China’s growing wealth is good news for gold

Business Day/Ranjeetha Pakiam and Daniela Wei/2-7-2018

“China’s growing throng of affluent consumers is driving a rebound in demand for gold rings, bracelets and necklaces as a property boom and high stock market valuations boost wealth in the largest bullion market.”

Share
Posted in all posts |

Gold runs into headwinds today

LATE REPORT

It was rough going for gold today fighting headwinds most of the day and finishing down $15.30 at $1324.  Silver also traded lower – down 8¢ at $16.62.

Gold traders on the Comex, where the price is determined on a daily basis, seem to be a bit bewildered by the wild trading in the stock market (as are we all) and cautiously waiting on the sidelines for a sign that the worst might be over – or not over, whatever the case might be. Probably the most troubling analysis to surface during the course of the day was speculation that arcane, little-known volatility index derivatives might be at the heart of the stock market sell-off – a reminder of the mortgage-based derivatives that nearly brought down the house in 2007-2008.

The legendary investor, Carl Icahn, was interviewed on CNBC this morning and delivered probably the most interesting opinion for the day.  “There is going to be a major, major, major correction. . .I do think the market will bounce back but these are the rumblings before the earthquake.  The market is telling you something. . .it is telling you it’s very dangerous. . .it’s way over leveraged.”

Icahn’s warning brings to mind the quote from John Kenneth Galbraith posted last night.  We think so much of it, that we are posting it again tonight.

Quote of the Day
“A common feature of all these earlier troubles was that, having happened, they were over. The worst was reasonably recognizable as such. The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to ensure that as few as possible escaped the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. (Not only were a record 12,894,650 shares sold on 24 October; precisely the same number were bought.) The bargains then suffered a ruinous fall. Even the man who waited out all of October and all of November, who saw the volume of trading return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next twenty-four months. The Coolidge bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable.” – John Kenneth Galbraith, The Great Crash: 1929


USAGOLD’s Online Order Desk

If you haven’t visited our new Online Order Desk as yet, we invite you to take a test drive. We have been surprised by its instantaneous popularity and the number of clients who have already placed their first order. One of its most useful features is that you can order anytime day or night and on weekends. With prices down some this evening, it might be a good time to put in your first order. The state of the art system updates prices continuously, and we have a good selection of items available typical of most safe-haven precious portfolios. We invite your visit and your participation.

Great prices. Quick delivery. All the time.
Modern gold and silver bullion coins and bars
Historic fractional gold coins
Historic U.S. gold coins

Share
Posted in all posts |

Dow suffers wild swings, recovers 567 points after historic sell-off

Fox Business News/Matthew Rocco/2-6-2018

“Stocks bounced back Tuesday in another day of volatility on Wall Street, as the Dow swung through triple-digit gains and losses on the heels of a historic sell-off. The Dow Jones Industrial Average soared 567 points, or 2.33%, to 24,912. The S&P 500 advanced 46 points, or 1.75%, to 2,695. The Nasdaq Composite added 148 points, or 2.13%, to 7,115.

U.S. equities have suffered from wild swings in recent sessions amid growing concerns over inflation — a decline in the value of money due to rising prices. Investors are bracing for the possibility that the Federal Reserve will accelerate its timetable for hiking interest rates to prevent inflation from getting out of control. However, low unemployment, robust corporate earnings and consumer spending remain headwinds for the stock market in the long run, according to Kimberly Foss, president of Empyrion Wealth Management.”

MK note:  Most of the gains were logged in the last hour and a half of trading.

 

Share
Posted in all posts |

Central banks will continue to “feed the beast”: Yale’s Stephen Roach

CNBC/Michelle Fox/2-6-28

“While investors may be concerned about higher inflation, Yale University fellow Stephen Roach says inflation will remain below target. Therefore, he says central banks will be slow and reluctant to normalize. He blames central banks for “distorting asset prices across the spectrum” over the past several years.”

MK note:  Roach makes the case for continuing disinflation, not inflation, and central bank produced asset bubbles.

