Week in Review (Video) – October 21, 2016

Posted in USAGOLD TV |

The great physical gold supply and demand illusion

Bullion Star/Koos Jansen/10-19-2016


MK note:  Koos Jansen has done considerable ground-breaking research over the years, in particular with respect to Chinese gold demand.  In this article, he establishes by inference that there is considerably more demand for physical gold than what the mainstream statistical services are reporting to us. Second, he goes on to establish a direct correlation between physical gold bullion net flows in and out of the United Kingdom and the price of gold.  The chart above shows that correlation, and it is an interesting one.  He also says that a similar correlation exists between private investor demand for gold coins and bullion and the price, but not jewelry which comprises the largest segment of demand according to the mainstream services.

It all makes sense, and I would recommend spending some time with the analysis posted above to anyone looking to gain a clearer and deeper understanding of how the gold market operates in the here and now.  We are often asked why the price of gold does not respond to surges in demand.  Well, apparently it does if you know where to look to find the correlation. Jansen states that the supply and demand reporting services are leaving out the most important part of the gold pricing mechanism – the ebb and flow of gold metal through London and the London Bullion Marketing Association.

Posted in all posts |

Gold doesn’t care who wins the election

by Michael J. Kosares
Founder, USAGOLD and author of The ABCs of Gold Investing – How to Protect and Build Your Wealth with Gold

“Gold prices have enjoyed a hefty climb so far this year as the market continues to guess the pace and timing of the next U.S. interest-rate hike, but the battle for the U.S. presidency is set to take center stage as Election Day nears. And it doesn’t matter if Republican Party nominee Donald Trump or Democratic Party nominee Hillary Clinton moves on to be the next president of the United States—gold is likely to come out a winner, George Milling-Stanley, head of gold investment strategy at State Street Global Advisors.” –– Myra Saefong/MarketWatch/10-19-2016

Gold is not just an inert metal, it is also an indifferent metal. It doesn’t care who wins the election. It is apolitical – one might even call it politically agnostic. In the end, it will respond to the macro-economic situation globally as it unfolds no matter who sits behind the desk in the Oval Office. It will assume, as it has in the past, that presidents can only do so much no matter what political agenda he or she intends. Washington, it says, is not Mount Olympus where the gods dwell, but the place where a mere mortal will take the stage January 20, 2017 – for better or worse.

Yesterday, Bloomberg posted a somewhat unbelievable headline for those of us who still adhere to a more or less classical view of economics:

Central bankers rejoice:  There are signs that inflation is actually arriving

A decade ago, the posting of such a sentiment would have been full-proof that economic policy makers had finally gone collectively mad.  Now it is greeted with enthusiasm amongst the mainstream media and Wall Street as well as apparently (if Bloomberg is right) within the Federal Reserve and the rest of Washington.  This might fall under the category of being careful what one should wish for, or it might be just another piece of hopeful propaganda.  And then again, the hoped for incipient inflation might simply turn out to be another in a long line of non-starters.

In the end, the same intractable demographic problems outlined here at length over the past several weeks will greet the next president day one of his or her presidency. The baby boomers will continue to eschew spending and attempt to save for retirement. The succeeding generations will continue to be mired in student debt and low-paying jobs that make it difficult to own a home and thereby pump up general demand.  And Congress and Washington D.C. are likely to slip into the same institutional tension that has gridlocked the nation politically and economically for more years than any of us care to count.

The combined effect will be continuing weak demand, disinflation and the accompanying systemic risks. Secular stagnation, as some have come to call it, will remain a steep hill to climb for the next president. Should we hit another rut in the road as we did in 2007-2008, gold will be there to help its owners pick up the pieces. It doesn’t care who wins the election and it is indifferent as to which presidential candidate’s name will be attached to the next economic crisis.  We might get a bump in one direction or the other after November 8th, but thereafter gold will likely settle into a pattern driven by the big, overarching themes dominating all the financial markets, and the same inducements that have driven its pricing since its secular bull market began in the early 2000s.

