“The global oil market is almost entirely conducted in dollars, which provides the foundation for dollar domination in the global financial system. Introducing new currencies in the oil trade could undercut demand for the dollar, diminish American influence over global finance, weaken American influence over sanctions, and thus, undercut its geopolitical reach. It’s hard to assess how serious Saudi Arabia is, but the implications of such a move are far-reaching and hard to overstate.” – OilPrice.com
USAGOLD note: In light of the Saudi Arabia’s threat to ditch the dollar and a list of other geopolitical concerns, Mills asks, “Is it any wonder central banks are bulking up on bullion?”
“’This is a sign of complacency,’ Sassower said. ‘When you see the demand go down so much for protection against a dollar rally, it just seems like a classic, tell-tale sign that the world is getting too complacent on dollar strength.’”
USAGOLD note: The dollar as a crowded trade. . . . Everything is quiet until it isn’t any longer.
“Richard Nixon imposed wage and price controls when the inflation rate was only 4%, and everybody thought that was a terrific idea until they saw the consequences. These deficits which are programmed to get significantly larger – a trillion dollar float. It is only when they spill over to increased money supply, or more exactly unit money supply, that we begin to see the political impact of inflation as a counterforce. I am not surprised at all that the CBO or OMB puts out huge forcasts of the deficits and nobody seems to mind, but they will mind when those things get monetized.”
USAGOLD note: Greenspan shares his wisdom on the current markets, Fed policy, etc. including the influence of politics on the Fed’s Board of Governors. (He says it’s nothing new.)
Gold Trends and Indicators
Our Gold Trends and Indicators page was first constructed many years ago to serve a specific need. At the time, there was no single place a client, or prospective client, could go to monitor statistical categories and correlations relevant to gold ownership. This page filled that need with interactive, automatically updating charts that featured gold’s annual returns; one-year, ten-year, and long-term price charts; correlations like gold and the purchasing power of the dollar, gold and the S&P 500 and gold and the volatility index (to name a few); and, real rates of return over the long term on gold and the dollar. It remains a favorite reference among serious investors and students of the gold market to this day. We believe it to be particularly useful to the prospective gold buyer who wants to understand the history of gold under various circumstances as part of the due diligence process.
Gold Trends and Indicators is another of the quiet pages at USAGOLD that garners significant global interest particularly when the market is moving or breaking news warrants more than average interest. We also invite you to return here regularly – to this Live Daily Newsletter page – for up-to-the-minute gold market news, opinion, and analysis as it happens.
Gold Trends and Indicators
Charts offered in conjunction with the St. Louis Federal Reserve and the ICE Benchmark Administration
“In this manner, global physical markets set lows for corrections in paper gold markets. Indeed, in evaluating the role of Western-type futures and options in global gold markets, it is instructive to highlight just how far removed COMEX trading actually is from anything having to do with physical bullion,’ the report said.”
USAGOLD note: We made reference to Trey Reik’s report on the out-of-whack influence of the options and futures market on the gold price in a recent DMR. This article provides a summary of his viewpoint – one he shares with a good many others in the gold business.
Repost from 4-11-2019
“But sometimes short-term yields rise above longer-term ones, an “inversion” of the usual shape of the curve that has been an uncannily accurate harbinger of recessions, preceding every downturn since the end of the second world war. For instance, when Mr Greenspan in 2005 read the last rites for the yield curve’s predictive powers, the three-month Treasury bill yield was still 0.9 percentage points below the 10-year Treasury yield. A year later the curve inverted and 18 months after that the US economy entered its worst recession since the 1930s.”
USAGOLD note: We referenced this excellent article on yield curve inversion in the April issue of our newsletter. If you would like to learn more detail about how yield inversions occur and what they create in the way of economic circumstances, we recommend a visit to the Financial Times link above.
Repost from 4-9-2019
“Our researchers, at Technical Traders Ltd., believe this current upside price move is nearing the end of any immediate upside potential. Yes, back in December 2018 and before, we called for an ‘Ultimate Low’ pattern setup followed by an incredible run to new all-time highs when almost everyone else was calling for a continued downside price move. Now, that the YM/DOW is only 640 points away from reaching all-time highs again, we believe a new price peak will setup sometime near June/July 2019.”