Share
Posted in all posts |

U.S. trade deficit rises to nine-year high on robust imports

Reuters/Lucia Mutikani and David Lawder/2-6-2018

“‘Trump’s trade team has not been able to stem the flood of imports into the country,’ said Chris Rupkey, chief economist at MUFG in New York. ‘Don’t forget it is American companies assembling goods outside the country and then bringing them back in which is the problem with the trade imbalance in goods.'”

MK note:  Quietly while everyone’s attention is elsewhere. . . . .Imports hit nine-year high even as the U.S. moves toward becoming the top oil producer in the world by end of 2018.  As mentioned here previously, the imports, and more specifically rising import prices, will figure heavily into the inflation equation.

Share
Posted in all posts |

Fed’s Bullard calls market rout “most predicted sell-off” ever

Bloomberg/Steve Matthews/2-6-2018

“‘This is the most predicted selloff of all time because the markets have been up so much and they have had so many days in a row without meaningful down days,’ Bullard told reporters after a speech Tuesday in Lexington, Kentucky. ‘So it is probably not surprising that something that has gone up 40 percent like the S&P tech sector would at some point have a selloff. Before there was a selloff, people said repeatedly some day this will sell off.’”

MK note:  Quite a departure from 2008’s mantra: “We didn’t see this coming.” From that, to “We told you so. . .”

Share
Posted in all posts |

ETFs show steady gold demand in 2017

ETF Trends/Tom Lydon/2-6-2018

“Inflation could serve as a catalyst for the yellow metal and for gold-related ETFs. By some metrics, the Fed has under-estimated U.S. inflation, which could prove beneficial to gold because the yellow metal is historically a popular inflation fighter.  ‘Inflows into exchange-traded funds (ETFs) continued steadily throughout the year, totalling 202.8t, but lagged behind the exceptional levels seen in 2016. Similarly, although central banks continued to add to reserves, purchasing 371t in 2017, buying was down 5% year-on-year,’ according to the World Gold Council (WGC).”

Share
Posted in all posts |

Gold gives up yesterday’s gain then some, but the day is young

EARLY REPORT

Gold is giving up what it gained yesterday and then some in early trading today.  It is down $11.50 at $1329.20.  Silver has given up 13¢ on the day and is trading at $16.67. That said, the day is young and anything can happen as volatile as the financial markets have been the past two sessions, also taking into account the impressive volumes at play in nearly all markets.

Both metals’ performances are heavily influenced by a strong acceleration in the dollar index, and we will be keeping a close eye on it as the day progresses.  It seems that the weakness in overseas stock markets is having a negative effect on the currencies making the dollar an inadvertent, perhaps even reluctant (from the Trump administration’s perspective) beneficiary. The DJIA is on a wild ride today – up about 360 points on the open, then reversing to down over 85 as this report is sent over to the server.  Overnight, it was down more than 850. What happens there is likely to figure into market pricing on most other assets, including gold.  As I said. . .the day is young.

For a more thorough understanding of the complexities driving these markets, we invite you to scroll and read. . . . .

Chart of the Day

Chart note:  Gold trading volumes have been massive over the past five trading days with the bulls in the ascendancy yesterday, and the bears thus far today.  Volume yesterday was over 43 million ounces, or 1337 metric tonnes. – some big numbers – and it is approaching that level again today, the seventh straight day of ramped up volumes.
Share
Posted in all posts |

Investment firms suffer website outages

Wall Street Journal/Daisy Maxsey and Sarah Krouse/2-5-2018

“The websites and mobile applications of discount brokerages, mutual-fund firms and digital advisers suffered outages and slowdowns Monday, unnerving individual investors trying to access their accounts during the market rout.”

 

Share
Posted in all posts |

Bets on Wall Street tranquility crushed by volatility surge

Financial Times/Staff/2-6-2018

“It is a frothy era where people are confusing using leverage with being smart. Everyone knew these things were going to blow up. It was just a matter of when . . ” –  Brad Golding at Christofferson, Robb

“Such volatility products that have been very popular with computer-driven trading strategies, a dominant feature of Wall Street’s ecosystem.”

