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The short side of the gold market temporarily having its way. . . .

LATE REPORT

Gold was down $6.40 today at $1291 and silver was down 14¢ at $15.69.  Thus far in December gold is down $38 and silver is down 72¢.

Speculators the long side of the futures market are well aware of the “December effect”, i.e, the fact that Decembers do not treat the precious metals kindly. Judiciously, they have elected to keep their powder dry for the time being. That collective recalcitrance, particularly with another Fed meeting on the immediate horizon, has left the short side to temporarily have its way. Come Christmas-time, if past history holds true, we might be writing a different story in these evening reports.

Quote of the Day
“So what happens when bitcoin blows up? If history is any guide then in periods prone to investment bubbles, like ours with its low cost of capital and highly inflated asset prices, then speculation will move on to something else. Why should it be gold and its even shinier sister silver? Well, historically, the people who always do best out of any investment bubble are usually those that cash out and buy precious metals.” – Peter Cooper, The National


The December issue of News & Views, is now available. We invite your interest.

FREE IMMEDIATE ACCESS. Much to think about, analyze, digest. . . . 

 

 

 

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Speculators run down gold price today on Fed rate hike

Gold was down another $16 today as speculators pounced on the Federal Reserve’s upcoming rate hike as sufficient reason to run down prices.  It finished at $1247 on the day. Silver also took a hit, down 23¢ on the day to finish at $15.69.  Decembers have not been kind to the metals in recent years and Federal Reserve policy has been a defining issue in each instance.  Prices, though, tended to level out by Christmas-time and by January the metals were trending higher – in some years significantly higher. To learn more we invite you to read the post immediately above this one.

Quote of the Day
“The changing of the guard at the US Federal Reserve raises questions over future policy and casts a shadow over the dollar in 2018. With the departure of prominent Fed members Stanley Fischer and Daniel Tarullo earlier this year, and the announcement that chair Janet Yellen will step down in February, analysts say the US is poised for its least experienced board of governors in three decades. The sweeping changes at board level might discount what analysts at Danske Bank are calling the ‘Fed experience premium’ baked into the dollar since 1973.” – Emma Dunkley, Financial Times

 

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The Gift of Gold – A simple thought for the holiday season

by Michael J. Kosares
Founder:  USAGOLD
Author:  The ABCs of Gold Investing – How To Protect and Build Your Wealth with Gold

Gold has a past. I suspect it has a future.

We live in a time when currencies and financial markets have become political enterprises – creations of the world’s governments and central banks. Since we have never seen times like these, when so much depends on the monetary largesse of the policy-makers, no one really knows where the future might lead us. Uncertainty reigns and, when that is the case, history teaches us that gold demand rises proportionally and at times impressively so.

Uncertainty reached a whole new level, though, toward the end of November when minutes of a recent Federal Reserve Open Market Committee meeting revealed a level of concern within the central bank not often expressed in the public venue. “In light of elevated asset valuations and low financial market volatility,” read the minutes, “several participants expressed concerns about a potential buildup of financial imbalances. They worried that a sharp reversal in asset prices could have damaging effects on the economy.” Blunt as it was, a good many took those words as a warning from on high about the prospects for 2018.

The gift of gold – the one passed from generation to generation in ancient times to present – is the protection it offers against an unpredictable economy. The gift of gold, in short, is peace of mind.

Wishing you and yours the very best for the holiday season and a prosperous New Year from all of us at USAGOLD.

On the ghosts of Decembers past

December, as it turns out, has been a humbug month for gold the past four years. In each of those years (2013 through 2016) December began poorly, but appropriately by Christmas-time things began to look brighter. By the end of January in the following year, the star over the gold market shone still more brightly. . .

–– On December 1, 2013 gold finished the day at $1220 per ounce. The low for the month came on the 19th at $1188, but by January 31, 2014, it traded at $1244 – up 4.7% from the December low.

–– On December 1, 2014 gold finished the day at $1212 per ounce. The low for the month came on the 24th at $1174, but by January 30, 2015, it traded at $1283 – up 9.3% from the December low.

–– On December 1, 2015 gold finished the day at $1069 per ounce. The low for the month came on the 17th at $1051, but by January 31, 2016, it traded at $1118 – up 6.4% from the December low.

–– On December 1, 2016 gold finished the day at $1171 per ounce. The low for the month came on the 22nd at $1128, but by January 31, 2017, it traded at $1210 – up 7.3% from the December low.

So the lesson imparted is to buy in December and enjoy the holidays. January is the start to a wholly new year.


Here we are in December, chugging along toward the end of the year.  In the recently released December issue of News & Views, we concentrate on the gold market itself with a variety short but informative reports with the upcoming year in mind:

• On the ghosts of Decembers past (See reprint above)
• End-of-year gold and silver price predictions
• U.S. Mint makes a mint selling gold coins at a 25% mark-up
• Gold’s mysterious waterfall drops
• The gold/quality man’s suit ratio

• And a long run of “Notable Quotables” for your reading pleasure

If you are not already a subscriber, we invite you to sign-up for free immediate access to the December issue, as well as future issues of our newsletter.  We think you will enjoy the subject matter and gain from our take on recent events in the gold market.


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Morning Snapshot: Gold Drops to 4-Month Lows

USAGOLD/Peter Grant/12-07-17

Gold is down in early U.S. trading, having definitively breached the low end of the range at 1260.10 overseas. That puts the yellow metal at a 4-month low amid a firmer dollar and ongoing optimism that a tax bill will get to the President’s desk before year-end.

Tomorrow is the deadline for at least a temporary spending measure to avert a government shut down. Congressional leaders are slated to meet with President Trump at the White House today in a last ditch effort to kick this can once again.

Then the Fed will make their final policy decision of the year next week. There is plenty of evidence to suggest they should remain on pause, but the market remains convinced that a 25 bps rate hike is in the cards.

U.S. initial jobless claims fell 2k to 236k in the week ended 02-Dec, below expectations of 240k. Later this morning we’ll get October Consumer Credit and M2 for last week.

Tomorrow is jobs Friday. Nonfarm payrolls are expected to rise by 198k. The jobless rate is expected to hold steady at 4.1%.

