Category: Today’s top gold news & opinion

The stupidity and greed of the market herd will hopefully keep me in business for the next thirty years

Steve Sedgwick/CNBC/5-15-2018

“I can tell you straight away the best and worst thing about my current job. The worst is going to bed before your five-year-old daughter at circa 7 p.m. so you can get up in the middle of the night five days a week. The best, however, is the fact that repeat dumb behavior by markets and certain participants hands out several freebies a year that will always make you look smarter than the average bear.”

MK note:  And then there is always the big-blow-up which is usually a culmination of a bunch of little blow-ups and that is the event you are going to need gold to help you through.  That is when the traders might feel dumber than the average bear. There are always those who think they have the insights to trade their way to success no matter the circumstances and those who through painful experience know better.  The latter are usually gold owners.

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Opinion: S&P 500 should be 1,000-plus points lower than it is today, strategist Rosenberg says

MarketWatch/Olivier Garret/5-14-2018

“A reversion to the mean in U.S. stock prices could mean the market will fall by at least 20%, according to David Rosenberg of Gluskin Sheff and Associates, who gave his prediction at the Strategic Investment Conference 2018 in San Diego. . . .However, increasingly more hedge fund managers and billionaire investors who timed the previous crashes are backing out. One of them is Sam Zell, a billionaire real estate investor, whom Rosenberg says is a ‘hero’ of his. Zell predicted the 2008 financial crisis . . .”

MK note:  And as we have reported here on a number of occasions, many of those same investors have been transferring some of those funds into shiny yellow metal.

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Goldman: Something strange is happening with the US economy that could cause interest rates to jump

CNBC/Jeff Cox/5-14-2018

“America’s budget deficit and unemployment rate are heading in opposite directions — something that’s never happened during post-World War II peacetime and could cause a significant jump in interest rates. Goldman Sachs projects, for instance, that the 10-year Treasury note could be yielding 3.6 percent next year.”

MK note:  We can add this to long and growing list of difficult-to-explain anomalies present in today’s economy.

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Gold attempting to gain some traction amidst mounting geopolitical concerns

Gold is attempting to gain some traction this morning trading up a little over $2 at $1321.  Silver is up 4¢ at $16.68.  There is much on financial markets’ plate as we begin the week and most of it revolves around growing geopolitical tensions – the Middle East, Iran, Italy and last, but not least, the festering currency and debt problems among emerging countries.

On that last score, Ethan Harris, head of global economics research at Bank of America Merrill Lynch in New York told Bloomberg that “It’s a bit like that old saying: The U.S. sneezes and the rest of the world catches a cold.”  And while primary attention is focused on the other matters listed, and few others we left out, we should also keep an eye on the emerging country issues on the back burner.

Remember the Asian flu?. . . That cold to which BOA’s Harris refers can make the rounds and come back to where it started as something worse. On October, 27 1997, the year many feel sent warning shots across the bow on the general stock market dissolution that began a couple of years later, the Dow dropped 7.2% in a single day in response to the Asian contagion. An equivalent drop today would equate to the Dow shedding 1800 points – once again, in a single trading session – a bit of history that leads nicely into our Chart of the Day further below.

Quote of the Day
“I wish Montagu Norman, Philip Snowden and the monetary experts were admirals or generals. I can sink them if necessary. But when I am talking to bankers and economists, after awhile they begin to talk Persian, and then they sink me instead.” – Winston Churchill, 1924

Chart of the Day

Chart courtesy of MacroTrends.net

Chart note: This chart shows how many ounces of gold it took to buy the Dow Jones Industrial average from 1918 to present.  At current prices, as you can see, the Dow is more expensive in terms of gold than in 1929, but less so with respect to the 1965 and 2000 peaks.  It took just under 20 ounces of gold to buy the Dow in 1929 and right at 20 ounces at the present. Whether or not the ratio has room to expand is a matter of debate, but for the prudent planner who understands the value of not having all one’s eggs in the same basket, the current levels are inducement enough to encourage some judicious readjustment.

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China’s crude oil futures boom amid looming Iran sanctions

Reuters/Henning Gloystein and Meng Meng/4-14-2018

“A U.S. decision to reimpose sanctions on Iran is supporting China’s newly established crude oil futures, and may spur efforts to start trading oil in yuan rather than dollars, traders and analysts said. . . . Traded daily volumes hit a record 250,000 lots last Wednesday, more than double the day before, spurred by news of the Iran sanctions.”

