monthly decline.

That is suggestive that the December and March rate hikes may have sapped the upward price pressures that the Fed worked so hard to generate. Prospects for another 25 bps hike in June remains all-but a sure-thing, although the inflation data may weigh on those expectations.

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The story behind continuing strong bullion coin demand

2016 was a very good year for both gold and silver in aggregate global mint sales

by Michael J. Kosares

I have always considered sales of modern gold and silver bullion coins a bellwether on the general health of the global precious metals market. In reality, though, bullion coin sales comprise only a very small portion of the physical gold and silver markets. According to the World Gold Council, modern gold coins make up only about 13% of investment demand and a little less than 5% of overall demand.* Yet, as is often the case in statistical inquiry, it is the small and often unobserved, sometimes even ignored, that can accurately tell the larger story – particularly when it reflects the net effect of human action within the greater economy and financial markets.

So how is it that such a small aspect of the global gold market in terms of the overall volume can at the same time be so important?

In a nutshell, it is because the demand among ordinary private investors is telling us something very important: The level of confidence people have in the economy and the plan being carried out by the central planners in charge. Twentieth-century economist Joseph Schumpeter (1883-1950), most famous for his theory of creative destruction in capitalist economies, said it best: “The modern mind dislikes gold because it blurts out unpleasant truths.” I am quite certain that the “modern mind” to which Schumpeter referred was a collective term for the social and economic planners responsible to this day for the construction and maintenance of the fiat money economy.**

With that for initial spade work, let’s take a look at the demand for modern gold and silver bullion coins to see what they might be “blurting out” at this juncture in economic history. First and foremost, the numbers tell us that though Washington and the mainstream media may have recovered psychologically from the 2007-2008 crisis, the investing public has not. In fact, by implication the numbers tell us that concerns about a repeat, or better put, an extension, of that crisis still run high among investors.

The charts depict two different eras for gold and silver bullion coins – the one before the crisis and the one after. The strong consumption in 2016, in that respect, is decidedly a continuation of a well-established trend that began in 2008. For gold, 2016 was the fifth best year on record in terms of sales and in a virtual dead heat with 2015. For silver, 2016 was the fifth best year on record coming after last year’s record sales. Since 2016 was a relatively calm year in financial markets, the question arises how high demand might go if another crisis were to suddenly ignite.

Another lesson in these charts, and one that should not be overlooked, is that the record performances in both precious metals since 2008 did not occur in an inflationary environment, but in a distinctly disinflationary one. The strong and continuing post-crisis demand, running consistently at five to nine times pre-2007 levels, belies the mainstream media’s unremitting mantra that the precious metals are an inflation hedge and inflation hedge only. In that regard, silver is the big surprise. Prior to the current period, silver was generally viewed as an industrial metal with some investment potential and rarely a safe-haven or crisis hedge. Now investors give silver nearly the same credence they do gold for asset preservation purposes.


FREE SUBSCRIPTION and access to this month’s edition of News & Views.  This month we explore the big issues in Washington and how they are likely to affect gold in the months ahead; the mechanics of how algo-trading might create a stock market panic and much more.   Several timely charts are included. We invite your free subscription at no obligation.


* These totals include only current year bullion coins and does not include the large volume in previous mintages traded in the secondary market globally. There is no accurate accounting available for the secondary market, but it would add significantly to the annual turnover demand if it were tracked.
** Complete quote: “In the first place, the ‘classic’ writers, without neglecting other cases, reasoned primarily in terms of an unfettered international gold standard. There were several reasons for this but one of them merits our attention in particular. An unfettered international gold standard will keep (normally) foreign-exchange rates within specie points and impose an ‘automatic’ link between national price levels and interest rates. The modern mind dislikes the this automatism, as much for political as for economic reasons: it dislikes the fetters this automatism clasps on government management of the economic process – dislikes gold, the naughty boy who blurts out unpleasant truths. But most of the economists of the period under survey liked it for precisely the same reasons. Though they compromised in practice as in theory and though they admitted central-bank management, the automatism – a phrase beloved by Lord Overstone [Samuel Jones Loyd, 1st Baron Overstone] – was for them, who are neither nationalists nor etatistes, a moral as well as an economic ideal.” –– Joseph Schumpeter, History of Economic Analysis (1954) Published posthumously
Charts compiled and designed by USAGOLD’s Jen Dentry with the assistance of the mints surveyed.
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Gold prices rebound as U.S. dollar weakens