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JP Morgan says $1300 barrier will be breached in 2018

LATE REPORT

Gold was down marginally today at $1263, but since reversing in its latest attempt to breach the $1300 barrier, it is down about $31 (from $1294).  Silver has followed along though with a greater percentage loss.  It finished today $15.93, down about 15¢ on the day and $1.09 from it’s recent high water mark of $17.27 (11/17).  JP Morgan, however, believes that the $1300 mark will be breached by the second half of 2018 saying “As we believe gold rallies on the back of US real yields potentially stagnating in 2H18, we see even greater upside potential in silver given its historical tendency to outperform gold during outsized rallies.”  Not sure what they mean by “outsized”, but they think gold will be trading in $1340 range by 2018 year end.

Quote of the Day
“We’re in a stage where if nothing is changed, we’re about to go from stagnation to stagflation, with a significant rise in inflation and a wholly significant imbalance in the economy, which is very difficult to anticipate at this stage. But the outlook is not exactly terrific.” – Alan Greenspan (12/6/2017)


Here we are in December, chugging along toward the end of the year.  In the recently released December issue of News & Views, we concentrate on the gold market itself with a variety short but informative reports with the upcoming year in mind:

• On the ghosts of Decembers past
• End-of-year gold and silver price predictions
• U.S. Mint makes a mint selling gold coins at a 25% mark-up
• Gold’s mysterious waterfall drops
• The gold/quality man’s suit ratio

• And a long run of “Notable Quotables” for your reading pleasure

If you are not already a subscriber, we invite you to sign-up for free immediate access to the December issue, as well as future issues of our newsletter.  We think you will enjoy the subject matter and gain from our take on recent events in the gold market.


With the recent addition of our brand new Online Order Desk, we offer a secure portal to buy gold and silver at great prices day or night at your convenience.  We encourage you to visit and look around. . . .

 

 

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For Christmas this year, give the gift of gold

Lucky French Angels

Coins, pendants and buyer incentives. . . . .

Review our seasonal offer here.

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Gold’s 47-year bull market

Gold Eagle/Steve Saville/11-24-2017

“This is why the gold/commodity ratio tends to trend downward when everything seems fine on the surface and rocket upward when it becomes apparent that numerous investing mistakes have been made and that the future will be nowhere near as copacetic as previously assumed. It’s reasonable to expect that the multi-generational upward trend in the gold/commodity ratio that began in the early-1970s will continue for at least as long as the current monetary system remains in place. Why wouldn’t it?”

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Blunt Fed tips gold see-saw higher

LATE REPORT

Gold was up today continuing the mercurial, see-saw performance that has dominated its price action over the past several weeks.  Finishing at $1292, gold was up $11.50 on the day and pretty much ended this shortened week (for all intents and purposes) where it started.  Silver was up 20¢ on the day finishing at $17.15, but down about 14¢ on the shortened week.

The minutes to the most recent Federal Reserve meeting reveal a governing committee genuinely concerned about the price levels in the stock market and the possibility for “a sharp reversal in asset prices [that] could have damaging effects on the economy.” Blunt as it is, that assessment is likely to stick in both peoples’ minds and the financial markets’ repertoire for weeks to come as we move to the end of 2017.  The gold market seems to have taken it as a caution on raising interest rates as well as a warning from on high.

Quote of the Day
“In a goldilocks scenario of low interest rates, abundant liquidity, stable growth and a focus on the ‘good’ Trump, investors continue to push asset prices, volatility and leverage to historical extremes. Yet, a low volatility carry environment with rather extreme positioning is a dangerous combination, which we recently likened to dancing on the rim of a volcano.” – Alain Bokobza, head of global asset allocation, Societe Generale


What is this important chart telling us about future Fed policy?
And what does it mean for the gold market?

Find out in the current issue of our newsletter.
We cover the gold market with the gold owner in mind.

FREE IMMEDIATE ACCESS to our latest issue

Newcomers, prospective clientele. . . . We welcome your interest.


News & Views
Forecasts, Commentary & Analysis
on the Economy and Precious Metals


 

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Gold reverses Friday’s gains, another mysterious mega-trade

Gold reversed today what it gained on Friday finishing down $17.25 at $1276.63.  Silver followed suit giving up 39¢ and finishing the day at $16.89.  Again today, gold and the Japanese yen were traveling partners, and now with the yen recovering in Asian trading gold has perked up as well (up $3 in the overnight market at $1279.50).  There was little in the way of news to justify the price drop – just a huge 15,000 contract dump  in a matter of seconds at the COMEX open reminiscent of a similar mysterious mega-trade last week. By the way, the U.S. federal government just went over $80 billion in additions to the national debt in November – quite a pace as we move to the end of 2017.

Quote of the Day
“Gold traders are having to grow more accustomed to surges in trading volume as spikes that began surfacing around mid-year become more frequent. In the 10 minutes ended 3:10 a.m. in New York on Tuesday, when most North American traders were probably still asleep, contracts representing more than 2 million ounces of the metal changed hands on the Comex, sending prices down as much as 0.7 percent. The bulls responded hours later, with trades covering more than 3.5 million ounces at around 10 a.m., helping to push the price higher.” – Luzi-Ann Javier, Bloomberg


From the October, 2017 issue of News & Views. . . . .

“In fact, institutional involvement may be unprecedented at this juncture and it is not just the high-profile gold advocates like Ray Dalio, Stanley Druckenmiller and David Einhorn pumping capital into the market, but hundreds of funds and institutions from one end to the globe to the other.

It came to light this past month, for example, that almost 3000 tonnes* of gold in physical form sit on the balance sheets of Chinese commercial banks and financial institutions – a surprising revelation. In the West, inventories at gold ETFs, the favored gold ownership vehicle for professional investors, have gone from 2050 tonnes in late 2015 to just under 2770 tonnes now – a gain of 720 tonnes or 35%. Last month, the World Gold Council (WGC) published a report showing that European funds accounted for 79% of the overall growth in gold ETFs in 2017 with German funds and institutions accounting for half of those inflows.”

