Retail gold insights 2019
World Gold Council/Alistair Hewitt, Louise Street, Mukesh Kumar and Ray Jia/November 13, 2019
“More than two-thirds of retail investors believe that gold is a good safeguard against inflation and currency fluctuations. Almost as many (65%) believe it won’t lose its value over the long-term and report that it makes them feel secure (62%). It is no surprise then, that with so much global economic uncertainty, 61% of retail investors trust gold more than fiat currencies. Because of this, gold is typically used as a strategic asset by retail investors, with the majority using it either to protect their wealth or to generate returns over the long-term.”
Emphasis added.
USAGOLD note: Some surprising and very positive findings from the World Gold Council on the global public’s affinity for gold – a survey of 18,000 investors worldwide.
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Important! – Gold’s Century: While stocks dominated headlines, gold quietly performed
Mark Carney calls for global monetary system to replace the dollar
“Mark Carney, the Bank of England governor, has said that the world’s reliance on the US dollar ‘won’t hold’ and needs to be replaced by a new international monetary and financial system based on many more global currencies.”
USAGOLD note: The real story is not the global currency of the future – whatever form it might take – but the escalating move to dethrone the dollar as the world’s reserve currency. In the end, dedollarization carries potentially bullish implications for gold in dollar terms. It comes as a surprise that someone the stature of Bank of England’s Mark Carney would promote moving beyond the dollar as the world’s reserve currency.
Repost from 8-25-2019
The Trump era could wind up like the 1930s
MarketWatch/Paul Brandus
“Even so, the president thought one thing was needed to make things better: tariffs on America’s trade partners. Many economists and lawmakers argued against this, saying it would hurt trade, kill jobs and slow, if not contract, the economy. The president dismissed their reasoning, and into place the tariffs went. As economic uncertainty mounted, many investors moved into gold, which was perceived as a safe haven (so much so that the Treasury feared it might run out of bullion).
USAGOLD note: That move to gold in the early 1930s had to do with the metal’s safe haven attributes and the growing threat of systemic risks.
Repost from 8-25-2019
Markets press higher as gold and bonds show correlation
Investopedia/Gordon Scott/11-8-2019
“A comparison between iShares 20+ Year Treasury Bond ETF and State Street’s SPDR Gold Trust shows that, on a percentage return basis, gold and bonds have tracked each other quite well.”
USAGOLD note: So what is it that bonds and gold have in common? We would reduce it to both being a destination for safe-haven capital. The difference between the two? Gold is a safe-haven asset that is not simultaneously someone else’s liability. Bonds, on the other hand, by definition are assets that rely completely on the performance of someone else (and the value of the currency in which they are denominated).
Repost from 11-12-2019
Jamie Dimon says ‘greedy’ bankers ‘let the American people down’
“Jamie Dimon said bankers ‘let the American people down’ ahead of the 2008 financial crisis, calling out those who were ‘greedy, selfish, did the wrong stuff, overpaid themselves and couldn’t give a damn.’”
USAGOLD note: How many on Wall Street would say that things have changed a great deal in the aftermath of the 2008 crisis?
Image by Alex Proimos from Sydney, Australia (Wall Street Sign) [CC BY 2.0 (https://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons
Repost from 11-11-2019
Gold, silver drift sideways; Boele, Mobius see solid future for the yellow metal
(USAGOLD – 11-15-2019) – Gold drifted sideways this morning as the trade war pendulum, at least for now, seems to have swung back to the positive (after swinging to the negative yesterday). Gold is down $2 at $1467. Silver is down 8¢ at $16.91. On the week, gold managed to eke out a .5% gain. Silver is up .8%.
ABN Amro’s Georgette Boele is circumspect about gold’s near term prospects but sees good things farther out as 2020 unfolds, according to a report from Kitco’s Anna Golubova. “ABN Amro’s 2020 gold forecast,” she writes, “sees gold starting next year at $1,450, then heading to $1,500 in Q2, followed by a rise to $1,550 by the end of Q3, and then $1,600 by the end of Q4.” Boele says that the bank is “optimistic for gold prices” in 2020, but waiting for a correction to jump in.