NASDAQ Daily Forex/Walker England/5-25-2017, 8:55 AM EDT

“Gold prices are rebounding and trading to new weekly highs today, as the US Dollar continues to decline. Technically gold prices may now be seen as trending higher in both the short and long term. Yesterday’s bullish breakout saw gold closing back above both the 200 day MVA (simple moving average) and the 10 day EMA (exponential moving average). Currently the 10 day EMA is found at $1,235.74, and should be referenced as a value of support if prices continue to advance.”

USAGOLD comment:  Something else might be going on.  We will keep an ear to the rail.  G-7 meetings in Europe have been less than positive and that might be weighing on markets.

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The Daily Market Report: Gold Consolidates Awaiting Fresh Impetus


USAGOLD/Peter Grant/05-24-17

Gold is consolidating within the recent range, buoyed by political and geopolitical concerns and a generally weaker dollar. Persistent expectations for a June rate hike are perhaps limiting the upside at this point.

As we’ve noted in the past, the yellow metal tends to soften into rate hikes and rally afterwards. Traders will be scouring the FOMC minutes of the May meeting later today in an effort to glean additional clues as to the likelihood of a June hike. Fed funds futures put the probability at 83%, which seems to make it a forgone conclusion.

Of course incoming data seems to suggest the Fed should be considering a pause. Minneapolis Fed President Kashkari noted yesterday that the inflation is going the “wrong way.” He wants to see more data before committing to further monetary tightening.

The PMI data that were released yesterday, suggested some downside risk to the May jobs data. Median expectations are presently for a gain of 190k nonfarm payrolls.

While there is some optimism about a Q2 rebound in growth. The Atlanta Fed’s GDPNow model is presently at 4.1%. Goldman Sachs just get their estimate to 3.0%. However, the last actual GDP print was 0.7% in Q1.

Gold may need some fresh impetus to extend the uptrend. That may come on the form of economic data, or new developments on the political/geopolitical front.

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The Daily Market Report: Gold Choppy On Mixed Data and Mixed Messages


USAGOLD/Peter Grant/05-23-17

Gold was unable to sustain the earlier intraday rebound, falling back into the daily range. The choppy trade comes as a result of a mixed bag of economic data, dovish FedSpeak, much ado about President Trump’s budget proposal and ongoing concerns about his broader economic agenda.

Markit PMI data were mixed with services better than expected and manufacturing missing expectations. The Richmond Fed index tumbled to 1 in May, below expectations of 15, vs 20 in April. New home sales tumbled 11.4% in April, well below market expectations. It was the biggest drop since March of 2015.

Sales fell in every region of the country, led by a 26.3% plunge in the West, the biggest drop since October 2010. — AP

Minneapolis Fed President Kashkari noted today that inflation is going the “wrong way.” Rising inflation and inflation expectations was the main incentive for the Fed’s move to tighter policy. Kashkari wants to see more data before considering a further tightening of monetary policy in June.

Speaking at the Peterson Foundation Fiscal Summit, Treasury Secretary Mnuchin confessed that “we’re not going to get [tax reform] done by August.” While he’s still hopeful that it will get done this year, there are rumblings that the GOP may have to settle for tax cuts, rather than reforms, but even that may be a heavy lift. There is also talk of combining fiscal spending with any tax bill in an effort to garner support from Democrats.