Share
Posted in all posts |

Paul Tudor Jones says inflation about to appear with a vengeance

Bloomberg/Saijel Kishan/2-5-2018

“’We are replaying an age-old storyline of financial bubbles that has been played many times before,’ Jones, founder of Tudor Investment Corp., wrote in a Feb. 2 letter to clients seen by Bloomberg. ‘This market’s current temperament feels so much like either Japan in 1989 or the U.S. in 1999. And the events that have transpired so far this January make me feel more convinced than ever of this repeating history.’”

Share
Posted in all posts |

Machines had fingerprints all over a Dow rout for the ages

Bloomberg/Sarah Ponczek, Elena Popina and Lu Want/2-6-2018

“Risk parity funds. Volatility-targeting programs. Statistical arbitrage. Sometimes the U.S. stock market seems like a giant science project, one that can quickly turn hazardous for its human inhabitants. You didn’t need an engineering degree to tell something was amiss Monday. While it’s impossible to say for sure what was at work when the Dow Jones Industrial Average fell as much as 1,597 points, the worst part of the downdraft felt to many like the machines run amok. For 15 harrowing minutes just after 3 p.m. in New York a deluge of sell orders came so fast that it seemed like nothing breathing could’ve been responsible.”

MK note:  I’ve written consistently over the years about “the madness of machines” usually with reference to the gold market.  The central point is that the same madness that occasionally afflicts humans and drives a financial panic is built into computer algorithms, and can be just as nettlesome a problem – or worse, as we saw yesterday in the stock market. I would take it a step further and say that the very interesting quote from John Kenneth Galbraith attached to last night’s LATE REPORT applies not just to humans but to their computer software as well.  The software mimics its creator as we have been mentored by more than one good science fiction tale.

My conclusions remain the same:  A solid diversification in gold can help weather the storm.  Even yesterday, that portion of your portfolio devoted to precious metals remained stable, even appreciated, while stocks cratered.  As shown in the wake of the 2007-2008 debacle, though it took a while to develop, gold owners received the benefit of a strong upward price movement, thus the image of the very prudent lemming with a parachute.

For those with the interest:
Extraordinary popular delusions and the madness of machines (2012)
More recently, The perils of complacency in the age of quants and the madness of machines (May, 2017)
Share
Posted in all posts |

Dow down another 860+ in overnight markets. . . .

. . . . . . .at 23, 463. Asia stocks drop precipitously. . . .Gold up $4 in Asian trading, silver up +15¢.

Dow futures point to a more than 1,000-point fall at the open/CNBC. . . . .(8 pm MT)

Share
Posted in all posts |

Gold holds own, finishes on up note after disastrous day on Wall Street

LATE REPORT

Gold finished today on a high note, up $6.50 at $1339.30 after trying to make up it mind on direction during and after the disastrous 1275 point collapse in the Dow Jones Industrial Average – the worst single-day point drop in its history. Silver had a similarly indecisive day finishing up 12¢ at $16.69 after being up sharply at the beginning of the day’s trading.

For the time being at least, it looks like gold is gaining some separation from the Dow psychologically after seeming similarly disposed to the downside in Friday’s trading. That is a good thing, i.e., the seemingly rational thing after a day like today.  Investors are likely to chalk that up in the PLUS column in the days ahead – and we hope that it sticks. (It should.)

For some interesting insights we refer you to the in-depth analysis released today and now getting quite a bit of play in gold circles on the world wide web – Gold takes center stage in the dollar scare.   A bit further down the page, this morning’s EARLY REPORT is also worth a look.

Newcomers might be well-served to venture through the past few days of posts here at our online daily newsletter – a good many germane to the events of the day. . . . . .