USAGOLD note: Sounds like 2019 might be a good year to sell in May and go away. . . . . .
Repost from 4-10-2019
. . . and would like to take advantage of today’s price dip
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(USAGOLD – April 16, 2019) – Overnight weakness in the gold market spilled over to the COMEX open this morning. In what looks like an algo-based trade that dumped $2 billion worth of paper gold onto the market (see chart below), gold dropped to $1279.50 and is now down $9 on the day. Silver is down 9¢ at $14,93. Theories abound as to gold’s mysterious weakness in the face of a falling dollar and generally favorable economic incentives, i.e., technical selling, a retreat from safe havens, etc. Until a more convincing explanation surfaces, we will blame it on institutional short sellers attempting to take advantage of a quiet, thinly-traded market.
Here is a chart on what the sell-off this morning looked like, volumes included. . . .
Quote of the Day
“The world clings to its old mental picture of the stock market because it’s comforting; because it’s so hard to draw a picture of what has replaced it; and because the few people able to draw it for you have no interest in doing so.” ― Michael Lewis, Flash Boys
Chart of the Day
USAGOLD note: The U.S. federal government added $1.481 trillion to the national debt in 2018, the third largest increase on record. The Republicans do not talk about the deficits because it is an embarassment. The Democrats do not talk about the deficits because they do not want to draw attention to the uncontrolled spending debt issuance to sponsor government social programs.
“Just as the stunning stock turnaround this year is boosting investor confidence, a ‘critical variable’ is now flashing warning signals—U.S. consumer confidence is starting to fall at rates not seen since the financial crisis. In a trillion-dollar economy where about 70% of activity is driven by consumption, that’s not a good sign and poses a major threat to the 10-year bull market.”
USAGOLD note: This report on consumer confidence falls in line with concerns that we might be headed for a recession and perhaps one of the first signs that we are already in dangerous territory.
“The periodic table of chemical elements turns 150 this year. The anniversary is a chance to shine a light on particular elements – some of which seem ubiquitous but which ordinary people beyond the world of chemistry probably don’t know much about. One of these is gold. In chemistry, gold can be considered a late starter when compared to most other metals. It was always considered to be chemically ‘inert’ – but in recent decades it has flourished and a variety of interesting applications have emerged.
USAGOLD note: Not must a monetary metal. . . . .This article covers gold’s high-tech uses.
“Risk assets have seen the better part of their game for now. We are very constructive on gold. . . .”
USAGOLD note: Robertson goes on to elaborate on what’s behind Standard Chartered’s opinion including its postion on the dollar.
“‘Silver does not represent large components of end products,’ Smirnova explains, pointing out that electronics, cars, and medicines don’t use a lot of the metal per unit, so an economic slowdown probably won’t have a big impact on it. Its use in solar applications is also ‘insulated from economic growth” because that market is ‘more driven by government incentives and the need for renewable energy.’ Instead, it’s the ‘return of retail investment demand [that] will be the driving force behind an increase in the silver price,’ Smirnova predicts.”
USAGOLD note: Conclusions similar to our own. . . We will remind our readers that when silver moves to the upside, it tends to move in grand fashion. Please see chart above.
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“The new downswing results from more than the 2010 financial crisis. There has been a wave of Chinese and Asian working-class resistance to exploitation, which has eroded profits. In the West, paradoxically, the historic defeat of the unions has flatlined wages. As a result, goods can be sold (and profits maintained) only by bolstering consumption through easy personal debt. That makes the Western capitalist model unsustainable and prone to endemic bank failure. The banks and their tame accounting firms are busy covering up this chronic instability via wholesale fraud. As a result, we are nowhere near the bottom of this K-wave.”
USAGOLD note: The link above takes you to an excellent overview of the various stages of the Kondratieff Wave when applied to recent history and includes the author’s opinion as to where we are now. . . . . . The chart above provides a simplified template of the Kondratieff Wave since 1800. We allow you to draw your own conclusions and only mention that gold is not just an historically proven inflation hedge, it has performed equally as well in modern times under disinflationary, stagflationary and deflationary circumstances.