We cover the gold market with the gold owner in mind.
FREE IMMEDIATE ACCESS to our latest issue
News & Views
Forecasts, Commentary & Analysis on the Economy and Precious Metals


 

 

 

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Gold up today in stellar fashion

LATE REPORT

Gold finished the day in stellar fashion – up $15.41 from yesterday’s close at $1293.87.  It finished the week up $18.52.  Silver also had a good day up 22¢ to finish at $17.27.  It was up 41¢ on the week.  As reported here, the upside push began last evening when it bolted higher in concert with the Japanese yen in Asian trading.  It sustained the upside in Europe early today then bled over to the U.S. market with the strongest part of the move coming in today’s COMEX trading.

Some gave credit to the tax bill, but with gold holding its own in recent weeks despite heavy paper selling, the shorts look like they are beginning to lose heart. Reports of heavy buying in the physical market by Bridgewater [Ray Dalio] might also have given short speculators cause for re-evaluation.  What is he factoring into the gold equation that they are not?

In the background, you have the clampdown in Saudi Arabia on big money players, including asset confiscations. (That had to turn a few heads among the moneyed elite in far-off places.) You also have North Korea back making unsettling assertions about its need to build a nuclear arsenal.  Then there is the small matter this past week of wholesale inflation suddenly registering something other than a faint pulse.

Quote of the Day
“The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.” – Ernest Hemingway

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Gold bolts higher in overnight, Asian trading. . . . .

LATE REPORT

After a quiet day today in Stateside trading, gold is bolting higher in the overnight, Asian market – up about $6 at $1284.  The yen is pushing higher as well, a scenario that raises questions about the yen/gold relationship mentioned in these reports several times over the past few months.  The dollar, in fact, is down across the boards in overnight trading.  Here’s a snapshot on tonight’s trading, i.e., the yen-gold correlation.  There is a reason for the Japanese yen heading North and it’s made an impression on gold.  That reason is not evident at the moment.  We might know more as the evening unfolds.

Quote of the Day
“In a matter of only 2 quarters, Bridgewater has accumulated 3.894 million shares of GLD, which are worth $473M today and 11.3 million IAU shares, which are worth $140M today. Put together, Bridgewater is betting $613M of clients’ money that gold will perform well, and we know the benchmark is 21%, so Mr. [Ray]Dalio has a conservative outlook that gold prices will reach $1,556 by the end of 2018. . .gold has weathered through huge paper smashes that have proven to bears that demand is too strong right now. . . Gold held above its 200-DMA. It’s now trading above its 100-DMA and is on the brink of moving higher than the 50-DMA. ” – Wealth Research Group


If you are looking for a quick snapshot of the day’s events with respect to gold, or if you are attempting to put together an explanation as to why gold is up or down at any given point in time, you would gain from bookmarking our GOLD TODAY! page.  This page is heavily traveled and always has been.  We invite you to take advantage of this service provided by USAGOLD and check back here regularly for our take when the market breaks in one direction or the other.

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Morning Snapshot: Gold Little Changed After Mixed Data, Tax Reform Concerns

USAGOLD/Peter Grant/11-16-17

Gold is up slightly in early New York trading, underpinned by recent softness in the dollar and mounting doubts about the prospects for tax reform legislation. Geopolitical tensions remain elevated as well, providing additional support to the yellow metal.

Senator Ron Johnson of Wisconsin has vowed not to vote for the Senate version of tax reform. “If they can pass it without me, let them,” said Johnson. There are reportedly some other potential defectors as well.

Today’s U.S. data were kind of a mixed bag. Industrial production for October was better than expected. The Philly Fed index sunk more than expected. Initial jobless claims jumped by 10k. Import and export prices were weaker than expected, dealing perhaps another blow to hopes that inflation is picking up.

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Gold up on PPI surprise, massive paper trade volume

LATE REPORT

Gold finished up $2 from yesterday’s close at $1280, but it was up $8 from the intraday low. Silver was down 2¢ at $17, but up 12¢ from the intraday low. Today’s upside in the gold market might well be the first signs of inflation affecting the price of the precious metal. It is too early to draw any strong conclusions, but the timing in concert with today’s release of the producer price index is worth noting. The sudden uptick in the PPI to 4.8% caught many Wall Streeters by surprise. A massive $4.5 billion in paper trades hit the COMEX market as the price dropped near the 200-day moving average and the PPI print hit computer screens.

Quote of the Day
“Money, again, has often been a cause of the delusion of multitudes. Sober nations have all at once become desperate gamblers, and risked almost their existence upon the turn of a piece of paper. To trace the history of the most prominent of these delusions is the object of the present pages. Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.” Charles Mackay Extraordinary Popular Delusions or the Madness of Crowds (1841)


NOVEMBER SPECIAL OFFER

In a world where stocks march ever higher, real estate prices remain strong, and fads like Bitcoin steal headlines, it’s admittedly easy to overlook the gold market. Yet, it is this very environment that has created unprecedented opportunities like our November offer. When it comes to investing, time and time again, it is those that buck the trend, that see the stampede and go the opposite direction, that are the most handsomely rewarded.

So, if you are among the contrarians out there saying, “I just don’t believe it”, or “Something’s gotta give”, you might be looking for ways to benefit when the inevitable rebalancing of asset values takes shape. In a gold market ripe with opportunity, the most compelling area of all is historic US $20 gold pieces, and more specifically the St. Gaudens in Mint State 63 grade – the focus of our November Special Offer.

TO LEARN MORE
$20 St. Gaudens Mint State 63
Only 250 coins available

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Is Gold Really a Good Hedge?

Bloomberg/Cameron Crise/ 10-10-2017

“Again, on this metric, gold looks pretty good as a risk-aversion hedge. By definition, equity market performance was poor, with an average loss of almost 20 percent per episode. Treasuries proved a useful offset, returning an average 3.4 percent and performing positively on seven occasions. Gold, meanwhile, was a star performer, rising almost 7 percent per episode, with gains in 8 of the 10 periods.”

MK note:  Came across this article over the weekend.  It is nearly a month old, but I thought it important enough to get it posted here for future reference. The author seems reluctant to accept the results of his own research, and ends with an interesting take:  “Given the solid performance of a portfolio including gold and the chance that the comfort of owning some might prevent investors from panicking at the height of a crisis, I have to conclude that the notion of gold as a hedge against serious risk aversion is true.”