The bottom line is that the economic agenda seems to be losing additional momentum, and the new budget proposal isn’t going to help the cause. President Trump’s $4.1 trillion budget seems to be overly optimistic about the growth prospects of the U.S. economy. While the budget targets 3% growth, some analysts suggest continued sub-2% growth is the more likely reality. Zerohedge also reported that the administration is perhaps overly-optimistic about how long the current expansion will last.

Given the cuts to entitlements, Democrats are already girding for battle. As that battle rages, the clock will continue tick toward the inevitable next 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 time elapsed since the Great Recession “officially” ended in June 2009 presently stands right at 95-months. To think we can go more than another decade without an economic contraction just might be delusional.

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U.S. Markit services flash PMI rose to 54.0 in May, above expectations of 53.1, vs 53.1 in Apr.

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The Daily Market Report: Gold Firms as Dollar Continues Its Slide


USAGOLD/Peter Grant/05-22-17

Gold remains generally well bid, with last week’s high at 1265.01 within striking distance. Above that — given the favorable technical posture — the high for the year at 1295.03 would be looking pretty attractive.

Political and geopolitical tensions are helping to keep the yellow metal underpinned. Continued pressure on the dollar is helping to buoy gold as well. The dollar index has extended to new 6-month lows toda, pushed by euro gains.

In answering a question as to why Germany continued to maintain a high trade surplus, Angela Merkel said that “the euro is too weak,” suggesting that ECB policy was too accommodative. With more hawkish rumblings emanating from the central bank this year, Merkel’s comment may have lent some credence to calls for some movement toward policy normalization later this year.

If Chancellor Merkel thinks the euro is too weak, and President Trump thinks the dollar is too strong, it seems like there may be a path of least resistance for that currency pair. That would bode well for gold, which is priced in dollars.

Uncertainty about U.S. growth prospects could put further pressure on the greenback if the Fed adopts a more dovish tact later in the year. Right now, markets remain fairly convinced that another 25 bps rate hike is coming in June. Fed funds futures put the probability back at 78%, but chances of an additional 25 bps in September at just 24.5%.

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The perils of complacency. . . .

. . . in the age of quants and the madness of machines

Daily Reckoning/James Ricards/5-19-2017

“In recent decades, mainstream economists insisted that markets are highly efficient, and do a near perfect job of digesting available information and correctly pricing assets today to take account of future events based on that information. In fact, nothing could be further from the truth. Markets do offer valuable information to analysts, but they are far from efficient. Markets can be rational or irrational. Markets can be volatile, irrationally exuberant, or in a complete state of panic depending upon the emotions of investors, herd behavior, and the specific array of preferences when a new shock emerges.”

MK note:  I might add that the volatility, irrationality, potential panic and the rest when applied to the markets extends beyond humanity itself to machine-driven algos as well – hence the madness of machines, as I have called it past writings.  We should keep in mind that computer driven trading models mimic human behavior by design.  As a result, the bad behviour necessarily comes with the good.  Computer driven trading is an extension of human psychology, not set aside from it.  After all, the goal in the end is get ahead of the competition, a decidedly human endeavor.

This morning’s Wall Street Journal features an article on algo/quant trading platforms.  In it, the authors bemoan the lockstep trading of the various quant funds and their potential to exacerbate a trend.  The lemmings in short can take the market higher; they can also take it over a cliff.

Quants today comprise 29% of stock market trading volume – a percentage large enough to dictate momentum in either direction depending upon if they are buying or selling.  I agree with James Rickards.  There is a peril in being complacent and thinking that all of this will end well, or that because the trading is dominated by algos and quant platforms that somehow the markets have suddenly become immune to the history of panics, mania, crashes and collapses that frequent economic history.  That quant is every bit as human in the way it acts and reacts as the programmers that gave it cyber-life.

The best way to guard against the power of quants moving against you and your portfolio is to own gold and silver.  The lemming with the parachute owns precious metals.