One man’s opinion. . .and all I care to say publicly about the upcoming election.

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Posted in all posts, USAGOLD |

Investors’ cash at levels not seen since 9/11

Bloomberg/Sid Lerma and Luke Kawa/10-18-2016

“Investors are running back to cash as they worry about a strong bout of volatility ahead, according to the latest Bank of America Merrill Lynch fund manager survey.”

MK note:  Cash in greenbacks is good under the circumstances, but ultimate cash in gold and silver coins is even better – offers some upside potential.

Posted in all posts, Author, MK |

Gold SPDR second largest holding among hedge funds

Notable. . . .

According to Insider Monkey, a service that tracks where hedge funds are putting their money, SPDR, the largest gold ETF, is the second largest single holding among hedge funds.  The largest ETF commitment unsruprisingly is with SPY, a fund that tracks the S&P 500 Index.  At the end of June, 94 funds had invested $24.89 billion in SPY and 72 funds had invested $8.9 billion in the SPDR.

What I find fascinating about those numbers is that so many in the mainstream financial press like to speak of gold as an investment pariah appealing only to America’s fringe elements.  NOTHING COULD BE FURTHER FROM THE TRUTH.  As we have pointed out consistently at this page, gold has gone mainstream and the strong hedge fund involvement in SPDR is just more proof of the trend.

Gold owners are a group of people I have come to know very well in my 40+ years in the gold business. Contrary to the less than flattering picture sometimes painted by the mainstream press, the people we have helped become gold owners are among those we rely upon most in our daily lives — our physicians and dentists, nurses and teachers, plumbers, carpenters and building contractors, business owners, attorneys, engineers and university professors (to name a few.)

In other words, gold ownership is pretty much a Main Street endeavor. A  Gallup poll taken a few years back found that 34% of American investors rated gold the best investment “regardless of gender, age, income or party ID. . .”  In that survey, gold was rated higher than stocks, bonds, real estate and bank savings.  Also, according to a recently published Bankrate survey, one in six investors chose gold as the best place to park money they wouldn’t need for more than ten years – the same number that chose stocks.

The strong commitment from hedge funds in the SPDR shows that Wall Street and Main Street are on the same page when it comes to gold.  These are times where its presence in the portfolio has become an essential ingredient for financial health (not to overlook one’s psychological well-being as well).  MK

Posted in all posts, Author, MK |

Wells Fargo’s LaForge says gold is going back to $1050

Gold-WashingtonMining.com/Michael Allan McCrae/10-14-2016

“Traditionally those long bear markets for commodities average about 20 years—and that is using data back to 1800—and we are only in year five.”

MK note:

The more things change, the more they stay the same

It should be noted that Wells Fargo’s John LaForge saw $660 per ounce as “in the cards” in October, 2014.  At the time, gold was trading in the $1200 range.  Since then it got as low as $1060 in December, 2015, but no lower.  In January, gold’s turnaround began and it hit an interim high of $1366 this past July.  So, at best, LaForge on his earlier prediction was off the mark by $400 at its low and $706 at its high.

Now, with gold trading in $1250 range he is back with a new prediction. He has adjusted his downside target to $1050 – $390 higher than his last target to the downside.  One wonders what happened to force the upward adjustment from his original $660 target. [??]

LaForge thinks gold is caught up in a commodities bear market that began five years ago and that is why it is headed for $1050 per ounce.  There are a couple of flaws in this analysis as I see it:

— First, if there is one area of significant disagreement among analysts, it is on the nature of cycles – when they begin, when they end, how long they last, where we are at present in any particular cycle, and whether or not current cycles under a fiat money system can even be compared to cycles when we were on the gold standard. And that covers just the high points. In short, with so many moving parts at play, LaForge could be right in his assessment, or he could be absolutely wrong.

— Second, and more importantly, one can put gold in the same container with the rest of the commodities if one so chooses, but is that a valid, or better put, workable classification given gold’s other prominent function as a safe-haven asset?  In the disinflationary years from 2008 until present, for example, gold went from $680 to $1800 at the top and trades at $1250 now.  In the same period, the Bloomberg Commodity Index (Click the “10y” tab) went from 233 to 85.  Commodities collapsed while gold went significantly higher – a clear indication that gold and commodities should probably not be thrown in the same hopper.