Imagine that.  Remaining calm because you appropriately hedged your portfolio against a Wall Street disaster ahead of time. [smile]  The article is worth a read. . . . I might add that the crises listed are mild in comparison to some of the more famous breakdowns in history, i.e., times when gold mattered in an ultimate sense.

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Gold down today under mysterious circumstances

LATE REPORT

Gold dropped $10 today under mysterious circumstances. It finished the day at $1275.35  turning a fairly good week a bit upside down.  Silver went along for the ride finishing the day at $16.86 – down 10¢ on the day.  As it is gold finished up $5.60 for the week, silver up 4¢.

Seasonax’ Dmitri Speck has tracked daily gold movement since 2000 and has come to an interesting conclusion about Fridays.  “. . .[P]rices”, he says, “essentially tended to move sideways over the first four days of the week. Only in 2009 did Wednesday manage to generate a somewhat stronger average return as well. The gains in the gold price over the entire period of almost 17 years were primarily achieved on Fridays. . . On Friday prices frequently even managed to rise even when the gold price declined overall in the course of the year, such as e.g. in 2014. In short, Friday is indeed quite an unusual day.”

This Friday (today) was markedly different from Mr. Speck’s finding, and it all happened when some entity dumped 40,000 contracts on the New York Comex – four million ounces.  The price immediately dropped $10.  No one has come forward to admit the dirty deed, but its not the first time we have had one of these mysterious waterfall drops in the gold price sans a logical explanation.  The mystery of it all was proclaimed at several news sources including Reuters, Bloomberg and CNBC.


Quote of the Day
“The bullion market has seen similar mysterious trades in the past few months. Last month, contracts covering more than 2 million ounces of gold traded in just five minutes, sending prices higher. Two months earlier, contracts for a similar amount traded in a minute, propelling the metal higher. In June, the market saw trades for over 1.8 million ounces posted in just a minute.” – Luzi-Ann Javier, Bloomberg (article linked above)


News & Views is the contemporary, web-based version of our client letter which traces its beginnings to the early 1990s as a hard-copy newsletter mailed to our clientele. The “Big Breakout of 1999” headlined in the November, 1999 issue of our newsletter moved the gold price from $250 to $325 per ounce. It was a major event.  To put it in perspective, the same upward move today would put the gold price at better than $1650 per ounce.

The times have changed, but our mission has not. Simply put, it is to deliver value to our readers in the form of cutting-edge Forecasts, Commentary and Analysis on the Economy and Precious Metals. The very same mission that has been displayed in our banner for over twenty-five years.

If you are looking for commentary on the gold market without the negative mainstream media spin, you will find News & Views a viable and valuable partner in that endeavor. We invite you to sign-up for FREE immediate access to our current newsletter as well as future publications. You never know with gold.  The next big breakout could be right around the corner.

November’s feature article:

Government Finances and Gold
A cautionary tale told in four straightforward charts


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Investment gold demand up 17%

LATE REPORT

Gold continued higher today – quietly finishing up another $3.78 at $1284.90.  Silver was down 4¢ on the day finishing at $16.96. Concerns about a ramp-up in Middle East geopolitical tensions along with the crackdown on many of Saudi Arabia’s wealthiest citizens have focused attention on the precious metals. The Gulf States have always been a strong market for physical gold and what is going on there now could fuel capital flight and even more demand.

The World Gold Council is out with its quarterly report on gold demand.  The headline – “Gold demand in Q3 at eight year low” – tells only part of the story.  Flagging jewelry sales in India led overall demand lower, and even then, the reduced demand is traced directly to India’s continuing attempts to artificially dampen demand through regulation. Central bank and private physical demand in the form of coins and bars, on the other hand, posted some fairly healthy numbers, up 25% and 17% year over year respectively.  China led the way – a steady source of strong physical demand.  All told, gold demand is holding up pretty well globally despite strong stock markets and central bank jawboning on interest rate and economic outlook expectations.

Quote of the Day
“Kuwait has unveiled a plan to build a massive gold city. The project which will cover 100,000 square meters will be the biggest of its kind in the region, according to Al Qabas newspaper. The Ministry of Commerce and Industry has submitted a demand to the Municipality of Kuwait City to assign the land for work on the mega project. The complex would include a building for precious metals, a VIP lobby, administrative facilities, car parks, jewelry testing labs, 1,500 jewelry workshops and 2,000 shops. The mega project will also include an exhibition hall, a permanent jewelry museum, a bourse for trading in gems and precious metals and another hall for holding auctions.” – MenaFN


The only “Why Gold” infographic
you will ever need

If you want a clear understanding of just what makes gold such a valuable portfolio alternative,  the link above is for you. This five part infographic will educate and delight prospective and experienced gold owners alike. Not the stuff of dry economics, it reveals in roughly 15-minutes viewing time how gold came to be mankind’s most revered form of money and safe haven asset, and why it is likely to remain so for a long time to come.

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Gold unstuck, moving ahead

LATE REPORT

Gold pushed higher today adding another $6 to the price and finishing at $1281.12.  Silver finished 9¢ higher at $17.00. Last week we talked about the metals running in place.  Now we are starting to get a little forward movement.   With everything that has occurred in the financial markets since election night, it is easy to overlook the fact that gold is still up 11% on the year and silver, though trailing, has managed to gain 7%.  By way of comparison, the S&P 500, which has been the beneficiary of a tremendous amount of positive publicity, is up a little over 15% thus far this year.

Jon Hussman (Hussman Strategic Advisors), who has a habit of calling major market turns, had some interesting advice for his clients recently. “For now, it’s enough to refrain from capitulating at record valuations,” he writes. “There’s no need to take a hard-negative outlook here, but don’t allow impatience, fear of missing out, or the illusion of permanently rising stock prices to entice you into entrusting your financial future to the single most overvalued market extreme in history.”  I interpret that message as a call to diversify.  Trees, as Richard Russell used to say, do not grow to the sky.