Image: Kondratieff_Wave.gif: Internaszonalderivative work: Agmen [Copyrighted free use]
Repost from 4-9-2019
“The biggest problem facing the financial markets today is that the folks at the Fed have no appreciation for how their policies are affecting the real economy. Ten years of inflation, open market manipulation, and other experiments have left the U.S. burdened with trillions of dollars in new public and private debt. The December market break was a direct result of the fact that Fed officials do not really understand the real-world consequences of their actions.”
USAGOLD note: Whalen makes a strong argument that the Fed is operating outside its legal mandate and asks “Is the Fed meant to be free of any real-world restraint on its actions?”
Repost from 4-9-2019
“In the decade since the 2008 crisis, plenty of weird things have occurred in the world of finance. But this week a new phenomenon was observed that might make even economists and financiers blink.”
USAGOLD note: One of the points Gillian Tett makes is that $100 bills are being used around the world as a hedge against a number of different negative scenarios. . . . An interesting read about the very same mindset that leads some to gold ownership.
Repost from 3-11-2019
(USAGOLD – April 15, 2019) – Gold is starting the week in a continuation of the downtrend that began late last week. It is off $6 at $1284. Silver is down 5¢ at $14.91. With the dollar also down on the day, analysts will be searching for a rationale to explain gold’s push to back below the $1300 mark. The Wall Street Journal reported over the weekend (Pact Hems Beijing Currency Moves) that the United States and China had reached an agreement that would limit China’s ability to manipulate its currency downward for export purposes. One would think that such dollar-negative news would translate as favorable for gold, but the precious metal seems to be trading on technical factors instead. As expressed in our reporting at the end of last week, this latest downside drift remains a mystery searching for an explanation.
Quote of the Day
“So, we were just chatting away there in friendly conversation and then Volcker walks in, you can’t miss him because I think he’s about six-and-a-half feet tall. So, he walks in and I thought, ‘well I have to shake his hand and say hello.’ He didn’t even look at me. He didn’t come to me. He went straight to his staff and he said, ‘what’s the price of gold?’ So, I thought, ‘gold is important to him’ and I still think it’s every bit as important to Fed people now because it is the ultimate measurement of the dollar. They can rig it and monkey around with it and play games, but ultimately, the market will have its say.” – Ron Paul from a Mises Institute Interview with Jeff Deist
Chart of the Day
USAGOLD note: As of Friday, April 12, 2019, the national debt stood at $22,027,837,127,788.04 – $966 billion higher than a year ago, $2.081 trillion higher than when Donald Trump took office January 20, 2017, and nearly double where it was ten years ago. “The health of the country, the prosperity we care about, and the security we care about are just inextricably linked,” says former chairman of the Joint Chiefs of Staff Mike Mullen, “. . .and we keep looking away hoping it will get better, and it gets worse. It’s about the debt levels, and the inability to pay our own bills, and if we don’t get our fiscal house in order, it’s going to dramatically affect our security of our country.”
“Goldman Sachs has even endorsed view that central bank demand is a major reason for expecting higher gold prices in the months ahead. Goldman analysts recently stated they expect gold to gradually move higher based partly on increased purchases from the central banks of China, Russia and Kazakhstan. Growing institutional support for the yellow metal is thus one of several reasons for expecting gold’s recovery, which began last fall, to continue well into 2019.”
USAGOLD note: In 2011 central banks turned from being net sellers of gold to net buyers. In 2018, that trend gained new momentum. The chart below does not include China’s true additions to its official gold serves – a state secret that once revealed could prove to be formidable.
“For better or worse, the markets perceive that Fed chairman Powell has showed his hand. The recent Federal Open Markets Committee (FOMC) minutes of the January meeting revealed almost unanimous agreement to announce a plan soon for ending the Fed’s policy of balance sheet reduction. This is the first step in an inevitable march towards the fourth round of quantitative easing (QE4).”
USAGOLD note: More and more analysts are raising the prospect of QE4. The real discussion on monetary policy is now conducted under a new set of terms, conditions and defintions that the public largely does not understand (or even care about for that matter). As the Fed shrinks its balance sheet, money is drained from the banking system. If it were to expand it by introducing QE4, it would pump money into the system and that, of course, is what the White House would like to see prior to the 2020 election.