I am reminded of an old Murray Rothbard quote that I first encountered when I entered the gold business in the early 1970s. He included it in the intriguingly titled pamphlet, What Has Government Done to Our Money:

“All pro-paper economists, from Keynesians to Friedmanites, were now confident that gold would disappear from the international monetary system; cut off from its ‘support’ by the dollar, these economists all confidently predicted, the free-market gold price would soon fall below $35 an ounce, and even down to the estimated ‘industrial’ nonmonetary gold price of $10 an ounce. Instead, the free price of gold, never $35, had been steadily above $35, and by early 1973 had climbed to around $125 an ounce, a figure that no pro-paper economist would have thought possible as recently as a year earlier.”

As you can see, even when gold was trading at $35, its adversaries were predicting lower prices ($10 per ounce), and even then under the flimsiest of arguments.  Its ‘industrial” nonmonetary price?  How is that different from its monetary price?  Ultimately in that first leg of gold’s long term bull market, it went well over  $800 per ounce – a far (very far) cry from $10!

The lesson in all this?  The more things change, the more they stay the same.  Gold’s critics have not changed their tactics over the years, and they are not likely to anytime soon.  Make your own assessment on gold and develop a strategy that makes sense for you.  The worst thing you can do if you don’t own gold, or don’t own enough, is to allow yourself to be sidelined by predictions that may or may not be based on a realistic assessment of the markets, gold and the economy.


By the way, for those with an interest, you can still access What Has Government Done to Our Money at the Mises Institute.

Posted in all posts, MK |

Dalio sees end of long-term debt cycle, prefers gold

Bloomberg Markets/Katia Porzecanski/10-10-2016

“Dalio has warned for some time that the economy is at the end of a long-term debt cycle, characterized by a lack of spending despite interest rates near zero or even negative. He said at a seminar last week at the Federal Reserve Bank of New York that while central banks around the world will probably extend bond-buying programs, making higher-yielding assets seem attractive relative to bonds and cash, those investments are still expensive relative to their inherent risk. I[f] that persists, betting on gold could prove preferable, he said.

‘Investment returns will be very low going forward,’ he said, according to a copy of his remarks.”

MK note:  The factors that drove gold higher from the beginning of the year, in other words, remain in place.  It is interesting that Dalio foresees central bank’s going back to quantitative easing (bond-buying programs).  One big factor that might drive the United States back to quantitative easing is the lack of demand for Treasury paper from overseas investors and central banks as summarized in this chart:


Lindsay Group’s Peter Boockvar recently pointed out in a CNBC interview that foreigners have not only refrained from buying U.S. Treasury paper, they are net sellers to the tune of $156 billion thus far in 2016 – an unprecedented level. “Foreign flows were a big part of Treasury bond buying. Take that away and central banks take away the stimulus that was affecting long-term interest rates. Deficits are expected to head higher. This is a process that takes time to see these things play out,” he told CNBC.

As long as domestic demand fills the gap left by the departure of former debt buying stalwarts China and Japan, QE can remain on the back burner.  Should that demand dry up. . . . . . . . . .Meanwhile, the United States federal government added $1.422 trillion to the national debt in fiscal year 2016 just ended in September – the fourth largest such addition in history.

Posted in all posts, MK |

Five factors drive outlook for gold

Financial Times/Henry Sanderson/10-9-2016

“One notable fact about last Tuesday’s sell-off was that it was not because of liquidation in ETFs, holdings of which have remained steady, and even rose slightly last week. ‘The drivers of strong physical ETF and bar demand for gold during 2016 are likely to remain intact, including continued strong physical demand for gold as a strategic hedge, limiting any downside,’ Goldman Sachs says.”