Quote of the Day
“Madness is rare in individuals – but in groups, parties, nations, and ages it is the rule.” – Friedrich Nietzsche


Should I buy a gold ETF?

You decide that the time has come to include gold in your investment portfolio. You contact your investment advisor and he or she puts you into a gold ETF. Did you do the right thing? In this article posted at USAGOLD’s Gilded Opinion page, Olivier Garret tells why gold coins and bullion owned outright are the better option.  Be aware: For the true asset preservation investor, hidden dangers lurk in the gold and silver ETFs.


 

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Turkey prices prove inflation not dead

Those of you who believe that inflation is dead are in for a big surprise when it comes time to plunk down your debit card to buy this year’s Thanksgiving Day featured table guest.  The price of turkey has spiked – up nearly 30% over last year.

 

 

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Will the Gold Price Hit $1,800 Again?

Interview: Ned Naylor-Leyland/Morningstar

Wall: And looking at U.S. dollar terms although we are situated in London the gold price is around $1,200 and something, it was $1,800 and something in 2011, 2012, 2013. Can you as an investor expect to see those kinds of prices again?

Naylor-Leyland: Well in my view undoubtedly yes. And even more so with silver. In fact, if you look at gold and silver on an inflation adjusted basis over a very long timeframe you are going to find there is nothing else you can buy which is trading at a fraction of where they were 30, 40 years ago on an inflation adjusted basis. Really, these are absolutely counter-cyclical hedge assets. Now you may not have needed to own them for 40 or 50 years. But I’ll tell you that cyclically this is a moment where you do need portfolio insurance, and so you are just getting it at a much cheaper price than you might otherwise have had three or four years ago.

MK note:  Naylor-Leyland expresses a viewpoint similar to one emphasized here at USAGOLD especially with respect to the real rate of return on gold and dollar-based investments.  Take a look at this chart on the real rate of return for gold.****  Note in the chart two periods of escalated returns – in the mid-to-late 1970s, the other more recently in the aftermath of the 2007-2008 financial breakdown.  The first occurred during a highly inflationary period; the second occurred under distinctly disinflationary circumstances.

The most obvious lesson here is that you would have wanted to own gold in either situation. Less obvious is that prior to either period the investors who owned gold could not have known with certainty that a crisis was imminent – not in the sense that they  might have identified a start date.  What they might have understood, and probably did understand, is that financial markets’ repeatedly cycle between dearth and abundance, i.e. good times and bad times.  With respect to the next financial crisis, it is never a question of “if” but “when”. . . . . . .Mike Kosares

****The real rate of return is represented by the extension of the gold bar (%age return on gold year over year) beyond the top of the black bar (%age change in consumer prices year over year).

 

 

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Gold off to healthy start for the week

LATE REPORT

Gold got off to a healthy start for the week today registering a $12.o5 gain to close at $1281.80  Similarly silver posted a 40¢ gain to close at $17.21.  As mentioned in the Friday LATE REPORT, it seems the precious metals were simply interested in getting past some of the overhanging questions, i.e., Fed policy and personnel, federal government numbers, etc., before deciding a direction.  It seems they leaned on “higher” once the Beltway smoke cleared and here we are. . . .The general instability in the Middle East is worth mentioning as the region is a long-standing market for the metals in physical form – particularly in the suddenly volatile Gulf oil states.

Quote of the Day
“It is beyond belief that we know so little about how people get rich or poor, about how it is they come to dwell in comfort and health or die in penury and disease. Financial markets are the machines in which much of human welfare is decided; yet we know more about how our car engines work than about how our global financial system functions. We lurch from crisis to crisis; so little is our knowledge that we resort not to science but to shamans.”  – Benoit Mandelbrat, Mathematician


If you are a chart enthusiast, we have a couple pages at the USAGOLD website worth bookmarking. These charts are presented in conjunction with the St. Louis Federal Reserve (FRED) and update automatically through the magic of the internet.

Both pages are handy references used often to settle after-dinner disputes among family members about the direction of the economy and the gold market. [smile]

Gold trends and indicators in chart form

Monetary trends and indicators in chart form

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Gold, silver running in place

LATE REPORT

Gold was down $6.10 today finishing at $1269.75.  It was down $3.89 on the week.  Silver was down 26¢ on the day and 3¢ on the week.  The precious metals have been pretty much running in place the past several weeks with little in the way of news or developments to push prices forcibly one direction or the other.  Gold started the month of October at $1270.76 and finished it at $1270.86.  Silver similarly started October at $16.55 and finished it at $16.67.  The noisy headlines belied the quiet price action all month – not unusual for the precious metals markets which attract a lot of attention even when things are quiet. We will be looking to get some traction next week now that some of the outstanding market questions have found at least temporary resolution. . . . .

Quote of the Day
“Amid this mania for investment, the stock market has begun self – cannibalizing … literally. Since 2009, US companies have spent a record $3.8 trillion on share buy-backs financed by historic levels of debt issuance. Share buy backs are a form of financial alchemy that uses balance sheet leverage to reduce liquidity generating the illusion of growth. A shocking +40% of the earning-per-share growth and +30% of the stock market gains since 2009 are from share buy-backs. Absent this financial engineering we would already be in an earnings recession.” – Chris Cole, Artemis Capital


News & Views is the contemporary, web-based version of our client letter which traces its beginnings to the early 1990s as a hard-copy newsletter mailed to our clientele. The “Big Breakout of 1999” headlined in the November, 1999 issue of our newsletter moved the gold price from $250 to $325 per ounce. It was a major event.

The times have changed, but our mission has not. Simply put, it is to deliver value to our readers in the form of cutting-edge Forecasts, Commentary and Analysis on the Economy and Precious Metals. The very same mission that has been displayed in our banner for over twenty-five years.

This month’s lead article, Government Finances and Gold, is published below, but there are few other nuggets of wisdom and perspective in the current edition that will be of interest to current and would-be gold owners.

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Prospective client?  We invite your no obligation interest.