Quote of the Day (Particularly appropriate today)
“A common feature of all these earlier troubles was that, having happened, they were over. The worst was reasonably recognizable as such. The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to ensure that as few as possible escaped the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. (Not only were a record 12,894,650 shares sold on 24 October; precisely the same number were bought.) The bargains then suffered a ruinous fall. Even the man who waited out all of October and all of November, who saw the volume of trading return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next twenty-four months. The Coolidge bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable.” – John Kenneth Galbraith, The Great Crash: 1929


What you need to know before you buy your first ounce of gold
Some initial guidelines from one of America’s top gold experts

If you are new to the concept of gold ownership, you might be looking for a little guidance.  We, at USAGOLD, have been in the gold business for a good many years and the one thing that stands out to us in working with so many over the years is how often investors, for one reason or another, get off to a bad start.

That is why we developed a question and answer page many years ago that delves into the subject of GETTING OFF TO THE RIGHT START. We update it regularly as things can change rapidly in the gold and silver markets. The page is linked above and we recommend that newcomers spend the few minutes it takes to get through it. . . .

This page receives considerably high-ranking from Google on a number of important searches and we like to think it’s because of the cause it serves – providing some positive direction to investors trying to get off to a solid start in their pursuit of gold ownership.

If you would like to talk with a real, live gold expert about your needs,
try this phone number or drop us an e-mail:

1-800-869-5115
Extension #100

orderdesk@usagold.com

Share
Posted in all posts |

Update 1987 redux. . .

MK note:  Jerome Powell’s first day on the job and the Dow Jones Industrial Average closes down 1175.  Can you imagine?  Has to be one of the rudest greetings for a Fed chairman in U.S. financial history.

>>> Please scroll below until you run into the photo of Mr. Powell and read. . .posted yesterday morning on the possibility of a 1987 replay.

“Have you ever seen in some wood, on a sunny quiet day, a cloud of flying midges — thousands of them — hovering, apparently motionless, in a sunbeam? …Yes? …Well, did you ever see the whole flight — each mite apparently preserving its distance from all others — suddenly move, say three feet, to one side or the other? Well, what made them do that? A breeze? I said a quiet day. But try to recall — did you ever see them move directly back again in the same unison? Well, what made them do that? Great human mass movements are slower of inception but much more effective.” – Bernard Baruch, early 20th century market speculator

Chart courtesy of tradingeconomics.com
Share
Posted in all posts |

Gold takes center-stage in dollar scare

Not strong, not weak but strategically benign

by Michael J. Kosares

Trump-Mnuchin qualifiers in dollar statements tell all

“While it’s [a strong dollar] described as a desirable and intended thing, it might not be a choice. The size of dollar holdings of reserves (in dollar-denominated debt) and the dollar’s role as the dominant world currency are anachronisms and large relative to what one would want to hold to be balanced, so rebalancings should be expected over time, especially when U.S. dollar bonds look unattractive and trade tensions with dollar creditors intensify.” – Ray Dalio, Bridgewater Securities

Much is made of the direct inverse correlation between gold and the dollar, but acknowledging that relationship does not really get us anywhere. The bigger question is whether or not the dollar will continue to track lower as it has over the past 18 months or will it suddenly reverse course and head higher.

In the end, the international FOREX markets will determine the dollar’s value against other currencies. That journey, though, will be influenced by other players on the stage, i.e., central banks and governments, including the U.S. government and the Federal Reserve, whose main interest will be the value of their currency, especially against the currencies of their largest trading partners.

It is there, on the ultimate battleground of the political economy, that the plots and subplots can become as twisted and complicated as the intricacies of a John LeCarre novel. Note, for example, the couching of terms in the following two statements delivered during the Davos conference late last month:

“I absolutely support a strong dollar over the long term.” – Stephen Mnuchin, U.S. Secretary of the Treasury

“The dollar is going to get stronger and stronger and ultimately I want to see a strong dollar.” – Donald Trump, President of the United States

Those qualifiers, over the long term and ultimately, tell all and go to the heart of what the administration intends. What happens to the value of the dollar between now and ultimately? What happens before the long-term policy kicks in? In its unambiguous ambiguity the Trump administration has signaled no intention of disrupting any market generated dollar weakness. It will stand aside. Beyond that, time will tell to what degree it will project the economic power of the United States if it becomes necessary to keep the exchange rate down.