MK note:  Sanderson verifies physical liquidations not reason for gold’s sell-off last week.  Last week’s drop was a paper bomb dropped on the market probably for the reasons we outlined last week, i.e., ancillary margin-driven bank and fund dumping in association with the collapse of pound sterling. Goldman Sachs calls “the retreat in gold a buying opportunity.” 

Posted in all posts, MK |

RED ALERT — Get ready for a ‘severe fall’ in the stock market, HSBC says

Business Insider – Bob Bryan – October 12

In a note to clients released Wednesday, Murray Gunn, the head of technical analysis for HSBC, said he had become on “RED ALERT” for an imminent sell-off in stocks given the price action over the past few weeks.

Gunn uses a type of technical analysis called the Elliott Wave Principle, which tracks alternating patterns in the stock market to discern investors’ behavior and possible next moves.

In late September, Gunn said the stock market’s moves looked eerily similar to those just before the 1987 stock market crash. Citi’s Tom Fitzpatrick also highlighted the market’s similarities to the 1987 crash just a few days ago. On September 30, Gunn said stocks were under an “orange alert,” as they looked to him as if they had topped out.

And now, given the 200-point decline for the Dow on Tuesday, Gunn thinks the drop is here.

“With the US stock market selling off aggressively on 11 October, we now issue a RED ALERT,” Gunn said in the note. “The fall was broad-based and the Traders Index (TRIN) showed intense selling pressure as the market moved to the lows of the day. The VIX index, a barometer of nervousness, has been making a series of higher lows since August.”

Gunn said the selling would truly set in if the Dow Jones Industrial Average were to fall below 17,992 or if the S&P 500 were to dip under 2,116.


JK Comment: HSBC joins the growing number of investment houses calling for a significant decline in equities. A murmur growing louder by the day…

Posted in all posts, JK |

Update 2 – When markets go bump in the night

Stock market on brink of bubble burst

CNBC video/Rebecca Ungarino/10-10-2016

bearphot1MK note: As we enter the earnings season, stocks take a turn for the worse – down nearly 200 at the moment. In this video, Lombard Street Research economist Charles Dumas tells CNBC that the stock market is “on the brink of a bubble burst.” He breaks down the problem in the stock market to a simple, straight-forward cause and effect analysis. The market, he says, has been held up by company stock buy-backs which in turn have been financed by borrowed money at very low rates. As a result, any interest rate rise would likely put an end to that input source and put the stock market into a tailspin.

“When the Fed gets real and makes the necessary increases, this market could prove much more vulnerable than is traditional in the early stages of a rate-hike cycle.” – Charles Dumas, Lombard Street Research

Posted in all posts, MK |

UPDATE1 – When markets go bump in the night


Shiller PE ratio update………..

MK note: Alcoa today announced weak earnings that pushed its stock down  10% and contributed to the overall decline.  The DJIA is down about 163 points as this is posted. . . . . .As it is price earnings ratio are at levels that inspired major sell-offs in the past.  In the area of 25/30 we have encountered topping action in the past. We are at 26.58 today.   Here’s the latest Shiller PE ratio chart with important annotations:


Posted in all posts, MK |

Blackrock: Making the bullish case for gold

Bloomberg video/10-10-2016

goldbullMK note:  Blackrock’s Heidi Richardson asserts that gold is an important component of modern portfolio construction.  She says the bullish case for gold is intertwined with the global perception that danger looms in the global economy and that is why ETF holdings are again on the rise.

As reported here regularly, that same investor interest extends to owning the precious metals in physical form (coins and bullion) as well.  In fact, owning gold and silver coins is often cited by experts as the better alternative for individual investors, as it is devoid of the risks associated with ETF-titled gold, i.e., logistical and liquidity concerns and counter-party risks in a very risky financial environment.

Heidi Richardson’s interview is interesting from another perspective:  It demonstrates clearly that Blackrock has far from given up on gold after last week’s sharp correction.

Posted in all posts, MK |

U.S. Mint reports strong sales last week

American Gold Eagles sales = 53,500 ounces, up 21,000 ounces from last week

American Silver Eagles sales = 1,405,000 ounces, up 1,038,000 ounces (!) from last week

USAGOLD comment: Falling prices brought out the buyers. Strong demand, especially in silver, confirms our market assessment published here last week.