 

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Gold pumped by Fed chairman decision

LATE REPORT

Gold was up today in Fed-related trading.  It finished the day at $1274.49 up $3.63 from yesterday’s closing number.  It is up another $6 in overnight trading.  Silver had an even better day, up 43¢ and back over the $17 mark at $17.10.  It is up another 6¢ in the overnight market.  Pushing the market was a Wall Street Journal report that the president had appointed Jerome Powell chairman of the Federal Reserve. Powell is generally considered dovish on interest rates.  Adding to the gold-positive tone was a report from the China Gold Association that bar demand there was up 15.49% through the first three quarters of the year. Gold is up 6% in yuan terms so far this year.

Quote of the Day
“We think the final break with precious metal currency systems from the early 1970s (after centuries of adhering to such regimes) and to a fiat currency world has encouraged budget deficits, rising debts, huge credit creation, ultra loose monetary policy, global build-up of imbalances, financial deregulation and more unstable markets. The various breaks with gold based currencies over the last century or so has correlated well with our financial shocks/crises indicator. It shows that you are more likely to see crises/shocks when we break from hard currency systems. Some of the devaluation to Gold has been mindboggling over the last 100 years.” – Jim Reid, Deutsche Bank


If our Quote of the Day resonates, you will find the lead article for our November newsletter of interest. Please scroll below to “Government Finances and Gold–A cautionary tale told in four straightforward charts” and a link to signing-up for the rest of the newsletter (which we believe you will find equally interesting).
 

 

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Government Finances and Gold

A cautionary tale told in four straightforward charts

by Michael J. Kosares
Author:  The ABCs of Gold Investing–How To Protect & Build Your Wealth with Gold
Founder:  USAGOLD
“President Trump, in complete contradiction to candidate Trump, has praised Yellen for being a ‘low-interest-rate-person.’ One reason Trump may have changed his position is that, like most first-term presidents, he thinks low interest rates will help him win reelection. Trump may also realize that his welfare and warfare spending plans require an accommodative Fed to monetize the federal debt. The truth is President Trump’s embrace of status quo monetary policy could prove fatal to both his presidency and the American economy.” – Ron Paul, Institute for Peace and Prosperity
Editor’s note: This issue of our newsletter features several interactive, live charts offered in conjunction with the St. Louis Federal Reserve and the ICE Benchmark Administration/LBMA. You can access statistical details by moving your cursor over the charts. If the chart does not automatically update, please move the toggle button on the year bar all the way to the right. We invite you to bookmark this edition for future reference.

CHART 1: Sustained by both political parties, the national debt has taken on a life of its own

(Click to enlarge)

Since the early 1970s, the logic for gold ownership has been inextricably bound to the cash flow problems of the federal government. As the national debt increased so did the well-documented damage associated with it – to the dollar, to financial markets and to the economy in general. Simultaneously, gold’s role as an inversely correlated portfolio hedge grew over that nearly one-half century as well.

As you can see from the chart above, which shows the percent change in the national debt from the previous year, those problems do not favor any particular political party or president. In a certain sense, it has taken on a life of its own, marching to over $20 trillion without regard to party ideology. I mention that for the benefit of those who might think that somehow things might be different under a Trump administration. In fact, the greatest percentage growth in the national debt occured surprisingly during Republican administrations.

“As GOP lawmakers are struggling to enact an agenda of spending and tax reform,” says one journalist, “they continue to face the painful reminder that Trump has no ideological drive to tame the deficit. The President has made clear that he doesn’t mind if deep tax cuts result in a ballooning of the national debt.”

CHART 2: How the national debt and the Fed could bankrupt the nation

DEFICITS MATTER!

Democrat Franklin Delano Roosevelt was the first to publicly declare that deficits did not matter since, he reasoned, we owe the money to ourselves. Dick Cheney, who should have known better, made the same claim on behalf of Republican deficits. Deficit denial has never held water simply because holders of government paper, foreign or domestic, intend to be repaid and with interest. It’s that part about creditors demanding interest that blows a hole in the “deficits-do-not-matter” argument. One of the stand-out features of the chart above is that, as interest rates have declined over the last several years, the interest paid by the federal government has increased markedly due to the rapid growth in size of the accumulated debt.

Some quick background:

* * * In 2008 when the national debt stood at $10 trillion, the federal government paid $336 billion in interest. For a measuring stick, the ten-year Treasury bill drew an average interest rate at the time of around 3.66%.

* * * In 2012 when the debt crossed the $16 trillion threshold, the interest payment was almost $456 billion. The ten-year Treasury bill drew an average interest rate of 1.80%.

* * * In 2016 with the national debt approaching the $20 trillion mark, the interest payment was $497 billion. The ten-year Treasury bill drew an average interest rate of 1.84%. It is difficult to overlook the fact that 2016’s interest payment was an all-time record at the second lowest rate on the 46-year chart.

* * * If the ten-year Treasury bill were to rise to 2.82% (the average since 2007), the implied interest payment would exceed $750 billion, 20% more than what the United States spends annually on the national defense.

* * * If the average interest rate were to double from current levels (about 3.7% on the ten year Treasury bill), the United States would pay almost $1 trillion annually in interest on the national debt, or nearly one-third of 2016 tax revenues ($3.27 trillion). At that point, markets might begin to question the solvency of the U.S. federal government.

The exercise above points up the limitations on the Federal Reserve with respect to raising interest rates. It is a cautionary tale told in some very big numbers that promise to become even larger. In short, the onerous public debt has hamstrung the Fed in ways that policy-makers are loathe to discuss publicly. The Federal Reserve either keeps a leash on interest rates, or it bankrupts the nation.

CHART 3: The national debt is the ultimate threat to the dollar’s reserve currency status

In the worst-case scenario, the accumulated debt and interest payments reach levels the markets find intolerable, threatening the dollar’s reserve currency status and foreign creditors’ confidence in U.S. Treasury paper. We came perilously close to that in 2011 when Standard & Poor’s downgraded America’s credit status citing the lack of “effectiveness, stability and predictability of American policymaking and political institutions.” Since then, an argument could be made that things have only gotten worse. Not only has the red ink flowed at an unprecedented rate, the U.S. debt to GDP ratio has gone from 62% in 2007 to 105% now. Among the G-20 nations, the United States now has the third worst debt-to-GDP ratio. Only Japan and Italy have worse. One cannot help but wonder what might lie ahead as we enter a new round of Washington wrangling over government finances.