“Draghi’s intervention is notable given central bankers are usually loath to comment on politics or events in economies other than their own. He was later seen in conversation in the IMF’s headquarters with Fed Chairman Jerome Powell, who Trump has frequently accused of not doing enough to stoke the U.S. economy.”
USAGOLD note: Given the pressures on the European Central Bank from more than one direction, perhaps Jerome Powell took the opportunity in that conversation to sound his concern about the ECB’s independence. There is a long history of political pressure on central banks most of which does not come public until the memoirs are written.
“When ministers last gathered at a meeting of the International Monetary Fund, in October, there appeared to be good momentum behind a recovery, although some wobbles in the global economy were provoking concern. Six months later, the picture is considerably gloomier. The economies of the EU, the US and China are all looking weak, and the discussion is increasingly about engineering a soft landing rather than stopping growth flying too high.”
USAGOLD note: It is amazing how quickly things have changed. Bloomberg reported over the weekend that “[t]he International Monetary Fund warned governments not to rock the boat with trade wars and other disruptions at a time when the global economy is already sailing through choppy waters.” Such warning, it seems, are likely to fall on deaf ears. . . . .
“’We say no to the euro, we say no to European prices,’ Kaczynski told a party convention in the eastern town of Lublin. ‘The EU membership treaty doesn’t specify the date of euro adoption, some day we’ll do it, but this will happen when our level of wealth comes close to that of Germany.’”
USAGOLD note: Signing up for the European Union appears to be one matter. Signing up for its currency is quite another. . . . .
“Such a precarious time in history. So much crazy talk has drowned out the reasonable. Deficits don’t matter, so why not a trillion or two for infrastructure? Our federal government posted a $691 billion deficit through the first six months of the fiscal year – running 15% above the year ago level. Yet no amount of supply will ever impact Treasury prices – period. A Federal Reserve governor nominee taking a shot at ‘growth phobiacs’ within the Fed’s ‘temple of secrecy’, while saying growth can easily reach 3 to 4% (5% might be a ‘stretch’). Larry Kudlow saying the Fed might not raise rates again during his lifetime. Little wonder highly speculative global markets have become obsessed with the plausible.”
USAGOLD note: In this edition of Credit Bubble Bulletin, Noland notes having been influenced by the highly regarded Dr. Kurt Richebacher (1918-2007). Although he actually worked directly with the Austrian economist/banker, my connection came only as an appreciative reader of the Richebacher Letter (in pre-internet times) and his Wall Street Journal editorials. Richebacher concerned himself regularly with the interplay between financial market credit leverage, ordinary investors and the real economy. Please see “International Precious Metals & Commodities Fair – Munich, Germany Transcript of Dr. Kurt Richebächer’s Lecture” (USAGOLD, November 19, 2005). In re-reading that lecture, I am struck with how much of Richebacher’s analysis at the time can be applied to the present and a very similar set of circumstances. Now that Noland has acknowledged Richebacher’s influence, it explains to a large degree why his writings – like the snippet above – strike a chord.
Image: John Exter’s Inverted Pyramid of Global Liquidity
“Well, as the facts turned out, they succeeded in bringing the 10 year long-term yield rate down to 3.1 %. That was the lowest yield in the whole period and it was achieved by encouraging yield curve playing. As a result, they had developed a whole composite bubble system. The first was the credit bubble. The second was the mortgage refinancing bubble which later led to the third bubble, i.e., the consumption bubble. Since then, all economic growth has been consumption led. One has to realize that this was an unusual development and it was all based on bubbles. The bond bubble emerged which ignited the carry trade bubble which later spawned the housing bubble. As you can see, one bubble is dependent on the other one and they all work in tandem with each other. . .No, I would say that there will be a change in perception. We have at the moment a perception that the US economy is in splendid shape. Interest rates make nothing and yet consider the bullishness in the stock market. I think the American economy is at its most critical situation point in the whole of the post-war period because all of the excesses have accumulated.” – Dr. Kurt Richebacher, November 19, 2005 (From the speech linked above delivered two years before those bubbles began to deflate with devastating results)
“Sometimes I think that the job of central bankers is to prove Kurt Richebächer wrong” – Paul Volcker, former chairman of the Federal Reserve
In a report titled Federal Government Financial Condition Worsened by $4.5 trillion in 2018, Truth in Accounting estimates that each taxpayer’s share of the national debt including unfunded social security and Medicare liabilities is $696,00. Next week, we will address one piece of the national debt puzzle per day in our Daily Market Report’s Chart of the Day section. We invite your visit each day for the newest installment. The reports, as most of you already know, are also posted here at our Live Daily Newsletter.