For the markets, there was no ambiguity in the statements at all. The intent of the administration was crystal clear. Its dollar policy would be neither “strong” nor “weak.” Instead it would be strategically benign. In the immediate aftermath of the Davos statements, the dollar cratered, gold jumped and the bond market went into a tail spin. For traders and speculators, the way was clear. As Marc Chandler of Brown Brothers Harriman told Financial Times: “While Mnuchin was only stating the obvious, Treasury secretaries since Robert Rubin have never really deviated from the strong dollar mantra. The mantra has never really meant much, but to deviate from it suggests that U.S. policy makers desire a weaker dollar.”


 I hope Gold Takes Center-Stage in Dollar Scare strikes a chord with you. If it does, you would probably appreciate our monthly client letter which offers in-depth news and opinion on the gold market with the interests of the typical gold owner always kept in mind.  To access the rest of the February edition and receive e-mail notification of future issues, we invite you to register at this link.  We make the newsletter available to our current and prospective clientele as a free service without obligation. We welcome your participation. MK

So where do we go from here?

As the first two charts below amply illustrate, the dollar has been in long-term secular decline since the start of the fiat money era in 1971. Gold over the same period has been in a long-term up-trend. So the short answer to the headline question is that gold likely will be in a very strong position for the immediate future – a prognosis hinted by its performance over the past two years of dollar declines (first chart below).

Historically, though, the dollar declines have not been against other currencies only, but against goods and services as well (second chart below). In short, if the U.S government and central bank have favored a strong dollar policy, their efforts have pretty much amounted to a prolonged failure. From time to time, it needs to be noted, the dollar’s secular down trend has been punctuated with periods of strength that then ultimately revert to the primary trend. We just recently completed one of those periods of strength in 2016 and seemingly have reverted to another period of weakness.

As you can see in all three charts, gold has served its owners well as a safe haven and asset of last resort. In fact, its history as a counter-measure to dollar depreciation has formed the basic rationale for gold ownership over nearly the past 50 years.

Now, with the dollar coming off its 2016 peak, market analysts are suddenly talking up the prospects for another episode of major dollar weakness against other currencies. However, unlike the last bout of dollar weakness in the early 2000s when disinflation bordering on deflation dominated the economy, analysts this time around are predicting the simultaneous return of price inflation.

The prospect of the two together – a crumbling dollar and inflation – spooked markets to the point that the Dow Jones Industrial Average gave up over 1000 points in a single week (1/29) and 665 points in a single day (2/2). This ramped-up scenario has all the earmarkings of a return to the stagflationary 1970s – something former Fed chairman Alan Greenspan has been predicting for some time now. In fact, two days before the February 2nd stock market reversal, he was on Bloomberg television warning of bubbles in both the stock and bond markets. Our third chart provides a clue as to how gold might perform in a 1970s redux.

(In the next section of this month’s client letter, we delve into what appears to be the first signs of inflation’s re-emergence: rising commodity prices.)

Share
Posted in all posts |

Gold regains its footing, silver up sharply

EARLY REPORT

Gold has regained its footing in early trading today, up $4 at $1337.00.  Silver is trading sharply higher – up 31¢ at $16.88. Gold and silver are getting a residual, though modest, boost from the stock market routs in Asian and Europe overnight and early New York trading.  The dollar is steady to down this morning, but inflation concerns weigh heavily on both the forex and bond markets.

Not getting much attention thus far is the report released this morning by Standard & Poor’s warning of the debt default danger among highly leveraged corporations.  (See immediately below.)  Zoom out from all the noise and obvious concern this morning among professional traders and you get a sense that the financial markets have crossed a psychological line of which the general public is only casually aware.

Please scroll to get a fuller picture of what is influencing markets this morning.