MK note:  File this one under unintended consequences.  Among the far-reaching consequences of the petroyuan is the indirect effect it will have on gold demand and prices.

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Crude oil price forecast: $100 per barrel by 2019

Investopedia/Gary Ashton/5-12-2018

“Disruption in Iran could force OPEC to adjust up production levels earlier than it had expected and could prompt U.S. shale drillers in West Texas to drill more. Despite these efforts to fill in for lost supply, analysts at Bank of America still expect oil to reach $100 per barrel in 2019.”

Related:  DMR Chart of the Day/4-24-2018

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Economic numbers are less than meet the eye

Daily Reckoning/James Rickards/5-11-2018

“American labor markets are not tight. America is not even close to full employment. America is in a depression. That’s one reason why wages have been stagnant despite declining unemployment rates.”

MK note:  Underemployment, low pay, part-timers who want to be full-timers, those who have simply given up looking for a job – all add up to a far different scenario than the one painted by many economists and politicians in Washington.

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Beware of the coming economic debt bomb

TheStreet/Peter Tanous/5-9-2018

“The primary reason the Fed kept interest rates low was to avert an economic catastrophe. Today, that catastrophe can no longer be avoided. The trigger for the economic explosion is the rising interest payments on the federal debt.”

MK note:  We last dug into the complexities of the national debt and its impact on the overall economy in the November, 2017 edition of News & Views and came to the same conclusions as Mr. Tanous.  Tanous recommends gold ownership as a means to hedging the potential problems associated with the enormous U.S. national debt.  The conclusion of the November News & Views was that the national debt has made gold a superstar since 1971.  “As for the future,” we concluded:  “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.”

 

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Gold in the Attic

Every once in a while we rummage around USAGOLD’s creaky old attic and dust-off a golden vignette from our storied past. Here is a short piece included in the May, 2012 edition of News & Views on software-driven trading in financial markets.  I have been both fascinated and alarmed over the years at the impact it is having on the pricing of assets ever since right up to and through the publication of this month’s newsletter (The case for gold in the era of financial virtual reality)  When Goldman Sachs replaces 497 of 500 human stock traders with computer software, one wonders what influences are coming to bear in the way value on stocks, commodities and bonds is determined in the financial marketplace.  This vignette speaks to the issue in a way you might not have anticipated. I hope you enjoy reading it as much as I enjoyed writing it.

Computer software gone mad

With respect to the growing dominance of machines on Wall Street, I recall the old Star Trek episode that involves a visit to a planet where the inhabitants seem to be living in a state of perfect bliss. Captain Kirk knows that this cannot be right. There is no such thing as perfect happiness. As it turns out, the population is controlled not by a loathsome dictator who has drugged the population into compliance, but by a computer that has evolved sufficiently to somehow gain control of their minds. Something must be done, concludes Kirk, to break its hold. Spock comes up with the solution by instructing the computer “to resolve the value of pi” – an impossibility because its resolution, as we all remember from high school math class, is infinite. The computer spends all of its time and devotes all of its resources trying to achieve the impossible and the dictatorial hold it has on the population is released – a trick we might want to keep in mind for the day computers complete their mastery of Wall Street.

Editor’s note (February, 2017): Similarly, Financial Times told the story of the text book, The Making of a Fly: The Genetics of Animal Design. It started out selling for $113 per copy at Amazon – that is, until the governing algorithm misfired between two third-party sellers. The price then skyrocketed to $23 million before someone took note and fixed the problem. We forget that computer software, and this applies to Wall Street’s trading apparatus as readily as it does the Amazon pricing platform, is only as reliable and intelligent as the code by which it is instructed to operate. The practical equivalent to Mr. Spock’s solution in the financial realm is to store significant capital in the form of gold and silver coins detached from potentially rebellious electronic circuitry.

Original publication date: May, 2012

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Gold recovering quickly from $1302 low posted just three days ago, now at $1325

DAILY MARKET REPORT

Gold is pushing higher this morning – up $3.50 at $1325 as we move into the COMEX open.  Silver is also higher – up 10¢ at $16.81.  The dollar is lower this morning and oil is holding steady above the $71 per barrel mark in response to uncertainties in the Middle East and escalating tensions between Israel and Iran. (See below). Commodities in general continue to move higher. The CRB Index is up almost 23% since last July.