American Eagle gold and silver bullion coins

Posted in all posts, Author, MK |

Week in Review (Video) – October 7, 2016

Posted in all posts, USAGOLD TV | Tagged , , , , |

U.S. consumer credit surged $25.9 bln in Aug, well above expectations of $16.5 bln, vs $17.8 bln in Jul.

Posted in Economic Data |

The Daily Market Report: Gold Remains Under Pressure, Despite NFP Miss

07-Oct (USAGOLD) — Gold rose modestly off the nonfarm payrolls miss; perhaps on a slight ebbing of rate hike expectations. However, these gains have proven unsustainable thus far as the Fed hawks have been out in force, keeping up the pressure.

Nonfarm payrolls for September printed 156k, below expectations of 174k. While the jobless rate edged higher to 5%, the change was actually quite minute. Rises in hourly earnings and average workweek were in line with expectations.

The financial press is spinning this report as being “okay,” albeit below the recent average jobs gains. Fed hawks Fischer and Mester were out beating the hawkish drum today and reiterating that the November FOMC meeting is “live.” Vice chair Stanley Fischer called said NFP was close to a “Goldilocks number” — presumably meaning it was “just right.” Mester said the jobs report was “solid.” Ester George, who favored rate hikes at the last two FOMC meetings, speaks later today.

They seem to be ignoring the trend . . .

One thing is certain, today’s jobs report does nothing to bolster growth prospects. That reality is reflected in this morning’s update to the Atlanta Fed’s GDPNow model, which saw another downward revision to Q3 growth expectations. This model was initially calling for Q3 growth near 4%! This too is a trend that flies in the face of (feigned?) Fed hawkishness.

It seems unlikely that the Fed would in reality raise rates if U.S. growth in 2016 is going to end up being below 2%. While the did indeed hike into weakness last December, it only begat further weakness in the H1-16. Now, the anticipated H2 rebound is looking increasingly dubious, so I don’t think they’ll make that mistake again.

In overseas trading the British pound flashed-crashed by more than 6% in a two-minute period of time. Let’s recall what Bridgewater’s Ray Dalio said earlier in the week at the New York Fed’s Central Banking Seminar:

“[H]olding non-financial storeholds of wealth like gold could become more attractive than holding long duration fiat currency flows with negative yields (which is what bonds are), especially if currency volatility picks up.” — Ray Dalio

I think the folks in London would concur that currency volatility has indeed picked up. I imagine gold looks pretty attractive as a safe-haven right now, even with the yellow metal comparatively well supported against the pound.

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

If gold gets below $1,250 an ounce, start buying: Goldman

07-Oct (MarketWatch) — Gold is facing a nearly 5% loss this week, its biggest weekly drop since November 2015, but Goldman Sachs is telling gold bugs to hang on.

The reaction in gold prices to the possibility of a U.S. interest-rate hike at the end of the year has been “larger than we anticipated,” said Goldman analysts Max Layton, Mikhail Sprogis and Jeffrey Currie, in a note released Friday. That leaves risks surrounding their year-end outlook of $1,280 an ounce as “moderately skewed to the downside,” said the analysts.

And while they still think U.S. real rates will rise into the year-end, they say gold has a couple of things going for it that will limit the selling: stronger exchange-traded fund buying and demand for gold bars, which will both likely remain intact, along with strong physical demand. Add the potential for a pickup in Chinese investment demand for gold to the mix, too, they said.


PG View: Gold traded as low as 1249.00 yesterday . . .

Posted in Gold News, Gold Views |

Gold’s initial reaction to NFP miss is positive on dimmed rate hike expectations, but only modestly so thus far.

Posted in Gold News, Gold Views |

Hourly earnings +0.2% in Sep, in line with expectations. Average workweek ticked up to 34.4 hours, also in line with expectations.