Chart of the Day

Chart note:  We thought that now with the rumblings in the stock market, it would be a good time to post the chart you see above from MacroTrends. It  shows how many ounces of gold it would take to buy the Dow Jones Industrial Average from 1915 to present.  At present, after Friday’s 665 point drop, it takes 19 ounces of gold to buy the Dow.  In 2000, it took over 40 ounces before the ensuing correction and the launch of gold’s secular bull market.  In 1979, the bottom shown on the chart, the ratio was near one to one. The chart suggests that gold is undervalued compared to the Dow Jones Industrial Average and that at some point the values will cross. The question then becomes: “Where and when will that happen?” – a question that opens the door to all sorts of possibilities.
Share
Posted in all posts |

S&P warns high corporate debt could trigger next default

Bloomberg/Narae Kim/2-5-2018

“The number of defaults by heavily indebted corporates could rise significantly amid tightening credit conditions, according to S&P Global Ratings. Easy liquidity and underwriting together with low interest rates have contributed to a spike in the number of highly leveraged firms, creating a risk masked by relatively low default rates. Removing the ‘easy money punch bowl’ could trigger the next default cycle since high corporate debt levels have increased the sensitivity of borrowers to elevated financing costs, the ratings agency said in a Feb. 5 report.”

MK note:  A flock of black swans quietly circling the financial pond . . . .

Share
Posted in all posts |

US Dollar Index speculators continued to add to bearish positions this week

Counting Pips/2-5-2018

“Large currency speculators continued to cut back on their net positions in the US Dollar Index futures markets this week, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on Friday.”

Share
Posted in all posts |

Gold Speculators reduced bullish positions for 1st time in 7 weeks

Counting Pips/2-5-2018

“The non-commercial futures contracts of Gold futures, traded by large speculators and hedge funds, totaled a net position of 207,262 contracts in the data reported through Tuesday January 30th. This was a weekly lowering of -7,422 contracts from the previous week which had a total of 214,684 net contracts. Speculative positions had risen strongly over the previous six weeks by +107,616 net contracts before this week’s reduction. The overall net position remains above the +200,000 level for a fourth straight week.”

 

Share
Posted in all posts |

China tops gold consumption table for fifth consecutive year

gbtimes/Weida Li/2-5-2018

“The consumption of gold in China hit 1089.1 tonnes in 2017, making the country the world’s largest gold consumer for the fifth consecutive year, according to statistics released by the China Gold Association (CGA) on February 1. The main reasons behind the increase in gold investment are the recovery of high-end consumption in 2017, especially in second- and third-tier cities, and the fluctuations experienced in the real estate and securities markets, said the CGA.”

MK note:  Sounds like the sorts of incentives that drive American and European investors.  China’s consumption has become a constant in the fundamentals’ tables taking up roughly one-third of global production.  There have been questions raised consistently, though, about China’s reported consumption with some analysts believing that it is much larger than what is being reported.

 

Share
Posted in all posts |

Dow futures down 300 before formal open

CNBC/Fred Imbert/2-5-2018

“The major U.S. stock indexes capped off their worst weekly performance in two years on Friday following a steep sell-off. The Dow and S&P 500 pulled back 4.1 percent and 3.9 percent, respectively, last week. The Nasdaq lost 3.53 percent. The Dow fell 665.75 points on Friday — or 2.5 percent . . . “

MK note:  A continuation of Friday’s breakdown at this juncture. . . . Asian and European stocks experienced a pretty stiff sell-off overnight.  Hard to tell at this point if they are leading or following Wall Street’s lead.

Share
Posted in all posts |

Yellen warns investors to remain cautious as she leaves Fed post

Daily Mail/AFP/2-2-2018

“Yellen, who leaves her post on Saturday and will be replaced on Monday by Jerome Powell, made the comments in an interview with PBS television before the Dow closed down more than 650 points, its biggest drop since June 2016. ‘I don’t want to label what we’re seeing as a bubble, but I would say that assets valuations generally are elevated,’ Yellen said, advising investors to “be careful to diversify in their investments.”