Gold is demonstrating once again how quickly it can recover from its periodic treks near the $1300 level.  It was just three days ago that it visited the $1302 level where it found support and began turning to the upside. Today, it pushed over $1325 briefly and is now trading at $1324.  Gold has spent 2018 oscillating in a range between $1300 and $1370 with a number of chart technicians predicting that it is coiling to break out of the range.

“Gold has been under pressure from a strengthening U.S. dollar,” says U.S. Global Investors Frank Holmes, “and May has historically delivered lower prices. As I’ve pointed out before, this makes it an ideal entry point in anticipation of a late summer rally before Diwali and the Indian wedding season, during which gifts of gold jewelry are considered auspicious. Demand in China for the remainder of the year also looks promising.” Given the circumstances, we might have a different kind of May in 2018.

Quote of the Day
“We sometimes forget that central banking, as we know it today, is, in fact, largely an invention of the past hundred years or so, even though a few central banks can trace their ancestry back to the early nineteenth century or before. It is a sobering fact that the prominence of central banks in this century has coincided with a general tendency towards more inflation, not less. By and large, if the overriding objective is price stability, we did better with the nineteenth-century gold standard and passive central banks, with currency boards, or even with “free banking.” The truly unique power of a central bank, after all, is the power to create money, and ultimately the power to create is the power to destroy.” – Paul Volcker

Chart of the Day

Chart note:  The annual rate of return on gold since 2001:  14 years of positive returns, one year level, two years of negative returns.  Not a bad track record after all is said and done during times of rapid, and often unexpected changes in the financial markets and the economy.
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Stocks in danger zone because ‘inflation has changed its stripes,’ market watcher Jim Paulsen warns

CNBC/Stephanie Landsman/5-11-2018

“‘You’re seeing more and more evidence that inflation has changed its stripes and is headed higher,” [Leuthold Group’s] Jim Paulsen said Wednesday on CNBC’s ‘Trading Nation.’ ‘What we’re doing, as a result, is being forced to readjust interest rates and ultimately price-earnings multiples in stocks.'”

MK note:  Historically the problem with inflation is that it can appear suddenly and once the genie is out of the bottle, it is very difficult to get it back in.  History is replete with examples of central banks that thought they could keep inflation within designated boundaries, only to find that like wild fire it can rage out of control – Argentina suddenly at a 26% inflation rate (and quickly going higher) being a prime example.  Venezuela, an extreme case, is running an inflation rate of 13,379%.

The Fed might someday find itself, if Paulsen is right, admitting that it should have been careful what it wished for. . . . . .Some judicious hedging with the right assets (gold and silver) ahead of that sudden appearance might do wonders for the average portfolio.

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Could Israel and Iran go to war in Syria?

CNBC/Natasha Turak/5-11-2018

“If the attack from Syria, which saw approximately 20 rockets fired at Israeli military positions in the occupied Golan Heights region, is confirmed as Iran’s doing, it would represent the first strike by Tehran directly onto Israeli soil. And Israel’s response was its largest military engagement in Syria in 45 years — since the Yom Kippur war of 1973.”

MK note: Global markets, except for oil, have acknowledged then moved on  from the potential for war in the Middle East.  In the meanwhile, reports like the one above hammer home a warning: The shackles to war are being thrown off and that we are a time of great uncertainty and danger in that part of the world.

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Oil near multi-year highs as Iran sanctions tighten supply outlook

Reuters/Christopher Johnson/5-10-2018

“Oil prices steadied near 3-1/2 year highs on Friday as the prospect of new U.S. sanctions on Iran tightened the outlook for Middle East supply at a time when global crude production is only just keeping pace with rising demand. . . .’The up-trend remains strong and intact,’ said Robin Bieber, technical chart analyst at London brokerage PVM Oil Associates.”

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Iran oil sanctions could advance China’s ‘petro-yuan’

Reuters/Kate Duguid/5-10-2018

“China is positioned to be a chief beneficiary of the U.S. decision to withdraw from the Iran nuclear deal as it would give China leverage to demand oil imports be priced in yuan, several currency experts said on Thursday.”