Posted in Economic Data |

U.S. nonfarm payrolls +156k, below expectations of +174k, vs positive revised 167k in Aug; jobless rate ticks up to 5.0% on expectations of 4.9%.

Posted in Economic Data |

Morning Snapshot: Gold consolidates recent losses

07-Oct (USAGOLD) — Gold is trading within the confines of yesterday’s range, awaiting the release of U.S. jobs data for September. Consensus is calling for an addition of 174k jobs last month and the unemployment rate is expected to hold steady at 4.9%.

Overnight volatility in the British pound had little impact on the yellow metal, even with the rise in the dollar.

Posted in Gold News, Gold Views, Snapshot |

Pound struggles to recover after plunging 6% in 2 minutes

07-Oct (FT) — The British pound suffered a sudden fall of more than 6 per cent against the US dollar early on Friday before recovering most of its losses, amid mounting concerns over the UK’s exit from the EU.

Shortly after currency markets opened in Asia on Friday, the pound lost as much as 6.1 per cent to $1.1841 in two minutes. The shortlived drop sparked speculation that it could have been triggered by a mistaken “fat finger” trade or a rogue automated algorithm, exacerbated by thinner liquidity during early Asian hours.

It was the currency’s lowest level since May 1985 and the biggest intraday drop against the dollar since its 11.1 per cent plunge on June 24 in the wake of the UK’s vote to leave the EU.

Although sterling quickly bounced back, it was still trading down 2.2 per cent at $1.2343 in midday London trading, well below the $1.26 levels it was holding at before the plunge. Against the euro, the pound was 2 per cent weaker, with £0.9012 required to buy a unit of the single currency.

“I’ve been trading sterling since 1978 through every crisis it has seen, and I’ve not seen anything like this,” says Ian Johnson, FX strategist at 4Cast, the consultancy.


Posted in Markets |

Gold easier at 1255.30 (-0.80). Silver 17.42 (+0.101). Dollar higher. Euro steady. Stocks called lower. U.S. 10-year 1.74% (+1 bp).

Posted in Markets |

U.S. National Debt: $19,663,411,497,797.40

PG View: It almost doesn’t seem that bad when compared to the massive $152 trillion debt reported this week by the IMF.

Posted in Debt |

Price drop likely to spur demand: Gold remains a key portfolio component in this environment

06-Oct (WGC) — Following a remarkable performance year-to-date, the gold price fell by over 3% on 4 October, which we believe will likely result in physical buying.

The move seems to have been driven by speculation of a scaling back in the ECBs asset purchase programme, combined with rising expectations of a US rate hike in December. The fall triggered stop-losses and further tactical selling.

We believe that a shift in monetary policy need not signal lower gold prices. The price dip will likely result in physical demand from consumers, long term investors and central banks. In addition, the broader market environment of ongoing low and negative interest rates, coupled with continuing political, economic and policy uncertainty remains unchanged, and are generally positive for gold.

…Market fluctuations will naturally occur from time to time, but the fundamental environment for gold remains strongly supportive. The broader market environment of ongoing low and negative interest rates, coupled with continuing political, economic and policy uncertainty remains unchanged, and are generally positive for gold.


Posted in Gold News, Gold Views |

Gold is the ultimate ‘anti-bubble’ amid falling bond yields, strategist says

06-Oct (CNBC) — Gold is being largely misunderstood and we should recognize how mispriced it is, according to Diego Parrilla, managing director at investment firm Old Mutual Global Investors.

“We are creating the biggest bubble in duration (with the debt markets) that we’ve probably seen in financial history”, he warned as he described gold as an “anti-bubble”.

Although Parrilla thinks gold prices should stay contained in the short-term, down the track he envisages a “perfect storm” investment thesis that could ultimately end with asymmetric upside for the precious metal.

…The next stage of the theory sees bubbles developing and spiraling out of control, forcing central banks to step in at precisely the moment where they can no longer contain the situation. This, according to Parrilla, could ultimately end with an explosion in foreign exchange risk,destabilizing fiat currencies and creating significant upside for gold.