Taking a longer-term view, Mark Mobius (Mobius Capital Partners) says gold will double over the next ten years, according to a report posted at Newsmax. “I am bullish on gold,” says the widely-followed investment analyst. “I am not saying that gold is not going to go down because it is going to fluctuate, but people should have at least 10 percent of their portfolio in physical gold.”
Quote of the Day
“An ounce of gold cost $271 in 2001. Ten years later it reached $1,896—an increase of almost 700 percent. On the way, it passed through some of the stormiest periods of recent history, when banks collapsed and currencies shivered. The gold price fed on these calamities. In a way, it came to stand for them: it was the re-discovered idol at a time when other gods were falling in a heap of subprime mortgages and credit default swaps and derivative products too complicated to even understand. Against these, gold shone with the placid certainty of received tradition. Honored through the ages, the standard of wealth, the original money, the safe haven. The value of gold was axiomatic. This view depends on a concept of gold as unchanging and unchanged—nature’s hard asset.” – Matthew Hart, Vanity Fair
Chart of the Day
Chart note: We have had quite a few new visitors over the past few weeks who are looking into gold for the first time, and this chart more than any other, we feel, is central to understanding why gold continues to make sense as a long-term portfolio holding. When the United States abandoned the gold standard in 1971 and freed currencies to float against one another, the fiat money era began. We are still in that era today. This chart shows the performance of gold from the early 1900s to 1971 when gold backed the dollar, and the era from 1971 to present when it did not. Gold has had its ups and downs since 1971, but clearly, over the long run, in the absence of an official gold standard, individual investors have been well-served by putting themselves on a private gold standard.
Serbia buys nine tonnes of gold to heed president’s crisis advice
Bloomberg/Gordana Filipovic/11-14-2019
“The acquisition is the latest in a series of moves by Serbia to shore up its financial stability by changing the structure of its foreign debt and increasing the share of dinars and euros, Tabakovic said. The central bank paid 395 million euros ($434.3 million) for the gold, $1,503 an ounce, the governor said.”
USAGOLD note: Central banks buy gold for the same reasons ordinary people buy gold – as a means to long term asset preservation.
Why the price of gold is rising despite the Fed’s mixed signals
Money Morning/John Krauth/11-14-2019
“As always, gold investors should remain data-driven. Look closely at federal and global activity influencing the price of gold over the medium or long term. After all, the big picture hasn’t changed. All major central banks are in easy-money mode. And there is deeper data suggesting the gold sector is actually holding up well.”
USAGOLD note: Money Morning’s John Krauth tells why he thinks “gold prices could start rising again soon. . . .” At the link.
Image courtesy of Visual Capitalist
Fidelity to baby boomers: Lay off the stocks
Bloomberg/Michael McDonald/11-13-2019
“More than a third of the generation had crossed over Fidelity’s recommended allocation to stocks, which is 70% for those 10 years from retirement. Almost one-tenth of boomers were entirely in equities during the quarter, running the risk of serious losses in a market meltdown.”
USAGOLD note: Nothing here that a proper diversification wouldn’t cure. I am reminded of a John Kenneth Galbraith quote from his book, A Short History of Financial Euphoria:
“There are those who are persuaded that some new price-enhancing circumstance is in control, and they expect the market to stay up and go up, perhaps indefinitely. Then there are those, superficially more astute and generally fewer in number, who perceive or believe themselves to perceive the speculative mood of the moment. They are in to ride the upward wave; their particular genius, they are convinced, will allow them to get out before the speculation runs its course. They will get the maximum reward from the increase as it continues; they will be out before the eventual fall. For built into this situation is the eventual and inevitable fall. Built in also is the circumstance that it cannot come gently or gradually. When it comes, it bears the grim face of disaster. That is because both of the groups of participants in the speculative situation are programmed for sudden efforts at escape.”
Something to think about. . . . . . . .
Powell says he doesn’t see a ‘day of reckoning’ coming for the US anytime soon
“‘If you look at today’s economy, there’s nothing that’s really booming now that would want to bust,’ Powell said in testimony before the House Budget Committee. ‘In other words, it’s a pretty sustainable picture.’”
USAGOLD note: A candid assessment of the future or famous last words? We report. You decide.