MK note: Comments posted 3/29/2018 – I am trying to think of a reason why China would not move quickly to encourage any potential sellers of crude oil to take yuan in settlement. Russia and Angola, two of three top suppliers of oil to China, have already expressed an interest in breaking the petrodollar’s dominance. When you stop to think about the petroyuan introduction, it is in China’s interest to maintain a strong yuan against the dollar for obvious reasons – the end seller will end up with the stronger of the two currencies in terms of global purchasing power. Such a development would be an economic game-changer the parameters of which are yet to be defined and likely a boost to gold as a hedge against dollar weakness.

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IMF says to continue talks with Argentina for fund-supported program

Reuters/Staff/5-10-2018

“Argentina’s government said on Wednesday it was requesting a ‘high access stand-by’ financing arrangement from the IMF.”

MK note:  It’s been a few days since we checked in on the problems in Argentina.  It looks like it will take the IMF route to buy time, but it may also be buying into a stringent repayment program likely to include restrictions on government spending, additional borrowing, etc.  It is likely to be another long road for Argentina with many bumps along the way.  Given the scope of the emerging nation debt problem, as it has been outlined at top financial publications, one hopes that the IMF has a large budget these days.  It looks like it may need it.

Related:  Argentina on brink of economic meltdown as inflation soars and peso plummets/Daily Express/Paul Withers/5-9-2018

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Iran’s gold demand set for spurt before Trump sanctions bite

Bloomberg/Claudia Carpenter/5-10-2018

“‘What’s going to happen initially, people will try to convert whatever they have into dollars or gold or whatever is of value that’s not going to depreciate,’ Cagdas Kucukemiroglu, an analyst at London-based Metals Focus, said Wednesday by phone. ‘Then next year the demand will gradually start to go down but it’s not going to be drastic. The base is already very low.’”

MK note:  The better strategy no matter where you call home is to make gold a permanent part of your portfolio so that you are prepared no matter what comes down the road.  Having been a gold broker most of my adult life, I can tell you with some certainty that it is much better to buy gold before a crisis than to pay the price rendered once it sets in.

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Wages remain stagnant despite full employment

SafeHaven/Alex Kimani/5-10-2018

“Something peculiar has been happening during the current economic recovery cycle. Nine years into the economic expansion, unemployment rates have fallen quite dramatically: The May 4 unemployment reading of 3.9 percent was so low that the country can be said to be technically in full employment. Yet real wage growth has remained elusive. But what is full employment, or unemployment, for that matter?”

MK note:  If the economy creates a boatload of low-paying dead end jobs, does that constitute a recovery? I guess it depends upon how one defines the word “recovery.”

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With Trump pulling out of Iran deal, ‘it could get nasty from here,’ predicts oil analyst

CNBC/Michelle Fox/5-10-2018

“‘Things could get ugly now that the Trump administration has taken the ‘hardest possible stand’ in terms of rhetoric against Iran, oil expert John Kilduff told CNBC on Tuesday. It could get nasty from here. I think you need to buckle up,’ the founding partner at energy hedge fund Again Capital said on “Power Lunch.”

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Gold up on rising global geopolitical, economic tensions

DAILY MARKET REPORT

Gold was off to a rousing start this morning after a strong showing in Europe overnight then ran into resistance at the COMEX open.  It is still up nearly $6 on the day at $1318.50, but got as high as $1322.50 in European trading. Silver is up 20¢ at $16.72.

In Europe, concerns are elevated that the U.S. has the power to enforce sanctions against European companies doing business in Iran and, as a result, put pressure on oil prices. Beyond the sanctions themselves, the threat of a military confrontation between the United States and/or Saudi Arabia or Israel and Iran has given markets globally a case of the jitters.  Too, the consumer price index came in low dampening accelerated rate hike expectations.  Even before Iran situation moved front and center, demand for gold was rising at the gold ETFs according to the World Gold Council.  Funds and institutions are hedging their bets against what many see as an overvalued stock market and general geopolitical and economic instability on a number of fronts globally.