Posted in Gold News, Gold Views |

The Daily Market Report: Gold Returns to Pre-Brexit Vote Levels

06-Oct (USAGOLD) — Gold has returned to the 1250.00 level. That’s where it was trading when the UK surprised the world by voting to leave the EU.

I find it interesting that this retracement occurred in the very week that PM May acknowledged that she would invoke article 50 before the end of March 2017, starting the formal Brexit process. Sharp losses in the pound sterling clearly show that concerns over Brexit are peaking once again.

Sterling set new 5-year lows against the euro today and fresh 31-year lows against the dollar. The FT went so far as to point out that the pound is vying with the Argentina peso for the worst performing currency this year.

While FX market action is keeping gold underpinned in terms of sterling, weakness in the British currency is pushing the dollar higher as well.

The financial press keeps saying the greenback is rising because rate hike expectations are as well. My colleague Jonathan and I concur that investors cant possibly still be trading on such nonsense. I mean, fool me once, right?

People cant really believe the age of massive debts and the obligatory über-accommodative monetary policy is coming to an end; regardless of the perpetual hawkish saber rattling of the Fed. ECB minutes today revealed that the door remains wide open for further accommodations. On Wednesday, former Japanese Economy Minister Heizo Takenaka said the BoJ will lower interest rate deeper into negative territory in its fruitless effort to generate inflation. “The BOJ will do so without doubt,” said Takenaka.

Not only do U.S. data not support a rate hike, but interest rate differential are widening without the Fed having to do a darn thing. If everyone is cutting AND the Fed hikes, they’re going to have a dollar problem on their hands in a big hurry, which could tip the U.S. into recession.

Even in the current environment, the U.S. is likely to log sub-2% growth this year. The IMF downgraded their expectations to 1.6%; reflective of the fragility of the U.S. economy. A rate hike is certainly not going to improve the prospects moving forward.

Meanwhile, the IMF warned this week that global debt has reached an all-time high of $152 trillion! That’s 225% of global GDP and rising. Since the global financial crisis — which at its core was a debt crisis — the world just kept digging a deeper hole.

The only way a debt burden of this magnitude is sustainable is if the current ZIRP/NIRP environment is maintained. Oh, the Fed may want to get a little additional clearance above the zero-bound just so they have room for a cut or two, but it won’t be nearly enough. That is, unless they’re prepared to go deep into negative territory . . .

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

Gold’s second waterfall drop this week


by Michael J. Kosares (Founder, USAGOLD & Author, The ABCs of Gold – How To Protect and Build Your Wealth With Gold)

We do not often find ourselves jogging the same track as the redoubtable Dennis Gartman who commands untold premiums for his advice, but now, it seems, he is verifying our suspicion of two days ago (Please see “Gold’s waterfall drop might be associated with the big drop in British sterling”) that something is amiss in London gold trading circles.  Here is today’s chart – a second waterfall move in the gold market coincident with a second swan dive for the pound and Gartman’s take (snipped from ZeroHedge).

My first instinct was that the paper gold liquidations in London “could be part of a scramble for liquidity among big banks.” Gartman blames it on one “massive” hedge fund. . . .Don’t know if he has an inside track on that or an educated guess, but for now we will stick with “the banks” – more precisely the trading banks who were long the metal on paper up until now.


Says Gartman:

“As for gold and the other precious metals they remain rather obviously weak and as we move away from Tuesday’s collapse it appears more and more that this was a forced liquidation on the part of a large… actually a massive… hedge fund out of London. The sheer panic that swept through the gold market then really hadn’t the look of a sell off predicated upon a rumoured push by the ECB to curtail its purchases of sovereign debt securities, nor had it the look of a rush on the part of hedgers in the gold mining industry to hedge forward production. Rather it had the look of forced margin-clerk liquidation. It looked like panic on the part of someone, somewhere who had lost control of the situation.”