CHART 4: The national debt has made gold a superstar

Few correlations in the financial markets ring truer and more consistently than the one between the federal debt and gold. That relationship between the two is about as fundamental as it gets because it goes to the heart of what’s wrong with the debt-based fiat money system. As the federal government borrows more and more dollars into existence and the banking system pushes those dollars through the global monetary system, it diminishes the value of all the other dollars already being held somewhere by somebody – domestic private investors, financial institutions, foreign governments and central banks, et al.

With respect to foreign holders of the U.S. sovereign debt, the process begins with trade imbalances that are later converted to Treasury paper in order to earn a yield. This process of replication simultaneously showcases gold, which cannot be replicated at will, as the dollar’s counterpoint and chief competitor – a superstar portfolio holding for reasons French president Charles DeGaulle famously outlined in his “Criterion” speech delivered in 1965. France set the tone and strategy for dealing with the “export” of dollars, as he described it, by converting those imbalances to gold and taking delivery within French borders.

From that time forward global investors, both private and public, have followed the French model with China’s current gold acquisition program the most notable recent example. The result is what you see on the chart. For those with capital preservation as the goal, gold has been a stalwart and productive ally since the United States went off the gold standard in 1971 and launched the era of fiat money, federal deficits and the massive federal debt.

As for the future, we should keep in mind that the very same conditions which created the long-term secular trend for both the national debt and gold are still in place today – nothing has changed fundamentally. As long as that is the case, we can assume gold will continue to attract capital as a long-term portfolio hedge just as it has, to varying degrees, through the first 46 years of the fiat money system. Please note, too, that gold is trading below the federal debt’s trend line, an indication that it might have some catching up to do in the months and years ahead.


If you would like to broaden your view of gold market, we invite you to sign-up for our regular newsletter and receive quality commentary like what you have just read. It’s free of charge and comes by e-mail. You can opt out at any time.

News & Views is the contemporary, web-based version of our client letter which traces its beginnings to the early 1990s as a hard-copy newsletter mailed to our clientele. The “Big Breakout of 1999” headlined in the November, 1999 issue of our newsletter moved the gold price from $250 to $325 per ounce. It was a major event.

The times have changed, but our mission has not. Simply put, it is to deliver value to our readers in the form of cutting-edge Forecasts, Commentary and Analysis on the Economy and Precious Metals. The very same mission that has been displayed in our banner for over 25 years.

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Gold down today picking up where it left off Friday

Gold was down today picking up where it left off Friday by giving up another $5.14 and finishing the day at $1270.86.  Silver finished off 15¢ at $16.67. Most of the downside occurred in the Asian market and simultaneously (again) with depreciation in the Japanese yen against the dollar.  Gold and silver both leveled out in U.S. trading. Gold and silver are down marginally in overnight trading. Generally speaking, most of the downside in gold the past few weeks is related to speculation about who might end up chairing the Fed and future interest rate policy.  An announcement on the next Fed chair is due before the end of the week.

Quote of the Day
“A financial strategist at a major investment bank in Europe recently told me he keeps two-thirds of his personal investment portfolio in a global stock portfolio and the remaining third in gold bullion. He’s not a crazy, far-right conspiracy nut or classic gold bug either. So why all the gold? ‘Political risk,’ he says. ‘It’s my insurance against the world’s governments or central banks screwing things up.'” – Brett Arends, MarketWatch


Happy Halloween everyone!


If you would like a different perspective on the economy and the financial markets – one distinctly separate from what is bandied about in the financial press as the daily regimen – you would probably enjoy our newsletter.

In the November issue (to be released soon) . . . .
Government finances and gold (in-depth)
What does it take to garner a real rate of return on your money these days
Four steps to becoming a successful gold and silver investor
And more. . . . .

It is available free of charge  to our current and prospective clientele, and we invite you to sign up here.  Immediate access to our October issue.

 

 

 

 

 

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Morning Snapshot: Gold retreats back into range as dollar firms on weaker yen

USAGOLD/Peter Grant/10-31-17

The consolidative tone in gold persists as the dollar remains firm and stocks rebound. The yellow metal still needs to climb back above $1300 to ease short-term pressure on the downside.

The BoJ left the policy rate unchanged at -0.1%, kept 10-year JGB rates capped “around zero” and will maintain the QE pace of ¥80 trillion per year. Despite optimism about both growth and inflation, guidance remains dovish. That pressured the yen, buoying the dollar in the process.

The Fed begins their two-day FOMC meeting today. When policy is announced tomorrow, no change is expected. While a December rate hike will remain on the table, it might behoove the central bank to start tempering those expectations; unless they truly believe inflation is on the verge of rebounding.

Expressed concern about the ongoing absence of inflation — which is the reason they paused in September — would likely halt the recent rise in the dollar. With the ECB, BoC and BoJ maintaining their dovish guidance, it might be in the best interest of the Fed to hint that the pause might be perpetuated into 2018.

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Gold continues southward trek, euro in tailspin

LATE REPORT

Gold continued its trek southward today with a drop of $10.37 finishing at $1266.86. Silver in similar fashion finished the day down 15¢ at $16.77. Today’s downside came the result of speculation that the next Fed chairman would bring a hawkish tone to interest rate and monetary policy, but that decision is still very much up in the air.  Also the European Central Bank announced it would halve its bond buying program from 60 billion to 30 billion euros per month, but undercut the reduction by extending the time frame 9 months from January to September, 2018.  The announcement sent the euro into a tailspin, the dollar higher and gold lower.


Small Observation
A situation that may or may not occur combines with a different situation likely to inspire strong precious metals demand among the local citizenry.  The two somehow conspire to drive prices lower. Contrarians, please take note.