Quote of the Day
“There is a reason so many investors are increasingly becoming workaholics. We are operating in a world where feelings always run high and ideas instantly become ideologies. Yet, no one really seems to believe in much of anything. . . .Go away for a few days and it has become almost a parlor trick to be able to guess where markets will be…And the worst mistake you can make in trying to pull that off is following the news, but not the price action, while away.” – Richard Breslow, Bloomberg strategist

Chart of the Day

Chart courtesy of GoldChartsRUs.com

Chart note:  An article in today’s Financial Times raises concerns that in the months and years ahead gold mining companies will face the dual threat of rising oil prices and “shifting politics” in the countries where their mines are located. This chart illustrates that gold miners – as represented in the HUI and XAU indices – have not kept up with gold since the 2008 financial crisis.  “If I have a view that I want to hedge against inflation,” Neuberger Berman’s Hadan Kaya told FT, “I wouldn’t do it with miners. . .If you’re really worried about inflation and if you want to hedge yourself, the underlying is the purer bet – instead of exposing yourself to further stock market volatility through miners.”

 

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“Silver technicals so ridiculously positive, you may wonder if there’s catch”

USAGOLD SPECIAL OFFER

“Note how in the previous couple of cycles (early and late 2017) the speculators’ net positions got close to zero but then bounced back quickly to the more normal net-long. But in the current cycle they’ve been net-short for most of the past two months. This has flummoxed industry analysts and led to some silver-to-the-moon predictions which, based on the rising volatility in the broader financial markets, are at least plausible.” – CommodityTradeMantra.com

You can order directly online HERE or
Call us at the ORDER DESK
1-800-869-5115 x100

by Jonathan Kosares, USAGOLD

Once upon a time, investors would routinely ask the question ‘What’s the best 5-year investment out there right now?’. And while this question is still important to some, for most, the same instant gratification impulse-based emotions that dominate daily life are now governing investment strategies. Quite simply, if an investment isn’t all over the place, it isn’t ‘exciting’ enough. Look no further than the crypto-currency craze. I’ll concede, reflecting on a ‘five year investment’ doesn’t get my heart pounding. But then again, I, for one, prefer my investments not keep me awake a night. So to me, this question, that has been notably absent in our current investment analysis climate, is the very question everyone should be asking right now, and quite ironically, if the answer does what it could, it might be just the thing that ultimately gets your heart really pounding…

So let’s do that…let’s ask that question… ‘What’s the best 5-year investment out there right now?”

Well, the stock market is stagnant after peaking out in January – and downside remains the path of the least resistance. We may very well be staring down a landscape much like the 2001-2011 period in which stocks, after a large rise, tracked lower before getting clobbered in 2008. Stocks did subsequently rise again, but ultimately ended an entire decade at the same level as the peak achieved in 2001. Property is arguably fully valued in most markets, if not a bubble again, stoked by yet another cheap-credit/leverage induced boom over the past five years. With interest rates rising, it’s hard to see a world where property value increase continues unabated. The bond market is stuck in ‘no-man’s land’, teetering on the brink of a true bear market. It’s going to be a long time before yields are sufficient to attract capital simply to earn interest, and yet still far too low to make any meaningful money playing the premiums in bond funds.

You can probably guess where this is headed…Gold, of course, but even more so of late, and the subject of this offer, Silver.

The current ratio of gold to silver of nearly 80:1 is within throwing distance of most undervalued condition in the market’s history. Even a return to the historic average of 62:1 would have remarkable implications for the silver price. In fact, widely read technical analyst Clive Maund called the current silver market ‘The most bullish set up for silver that I have ever seen.”

I’ll routinely sit down with clients and run a few hypotheticals (a picture is worth 1000 words) – I think you’ll quickly see why so many have ended these conversations with a single word, “Wow”.

Bond king Jeffrey Gundlach recently said he wouldn’t put it past gold to rise $1000 per ounce in the near future. BOA/Merril Lynch recently predicted a rise to $1450 or higher by year’s end. Many others have predicted rises anywhere from $1500-$1900 per ounce. So for the sake of this presentation, let’s pick a gold price of $1600 per ounce. I don’t think you’ll have much argument from anyone that $1600 is certainly possible, if not this year, in the next five.

Here’s what silver would do if:

The ratio improved to is historical average of 62:1
Gold $1600 divided by 62 = spot silver price of $25.80
(That’s a 50+% increase from current prices)

The ratio improved to it’s bull market level average (2010-2012) of 50:1
Gold $1600 divided by 50 = spot silver price of $32
(That’s basically a clean double from current prices)

And last, the ratio improved to its bull market peak of 34:1 (May 2011)
Gold $1600 divided by 34 = spot silver of $47
(That’s roughly triple current prices)

Wow.