Related: PBS interview of out-going Fed chairwoman, Janet Yellen (Video)

MK note:  So Janet Yellen leaves with a not so subtle warning to investors.  One wonders what she means by diversified. She isn’t talking about gold, is she? Couldn’t be. . . . .Yet, if we are talking about real diversification, we need to be.  The right weighting between stocks and bonds just isn’t going to cut it.

Share
Posted in all posts |

Gold: Why this golden bull market is just getting started

Seeking Alpha/Victor Dergunov/2-4-2018

Inflation is everywhere you look, the latest CPI came in at above 2%, the PPI is trending above 2.5%, with final demand goods coming in at 3.5% and trending well above 3% throughout the last year. Even wage growth is on the rise with the most recent figure coming in at 2.9%. Crude oil is on its way to $70 fast, likely $80 before mid-year, and possibly $100 before year’s end. Gold is no exception when it comes to price appreciation due to inflationary pressures. Gold’s price is approaching multiyear highs, and will very likely break out in the very near future.”

MK note:  Nice summary of the backdrop to rising inflation expectations.

Share
Posted in all posts |

Beware the Davos bubble’s dubious emissions

DAVOS UPDATE

Reuters/BreakingViews/Peter Thal Larsen and Rob Cox/ 1-29-2018

“In panel debates and private discussions, optimism about synchronised growth was almost unanimous. China’s rate of expansion has stabilised, the euro zone is resurgent, and the United States has just received an extra boost from a tax cut. The International Monetary Fund upgraded its global GDP growth forecasts to 3.9 percent for 2018 and 2019. Others are aiming even higher. At a private reception with business leaders in Davos, Trump questioned why U.S. GDP couldn’t grow at the same rate as China’s or India‘s, joking that it might plausibly grow by 7 percent, people at the event told Breakingviews. Such ebullience invites comparisons with January 2007, when optimistic delegates failed to spot the fragilities of the financial system.

MK note:  Note that this article was published before last week’s meltdowns – Davos as a contrary indicator?

Share
Posted in all posts |

How worried should you be? Traders confront inflation’s reality

Bloomberg/ Sarah Ponczek , Lu Wang , and Elena Popina/2-3-2018

“For almost a decade, investors have waited patiently for any hint of inflation in the U.S. economy, a sign the recovery can sustain itself without emergency stimulus from the Federal Reserve. Now they’re getting it, and many are shocked at the reaction. It landed last week with the worst stock market plunge since January 2016. A stronger-than-expected employment report with signs of strengthening wage growth sent the Dow Jones Industrial Average down 666 points on Friday, bringing its five-day loss to almost 1,100 points. Share volatility surged.”

Share
Posted in all posts |

Deja vu? It’s looking like 1987 again for the US economy

The Guardian/Larry Elliott/2-4-2018

“As the years roll by, it becomes ever clearer that the collapse of Lehman Brothers in September 2008 was not a cathartic event. The sub-prime mortgage crisis was supposed to be the bubble of all bubbles, yet here we are 10 years later watching speculators pile in and out of bitcoin. In two years it will be the 300th anniversary of the South Sea bubble. History has a strange way of repeating itself.”

MK note:  Will Jerome Powell enter the Eccles Building tomorrow morning with the beginnings of a financial market crisis on his hands?  This Guardian article outlines the dangers including a possible repeat of another the 1987 stock market crash (when the stock market dropped almost 23% – the largest one day drop in history).  Circumstances, as Larry Elliott points out, are eerily similar. . . . . .

Share
Posted in all posts |

The four pillars holding markets up are strained, all at the same time

Fasnara Capital/2-2-2018

“This note is intended to provide some more empirical evidence and data points for our thesis that markets stand at a critical juncture, ready to snap. Viewed as a combination of intertwined components, each component is showing growing signs of pressure and seem to be running out of road for further advancing. The synchronicity of them, more than any single component taken independently, is what should draw attention, as it compounds systemic risk.”

MK note:  The four pillars are valuations, cash, QE flows and debt.  It is difficult to dismiss Fasnara’s concerns – fundamental as they are. “Ready to snap. . .”