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“Although not directly addressed in Darkest Hour, the U.K. ended up evacuating billions of dollars’ worth of gold bullion and other assets across the Atlantic, all to be kept safely in Canada. The mission, codenamed ‘Operation Fish,’ is still the largest movement of physical wealth in history.”
USAGOLD note: An interesting story about the the bedrock value of gold in the context of a very good movie and Gary Oldman’s extraordinary portrayal of Winston Churchill. Holmes weaves Britain’s gold mobilization of World War II with Germany’s repatriation in the modern era along with that country’s recent rise to the number three position for gold investment consumption globally.
Repost from 6-7-2018
The naughty boy who blurts out unpleasant truths
“In the first place, the ‘classic’ writers, without neglecting other cases, reasoned primarily in terms of an unfettered international gold standard. There were several reasons for this but one of them merits our attention in particular. An unfettered international gold standard will keep (normally) foreign-exchange rates within specie points and impose an ‘automatic’ link between national price levels and interest rates. The modern mind dislikes this automatism, as much for political as for economic reasons: it dislikes the fetters this automatism clasps on government management of the economic process – dislikes gold, the naughty boy who blurts out unpleasant truths. But most of the economists of the period under survey liked it for precisely the same reasons. Though they compromised in practice as in theory and though they admitted central-bank management, the automatism – a phrase beloved by Lord Overstone [Samuel Jones Loyd, 1st Baron Overstone] – was for them, who are neither nationalists nor etatistes, a moral as well as an economic ideal.” –– Joseph Schumpeter, History of Economic Analysis (1954) Published posthumously
Dr. MoneyWise says. . . .And to Dr. Schumpeter’s well-considered discourse on the practical merits of the gold standard, I will add a simple thought of my own: Absent the gold standard, the prudent investor who stores gold benefits in concert with the blurting of those unpleasant truths.
(USAGOLD – April 12, 2019) – At $1292 per ounce, gold is level in early trading after yesterday’s sell-off. Silver is up 6¢ at $15.04. Mystery lingers as to the cause of yesterday’s sudden $17 retreat. The dollar index this morning has already given up yesterday’s gains and more. The Japanese yen, on the other hand, remains in a downtrend against the dollar supporting the notion that yesterday’s abrupt market movement could have been the result of a trader or traders reacting to that country’s monetary and currency policies. We note that though the price of gold dropped in dollar terms yesterday, it rose sharply in Japanese yen.
The World Silver Survey is out this morning and it reports strong demand for silver among investors in 2018. “[P]hysical demand increased 4% in 2018,” reads the survey, “propelled by a modest rise in jewelry and silverware fabrication, and a jump in coin and bar demand. Indeed, investment in silver bars and coins grew by an impressive 20% last year, driven by an exceptionally strong demand sentiment in India.” In addition to the strong demand from India, the WSS reports strong bullion demand from Chinese domestic banks that “thought the silver price attractive.”
Quote of the Day
“The Fed will be forced to participate as avoiding deflation will be the number 1 priority – not the profitability of the banking sector. Investors should contemplate a brave new world of negative Fed Funds, negative US 10y and 30y bond yields, 15% budget deficits and helicopter money. Sounds ridiculous, doesn’t it? What I said in 2006 sounded ridiculous too.” – Albert Edwards, Society Generale
Chart of the Day
Chart note: The Volatility Index pushed to levels late last year and early this year not seen since the financial crisis in 2008. December 2018 was the worst month for stocks since the Great Depression. According to the Bank of America, not even the stock market rally early in the year was enough to convince investors to stay put. They were net sellers of $26 billion in U.S. stocks and $7 billion in European stocks in January. Meanwhile, gold bullion accumulation continued to advance steadily. Gold ETFs, the favored vehicle for funds and institutions, added almost 72 tonnes to their holdings in January and 185 tonnes since the beginning of October. ETF stockpiles now stand at their highest level since 2013.