And if you really want to make your head spin, run some hypotheticals at $2000 gold…

Which leads us to our May offer…handsomely discounted Silver American Eagles (40¢ per ounce) offered at the current cycle low spot silver prices, making this the best accumulation opportunity in silver eagles this year. And that’s not an exaggeration. Only 5000 coins available at this price. Free Shipping on orders of 500 ounces or more.

Here is a graph displaying the divergence between gold and silver as it has developed over the past year.

You can order directly online HERE or
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1-800-869-5115 x100


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Chinese bullion demand off to a good start in 2018

Value Walk/Frank Holmes/5-10-2018

“In China, the world’s largest importer of gold, jewelry demand rose 7 percent in the first quarter to 187.7 metric tons, a three-year high. According to the WGC, Chinese retailers are working on improving the customer experience, providing consumers with a more holistic retail solution.’ The industry is expecting a strong 2018 after a relatively subdued 2017.”

MK note:  You have to wonder what Chinese retailers mean by a more “holistic” solution . . . .

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Trump Iran sanctions just gave Saudi Arabia and Russia more clout in the oil market, so watch out for higher prices

CNBC/Patti Domm/5-10-2018

“Saudi Arabia said it will help meet world oil demand if President Donald Trump’s Iran sanctions create shortfalls, but analysts say it will do so only in conjunction with Russia, and the world may have to get used to higher prices as a result.”

MK note:  We must keep in mind that OPEC’s mission is not to keep oil prices down but to make sure it preserves the markets it has already established while increasing prices.  As pointed out in yesterday’s DMR, from the Western standpoint it is not so much the sanctions themselves that are a concern with respect to the flow of oil, but the possibility of military action affecting Middle East production as a whole.

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The dollar plagued world now has another currency to worry about

Bloomberg/Sid Verma/5-10-2018

“While investors have been focused on a strengthening U.S. dollar and rising Treasury yields, a weaker Chinese yuan also threatens to heap pressure on emerging market assets that have already wiped out their gains for the year.”

MK note:  Given the increasing frequency and severity of these international currency imbroglios, it is not difficult to visualize more and more nation states following the China’s example of national gold acquisitions. One recalls Charles DeGaulle’s famous criterion speech on gold in this context.  Though such a holding would not cure internal problems derived from excessive debt and the debasement of their own currencies, it would offer something of a shield to the devaluation/revaluation policies of other nation states.

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Oil and the dollar are doing something they have only done 11 times in the past 35 years

MarketWatch/Mark DeCambre/5-9-2018

“Oil prices and the U.S. dollar are rallying in tandem—a dynamic that has only occurred 11 times since 1983, and it’s drawing the attention of market participants attempting to assess its significance.  Oil prices and the U.S. dollar are rallying in tandem—a dynamic that has only occurred 11 times since 1983, and it’s drawing the attention of market participants attempting to assess its significance.”

MK note:  Paradigm break or short-term anomaly?  I’m going with short-term anomaly.  It is usually gold and oil that go in the same direction, but the situation does signal that something has to give.  We have had other instances of oil and the dollar rising together, as this article points out, the most recent being in late 2017.  The concurrent rise lasted a few months and then abruptly ended when the dollar took a major turn due south and oil continued higher.

Chart courtesy of TradingEconomics.com

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The Fed has ‘time to wait’ while hiking rates, former vice chair Fischer says

CNBC/Jeff Cox/5-9-2018

“‘When I left, which was only six or seven months ago [in October 2017], all the concerns were we’re not seeing any inflation,’ said told CNBC’s Leslie Picker during an interview on the sidelines of the Context Leadership Summit in Las Vegas. ‘I don’t think we’re seeing a whole lot more inflation than we saw at that time.'”

MK note:  As mentioned briefly in our DMR this morning the low producer price index number is likely to figure into future Fed interest rate deliberations.  Also, as we noted last week, the Fed statement following last week’s interest rate meeting carried a distinctly dovish tone – at least enough of a divergence from the past to warrant consideration.