 

Share
Posted in all posts |

Gold takes one on the chin, but it wasn’t the only one

LATE REPORT

Gold took one on the chin today, but nothing like the stiff uppercut delivered to stocks and bonds.  Gold finished down $17 today at $1331.39 and shedding 1.3% off the price. Silver got pummeled as well finishing the day at $16.57, down 63¢.  Stocks finished down 665 on the day – a 2.6% shellacking.  Bonds did not fare any better with the 10-year Treasury finishing at a 2.839% yield.

All in all, investors find themselves coping with the combined effects of a new surge in government debt, a threatened inflation, a weakening dollar and a promise of higher interest rates.  For awhile, the markets avoided the worst, but now the momentum has shifted to the downside. Gold  got caught up in the overall asset downgrade today, but we have to ask: Will it continue to be thrown in the same hay wagon with everything else as we move further down this treacherous road?

History tells us that gold is likely to separate from the pack and strike out on its own when market stress prevails.  In fact, that is why it is universally recognized as a reliable portfolio hedge. (Please read former Bank of England governor Mervyn King’s words immediately below.)

Quote of the Day
“If we don’t quite know what the future holds, there is little point in getting carried away by very fancy mathematical calculations of optimal portfolios. Don’t rely on past data to be a good guide. Try to think through what mix of assets gives you the best chance of surviving some big event. That must mean including assets that are negatively correlated or uncorrelated in your portfolio.

And I am very struck by the fact that over many many years, central banks, governments and individuals have always, despite the protestations of economists, held some gold in their portfolio. Obviously, there is no high running return, but when unexpected things happen, particularly when governments rise and fall, then gold is a means of payment that everyone is always prepared to accept. And I think that’s why even central banks have always had a role in their portfolios for gold.” – Mervyn King, former Governor of the Bank of England


Let’s say that you have determined that the former Governor of the Bank of England, Mr. King, knows what he is talking about and that it is time for you to hedge your portfolio with gold.

What next?

Well, you might then consider how to go about choosing a gold firm with whom you can safely make purchases and subsequently sales. If that is the case, you might take interest in a page here at USAGOLD that gets a considerable amount of attention among searchers trying to choose a gold firm. It is aptly titled ––

How to choose a gold firm
A quick guideline for beginning investors

–– and it is written by Michael J. Kosares, author of The ABCs of Gold Investing – How To Protect and Build Your Wealth with Gold and the founder of USAGOLD.

It is surprising how many prospective investors simply dive into gold and silver investing without much in the way of a consumer inquiry. That lack of simple due diligence has ended up costing a good many investors thousands of dollars, and sometimes even hundreds of thousands, before the damage is detected. At the page linked above, you will find some brief but valuable guidelines to help you choose the right gold and silver company. It might be the most important decision you will make on the road to becoming a gold and silver owner.


 

Share
Posted in all posts |

Upcoming release of an important edition of our client letter


Next week we release the February issue of our client letter. 

The feature article this month is titled:

Gold takes center-stage in dollar scare
Not strong, not weak but strategically benign
by Michael J. Kosares

From that article. . . .

“In the end, the international FOREX markets will determine the dollar’s value against other currencies, but that journey will be influenced by other players on the stage, i.e., central banks and governments, including the U.S. government and the Federal Reserve, whose main interest in each instance is the value of their currency. More specifically, their interest lies in the value of their currency against all others especially their largest trading partners.
It is there, on the ultimate battleground of the political economy, that the plots and subplots can become as twisted and complicated as the intricacies of a John LeCarre novel. Note, for example, the couching of terms in the following two statements delivered during the Davos conference late last month. . . .”

If you are not a subscriber and you would like to be, we invite you to sign-up at this link.  We make the newsletter available to our current and prospective clientele as a free service and we welcome your participation. You will receive notification of the February edition’s publication by e-mail.  In the meantime, you will have open access to the January edition.


Mr. Kosares is the author of The ABCs of Gold Investing: How To Protect and Build Your Wealth with Gold and the founder of USAGOLD.
Share
Posted in all posts |