Quote of the Day
“[T]he time had come, as in all periods of speculation, when men sought not to be persuaded by the reality of things but to find excuses for escaping into the new world of fantasy.” – John Kenneth Galbraith, The Great Crash of 1929


Market Anecdote
Bernard Baruch, the famous early 20th century stock speculator, in explaining the behavior of markets:

“Have you ever seen in some wood, on a sunny quiet day, a cloud of flying midges — thousands of them — hovering, apparently motionless, in a sunbeam? …Yes? …Well, did you ever see the whole flight — each mite apparently preserving its distance from all others — suddenly move, say three feet, to one side or the other? Well, what made them do that? A breeze? I said a quiet day. But try to recall — did you ever see them move directly back again in the same unison? Well, what made them do that? Great human mass movements are slower of inception but much more effective.”

This is the same Bernard Baruch who just before the stock market crash of 1929 liquidated his stock holdings and put his money into bonds and cash, and then later, after the crash, dumped a good portion of his fortune into gold. When asked why he would do such a thing by the Secretary of the Treasury, Baruch replied that he was “commencing to have doubts about the currency.”

While others banked on the 1920’s stock mania, Baruch’s intuition was telling him that there was something amiss. There are times when it pays to distinguish yourself from the crowd – the midge that flies in the other direction.


If you are commencing to have doubts about the currency, or at the very least, if you are commencing to have doubts about the stock market perhaps the time has come to speak with a USAGOLD representative about hedging your portfolio with the precious metals.

In the meantime, if you would like a different perspective on the economy and the financial markets – one distinctly separate from what is bandied about in the financial press as the daily regimen – you would probably enjoy our newsletter.

November issue (to be released next week)
Government finances and gold (revisited)
What does it take to garner a real rate of return on your money these days
Four steps to becoming a successful gold and silver investor
And more. . . . .

It is available free of charge  to our current and prospective clientele, and we invite you to sign up here.  Immediate access to our October issue.


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The Daily Market Report: Gold Falls Within Range as Dovish ECB Lifts Dollar


USAGOLD/Peter Grant/10-26-17

Gold has turned more defensive within the range, dropping to fresh 3-week lows. The yellow metal is being pressured by strength in the dollar after a dovish ECB pushed the euro lower.

The ECB held steady on policy as was widely expected. While QE was extended by 9-months, the monthly purchases were halved to €30 bln.

Mario Draghi maintained a dovish bias during his presser, stressing that an “ample degree of monetary stimulus remains necessary.” He also said that QE remains “open-ended” and could be extended. There is some speculation that cutting the size of the monthly purchases was a necessary reaction to an absence of supply.

News that the U.S. $4 trillion 2018 budget narrowly passed the House, is further stoking risk appetite. This is seen as another significant hurdle toward advancing tax cuts.

Politico cited an unnamed source, said to be close to the President, as saying that the field of potential replacements for Janet Yellen has been narrowed to Jerome Powell and John Taylor. The former being a centrist, the latter thought to be a hawk.

While this may be modestly moving the policy expectations needle toward hawkish, the White House has said that no final decision has been made. The President is likely to make the nomination before he leaves for Asia on November 3.

Another unnamed senior source that Politico described as very close to the process said it was not safe to assume Trump will nominate Powell or Taylor for the top spot at the central bank, saying he “changes his mind about it every day.” — Reuters

On the support side of the equation are geopolitical tensions regarding Catalonia and North Korea. And political tensions associated with various ongoing investigations and the recent discord among GOP Senators.

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Gold marginally higher on Fed chair speculation

LATE REPORT

Gold finished marginally higher today at $1282.04 up $1.71. Silver also traded sideways.  In Asian trading last night gold sunk toward $1270 level on Shinzo’s Abe’s victory in Japan’s parliamentary elections, a win interpreted as yen negative (dollar positive).  It rebouned during U.S. trading following a Bloomberg article raising the the possibility Jerome Powell, who is widely seen as an interest rate dove, might become the next Fed chairman.  Silver traded sideways today.

Quote of the Day
“Gold has worked down from Alexander’s time. . .When something holds good for two thousand years, I do not believe it can be so because of prejudice or mistaken theory.” – Bernard Baruch


“USAGOLD is a delightful & refreshing company. Their website contains extremely valuable information for experts as well as novices. Checking gold & silver spot prices and trends are easy from my smart phone. The folks with whom I’ve dealt are extremely knowledgeable & patient with explanation of details. The office promptly provides an invoice & confirmation of receipt of funds. The metals are shipped timely as promised and follow-through is impeccable. I have proudly recommended USAGold to family, friends & business associates.” – Eleanor D. (Better Business Bureau five-star rating)

For your first or next purchase, give us a try and see why thousands of investors have chosen USAGOLD as their gold firm.


 

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Fence sitters looking for a sign

LATE REPORT

Gold gave up all of yesterday’s gains today to close out the week.  Silver was similarly disposed.  For the day gold was down $9.54 at $1280.33.  For the week, it was down $23.60.  Silver was down 21¢ on the day and 37¢ on the week.

Sharps Pixley’s Lawrie Williams sums up current market conditions as follows:  “The key factor here appears to have been the dollar index which has shown a minor degree of strength after a prolonged period of weakness, but we’re not convinced this ‘strength’ will last. Strength in the dollar tends to mean weakness in the gold price in dollar terms at least. There have been no net sales or purchases in or out of the big GLD gold ETF over the past few days either – and these tend to be a pointer to institutional investment interest in gold – suggesting that the players in this sector are sitting on the fence awaiting some indication of significant price movement in one direction or the other.”

Quote of the Day
“It is only relatively recently that Western capital markets have become aware that Chinese demand for physical gold absorbs large quantities of annual mine production, and that the country is now the largest mining nation by far, extracting it at a rate of over 450 tonnes per annum. Knowledge of China’s overall demand is restricted to deliveries out of the Shanghai Gold Exchange’s vault into public hands, running at about 2,000 tonnes per annum, which with India’s public demand accounts for nearly all global mine extraction of about 3,000 tonnes.” – Alasdair Macleod, GoldMoney


Lawrie Williams alludes to the slack ETF gold demand this past week as an indicator that institutional investors are sitting on the fence.  In this month’s News & Views, we take a close look at the important role professional investors now play in the gold market under the headline: How professional investors radically altered the gold market.

To learn more, we invite you to sign-up for our free monthly newsletter with appreciation to our current and prospective clientele. Immediate access.


 

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