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U.S. 10-year note sold at highest yield since 2014

Reuters/Staff/5-9-2018

“The U.S. Treasury Department on Wednesday sold $25 billion in 10-year notes at a yield of 2.995 percent, which was the highest yield at auction of this debt maturity since January 2014, Treasury data showed.”

Related:TREASURIES-Supply glut pushes 10-year yield back above 3 percent 

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Gold trading steady in an increasingly complicated national and international scenario

DAILY MARKET REPORT

Gold is trading steady at $1316 after hitting an overnight low of $1305 in Asian and European trading. Silver is up 9¢ at $16.5p.  The precious metals are reacting to a mix of news this morning that includes advancing oil prices, a weaker than expected producer price index and a falling dollar.

Iran weighs heavily on all markets this morning with oil hitting a three year high at over $70 per barrel.  Though the sanctions aspect of the Trump decision may turn out to be a non-starter (China and the European Union – the two largest destinations for Iran’s oil – are unlikely to participate), there is the greater danger of the U.S. deploying militarily to enforce those measures, or an overt Iranian retaliation of some kind.

As for the inflation outlook, weaker producer prices, i.e., the absence of inflation, is likely to figure into the Fed’s interest rate deliberations. Yield on the 10-year Treasury this morning topped the 3% benchmark once again and the dollar index is dropping precipitously.

All in all, a complicated set of circumstances that encourages a watchful eye. . . . . . .There could come at some point a flash point (or flash points) that leads to a cascading response in financial  markets and it could come from any one of several potential sources.

Quote of the Day
“Why then is so much writing on the subject of money so needlessly complicated, with dense, impenetrable language and equations that make sense to only a handful of academicians? And why do so many people insist that bad ideas about monetary policy, like ‘inflation is needed to increase employment,’ are as settled and unassailable as scientific principles?” – Steve Forbes and Elizabeth Ames, Money: How the Destruction of the Dollar Threatens the Global Economy – and What We Can Do About It

Chart of the Day

Chart note: The gold price remains above its rising trend line since early 2016 and technically still showing signs of a possible breakout. “[S]ince bottoming in December 2015,” says a recent NASDAQ report on gold, “there has also been a clearly defined rising support line which is now converging very closely towards the 1,345 resistance. Typically this implies a breakout, up or down, is likely to occur soon. Given the long duration and size of this consolidation which strongly resembles a head & shoulder bottoming pattern, a breakout would likely to be accompanied by strong, accelerating momentum. And while the dollar has shown strength over the last three months, it looks more like a relief rally following 2017’s sharp decline. In time if the dollar resumes its downtrend, that could very well be the trigger for an upside breakout in gold which could be quite powerful.”

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Forget Iran. The real oil action is in China

Bloomberg/David Fickling/5-9-2018

“Forget Iran, shale and Opec. The real action in the oil market is happening on the other side of the globe. China overtook the U.S. as the world’s largest oil importer last year, and for 2018, it’s hoping to beat that achievement. April imports of 39.46 million metric tons reported late Tuesday came off the back of a string of blockbuster months.”

MK note:  Actually, the two together are what we need to keep in mind. China remains Iran’s biggest oil customer.

 

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Posted in Today's top gold news & opinion |

Recession is nowhere in sight

Seeking Alpha/Cliff Droke/5-8-2018

“With recession watch being in full force among financial commentators, the mood has turned decidedly sour not long after the S&P 500 Index peaked in late January. Serious discussion of the next economic recession has gained traction in the last couple of months with the flattening yield curve being the indicator that many, if not most, pundits refer to. While it’s true that a flattening yield curve often leads to an inverted yield curve – which in turn typically presages a recession – we’re a long way from that point.”

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Posted in Today's top gold news & opinion |

Gold-backed ETFs had their strongest inflows since early 2017

World Gold Council/5-9-2018

“Global gold-backed ETFs holdings added 72.2 tonnes(t) to 2,481t in April. This is the strongest month of net inflows in more than a year. Growth in global holdings was led by significant North American and European inflows and supported by a small increase in Asia. ETF inflows were steady throughout the month even though the gold price retraced early gains, finishing April 1% down, after reaching an intra-day high of approximately US$1,360/oz mid-month.”

MK note:  ETF demand is led by hedge funds and institutions.  As we have reported consistently, that sector has been a major contributor to physical demand over the past few years and it likes to buy into price weakness.

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Posted in Today's top gold news & opinion |