Another waterfall later, it looks like the Gartman’s culprit should be pluralized, unless the single fund’s positions are so deep that it will need more than one trading session to get liquid.  But that doesn’t make a lot of sense, nor does it speak highly of the fund’s chief trader, if it is indeed one big fund doing the damage.  Why set yourself up for lower prices on your second foray when the trade could have been implemented in one fell swoop?  We may find out the details at some point down the road, but it is doubtful.  Stuff hidden in the bushes in London tends to stay in the bushes unless something forces it out.

The key point is that, if these waterfalls represent forced liquidations to meet obligations elsewhere, the selling will be limited to the positions on the books of whatever entities need the capital.  In short, they are likely to come to an abrupt end.

Meanwhile, as the World Gold Council reports this morning, China is out of the game for the week on holiday so gold’s standing buyer won’t be back in the game until next week.  When they get back, it they sense opportunity, they will use this downside and put a call on the market for more physical metal. If that happens, we could get a quick reversal. As we have reported here copiously there still isn’t enogh physical metal available to meet a big surge in physical demand and the buy orders won’t be met if the price is not high enough.

We go along with the World Gold Council and others who have deemed the current situation a buying opportunity, particularly for physical buyers who can weather any further downside.  In the past snapback rallies under similar conditions have been sharp and robust.   We can report strong volumes at USAGOLD in both gold and silver over the past few days – not at the best-of-the-year levels reported by some of our British counterparts, but notable nevertheless.  Americans are not as directly affected, but they know attractive pricing when they see it.   MK


If this type of gold-based analysis interests you, you might want to take a look at the October issue of News & Views – Forecasts, Commentary & Analysis on the Economy and Precious Metals, we invite to subscribe at our registration page.  There is no charge for the service and your participation is welcome.

In this edition, we cover Deutsche Bank’s troubles and their potential effects on the gold market, Russia’s important policy of gold accumulation for its national treasury, the surprising strength in the silver ETFs, an interesting piece on the long term evolution of the gold market and some background on what a prominent member of the Council on Foreign Relations thinks about gold (Titled “An enlightened minority”).  We think you will also gain from this issue’s Chart of the Month on gold under varying longer-term interest rate circumstances.

We invite your interest. . . . . . . . .

Posted in all posts, MK |

Top Gold Forecaster: “As Quickly As Gold Fell” May “Rally Back” on Global Risks

06-Oct (GoldCore) — Gold’s largest plunge in 14 months may soon reverse according to gold’s top forecaster in Q3 according to Bloomberg:

Looming risks from the U.S. presidential election in November to Britain starting talks to leave the European Union next year may boost its role as a haven, said Barnabas Gan, an economist at Oversea-Chinese Banking Corp. in Singapore. Increasing shale oil output in the U.S. is also likely to cool the surge in crude prices, curbing inflation, he said.

“As quickly as gold fell, as quickly gold could rally back,” Gan said in a report received Wednesday. “Weak inflationary pressures may once again lift gold prices back to their previous shine.” He was the most accurate forecaster of the metal in the third quarter, according to Bloomberg data…

Gold forecasting is a mugs game at the best of times but given the uncertain geo-political situation, the fragile banking system and the very strong fundamentals for gold, it is hard to argue with Barnabas Gan of OCBC or BMI. Gold should be meaningfully higher in the coming months and into 2017 as investors diversify into gold. Or rather we are likely to see dollars, euros, pounds and other fiat currencies continue to be devalued versus gold.


Posted in Gold News, Gold Views |

The IMF Is Worried About the World’s $152 Trillion Debt Pile

05-Oct (Bloomberg) — Eight years after the financial crisis, the world is suffering from a debt hangover of unprecedented proportions.

Gross debt in the non-financial sector has more than doubled in nominal terms since the turn of the century, reaching $152 trillion last year, and it’s still rising, the International Monetary Fund said. The figure includes debt held by governments, non-financial firms and households.

Current debt levels now sit at a record 225 percent of world gross domestic product, the IMF said Wednesday in its semi-annual Fiscal Monitor, noting that about two-thirds of the liabilities reside in the private sector. The rest of it is public debt, which has increased to 85 percent of GDP last year from below 70 percent.


Posted in Debt |