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The Daily Market Report: Both Technicals and Fundamentals Remain Supportive for Gold


USAGOLD/Peter Grant/05-19-17

The dominant trend in the gold market remains positive, despite the recent multi-week pullback. The yellow metal appears poised to end the week with a 1.8% gain, the biggest in more than a month.

The technical picture remains constructive with gold holding above key moving averages. The 50-day MA remains above the 200-day MA, sustaining the “golden-cross” that occurred late last week. When the 50-day moves above the 200-day moving average, it is typically interpreted as a rather bullish event, hence the name.

Gold is proving quite resilient today in the face of a rebounding stock market. Stocks were lifted by dovish FedSpeak, but heightened political and geopolitical risks are likely to continue underpinning the yellow metal.

St. Louis Fed President James Bullard acknowledged that both growth and inflation data have been pretty soft of late. “FOMC’s contemplated policy rate path is overly aggressive relative to actual incoming data on U.S. macroeconomic performance,” said Bullard.

I have maintained that the primary goals of the Fed’s tightening into weak growth, is to prick the stop market bubble and to replenish the central bank’s ammunition in case of more pronounced growth risks and/or deflationary pressures. Minneapolis Fed President Neel Kashkari warned this week that, “Monetary policy should be used only as a last resort to address asset prices, because the costs to the economy of such a policy response are potentially so large.”

So what is the Fed to do at the June 13-14 FOMC meeting, given still relatively buoyant stocks and the worsening risk that the economy stumbles in the face of the considerable headwinds now facing President Trump’s fiscal policy agenda? Rate hike expectations have ebbed recently, but there’s still several weeks to go before the FOMC convenes.

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Dow finishes down 370 points, dollar hammered, gold surges $17. . . . .

Surprise! Gold up almost 9% on the year.

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Dow drops 250 points, S&P and Nasdaq fall 1% as Trump worries send shivers down Wall Street

CNBC/Fred Imbert/5-17-2017

“This is clearly Washington-driven,” said Michael Shaoul, chairman and CEO of Marketfield Asset Management. “It’s a lot like 1998-99, when the market had to deal with the [Monica] Lewinsky scandal.”

MK note:  Unravelling euphoria + deflating bubble = Gold up $15.

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Morning Snapshot: Gold buoyed by weaker dollar

USAGOLD/Peter Grant/05-16-17

Gold is modestly higher, buoyed by a weaker dollar. The dollar index has fallen to new 6-month lows, mostly on the back of euro strength, but commodity currencies have also gained against the greenback recently.

The dollar has now retraced most of its post-election gains, weighed by uneven economic data, dimmed expectations of further Fed rate hikes and a growing realization that implementing the President’s reflation agenda is not going to be easy. Nonetheless, Mr. Trump has not been shy about saying he prefers a weaker dollar as a means of stoking demand for U.S. exports. Therefore the President may be pleased to see the dollar retreat, but is likely nonplussed about the reasons.

U.S. data this morning were mixed: Housing starts missed expectations, dropping 2.6% in April. Industrial production rose 1.0% in April, above expectations of +0.4%.

Meanwhile the euro is at 6-month highs, buoyed by optimism in the wake of the centrist victory in the French election and growing belief that the ECB is going to start removing accommodations at some point this year. While Q1 GDP was confirmed at +0.5%, the annualized rate of growth eased to 1.7%.

European market seem to be taking heart from German ZEW investor confidence index. While the headline number slightly missed expectations, the overall Eurozone expectations reading jumped to 35.1 from 26.3.

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Of inflationists and swamp creatures. . . . .

“This crowd couldn’t sell gold bars to inflationists.”  – Today’s lead Wall Street Journal editorial with reference to the Trump administration’s handling of Comey’s termination

MK note:  Though the Wall Street Journal confuses use of the term “inflationist,” the point is well-taken.  It is not the perpetrator of inflation (the inflationist) who seeks the safety of gold in most cases.  It is the victims, i.e. ordinary citizens. I say “in most cases” because there is one notable instance of an inflationist taking refuge in the metal. He was one of the most infamous perpetrators of them all, John Law, who in 1720 was ultimately caught in escape mode at the French border with a wagon load of gold and silver booty he had accumulated against the currency hyperinflation he had created.

History aside, as a firm that has placed millions in gold coins and bars over the years with investors hedging an assortment of potential disasters, we can say with confidence that USAGOLD can and does sell gold to “inflationists” under the WSJ definition. . . . . and plenty of it.  If anything, the level of confusion, angst and partisan politics on the loose in Washington DC these days only adds another good reason for the rest of us to own gold.  The swamp, in short, requires hedging.  I am not surprised to see gold moving back to the upside under the current circumstances.  As noted yesterday, the euphoria bubble is in the process of being deflated by events.

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The Daily Market Report: Gold Consolidates at Low-End of Recent Range


USAGOLD/Peter Grant/05-10-17

Gold is consolidating at the low end of the recent range. Risk aversion has ticked up in the past 24-hours as a result of intensified North Korea saber rattling and the firing of the FBI Director Comey by President Trump.

North Korea’s ambassador to the U.K. told Sky News yesterday that the DPRK is ready to conduct another nuclear test. There is speculation that both such a test could illicit a response from either the U.S. or China. “If the U.S. moves an inch, then we are ready to turn to ashes any available strategic assets of the U.S.,” said Ambassador Choe Il

The firing of James Comey is being viewed as another distraction that could further delay the implementation of President Trump’s aggressive economic agenda. Commerce Secretary Wilbur Ross has already conceded that Trump’s 3% GDP target “is certainly not achievable this year.” In a Reuters interview, Ross complained that “The Congress has been slow-walking everything. We don’t even have half the people in place.”

An early read for Q2 GDP saw the Atlanta Fed’s GDPNow model revised lower from 4.2% to 3.6% yesterday. Early GDPNow reads for Q1 were above 3% and was ultimately revised all the way down to 0.2%, before the Commerce Department reported an advance estimate of 0.7%. The blue chip consensus for Q2 is presently around 2.7%.

As growth risks are accentuated, the Fed may be forced to adopt a more dovish tone and perhaps even forgo the broadly anticipated June rate hike. That would reinvigorate interest in gold, but there are certainly a number of fundamental factors that one would expect to offer support to gold.

“I do think that gold is probably a real good buy somewhere around here, maybe as low as $1200. I think we’re going to see much higher prices. I think it’s a great hard asset for people to own anyways,” said strategist Todd Horwitz in a Bloomberg interview.

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Gold vs. Trumponomics

The Alchemist/Dr. Jonathan Butler, Mitsubishi/5-10-2017

“After the dollar and stock market euphoria of late 2016 and early 2017, there are already signs that the Trump reflation trade may be more an expression of hopeful sentiment rather than a new paradigm of actual higher economic growth and inflation. Treasury yields, the dollar, equity valuations and inflation expectations are all reversing their previous gains, to the benefit of gold. Though it remains too early to say with any certainty, bullion may even end up benefiting further from the Trump administration’s changes to the regulatory environment and the promotion of US manufacturing. As Trumponomics, in whatever form it ultimately takes, brings a new set of political, economic and trade uncertainties over the coming four years, gold should have plenty of opportunities to shine as a safe-haven asset and portfolio diversifier.”

MK note:  Somehow this argument seems considerably more credible now than 24-hours ago.  The quote above leaves out another important argument made several times in this Alchemist article.  The Trump administration is likely to have a great deal of difficulty pushing its programs through Congress, a direct blow to the reflation trade.  Slowly, sentiment is beginning to turn from the post-election euphoria that has governed trading in financial markets since the November election.

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Strategist Horwitz Sees Breakout in Oil, Gold Soon

Bloomberg/05-10-17

“I do think that gold is probably a real good buy, somewhere around here, maybe as low as $1200. I think we’re going to see much higher prices. I think it’s a great hard asset for people to own anyways.”

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