ETFs drive gold demand
Degussa/Thorsten Polleit/11-7-2019
“If and when the popularity of gold ETFs indeed increases among retail and institutional investors, it might well result in a more volatile gold price going forward. ETFs allow a large number of investors to build up and reduce significant exposure to the gold market quickly, which, in turn, could cause substantial fluctuations in demand for physical gold and thus ultimately the US dollar price of gold.”:
USAGOLD note 1: An article that does a good job reviewing physical gold demand globally. It ends, as highlighted in the quote above, with an important observation: The sizable ETF stockpiles are likely to an ever-present source of increased volatility on both the upsides and downsides – an assessment with which we agree. The detailed report, including tables and charts, is worth the time spent (linked above).
USAGOLD note 2: It is interesting to note that ETFs – the preferred repository among funds and institutions who trade large volumes – purchased 258.2 tonnes of gold in Q3-19. Private investors, who prefer to hold gold in personal storage, at the same time quietly took delivery of 150.3 tonnes of the metal in the form of coins and bars.
U.S. budget deficit jumps 34% in October, gap set to top $1 trillion in 2020
MarketWatch/Jeffry Bartash/11-13-2019
“The federal government’s budget deficit in October rose 34% from a year earlier to $134.5 billion, putting the U.S. on course to top the $1 trillion mark in fiscal 2020 for the first time in eight years.”
USAGOLD note: Spending is increasing. Revenue is decreasing. The budget gap is widening. One congressman said recently that deficit hawks are about as fashionable as bell bottoms.
Should I buy a gold ETF?
Are you looking for a price bet or the real thing?
For safe-haven, asset-preservation purposes, the best alternative is not futures, options, mining stocks or even ETFs, but delivery of the metal itself in the form of gold coins or bullion. Some think that owning an ETF is akin to owning real gold, but it is not. It is essentially a price bet simply because only owners of 10,000 ounces or more (with most trusts) can take delivery of the metal represented by the shares. Then there is the problem of counterparty risk. “Unlike physical gold bullion – which is a tangible asset,” says Mauldin Economics’ Olivier Garret, “ETFs are a financial product that have counterparty risk. Counterparty risk is present when there’s a possibility the other party in an agreement will default or fail to live up to their obligations. . .[O]ne of gold’s primary benefits is being the only financial asset that is not simultaneously somebody else’s liability. Therefore, these ETFs are a poor substitute.” In short, by owning an ETF instead of the real thing, investors expose themselves to one of the primary risks they hope to avoid through gold ownership.
The USAGOLD storage option – strong competition for the ETF
One of the advantages of a gold or silver ETF is that the trustee stores the metal for you and makes it easy to buy and sell. We can open a fully-allocated storage account for you that offers the same advantages. In fact, the annual cost of storage and insurance is actually lower than most ETF fees. You can buy and sell with a phone call. Most importantly, because specific coins and/or bullion are stored in your account, you can still take delivery in part or full whenever you so wish – something, as mentioned above, that the ETFs offer only to their largest institutional clients.
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Lagarde says ECB did the right thing choosing jobs over protecting savers
“’Would we not be in a situation today with much higher unemployment and a far lower growth rate, and isn’t it true that ultimately we have done the right thing to act in favour of jobs and of growth rather than the protection of savers?’ she asked.”
USAGOLD note: These words from Christine Lagarde the day before she officially became president of the European Central Bank might become one of those statements by which the speaker is defined for a long time to come. It will certainly draw the attention of the increasingly vocal members of the ECB’s board of governors who oppose the central bank’s bond purchases and negative rates.
Repost from 11-4-2019
Sleepwalking toward a crisis – got gold?
“The rapid increase in Fed money printing in just five weeks reflects serious problems developing in the global financial system. Actually, the problem is easy to identify: At every level – government, corporate and household – the level of debt has become unsustainable, with not insignificant portions of that debt in non-performing status (seriously delinquent or in default).”
USAGOLD note: The headline references a quote from former Bank of England governor, Mervyn King, who once said: “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.” King made the ‘sleepwalking toward a crisis’ comment in a speech at a recent International Monetary Fund conference.
Repost from 11-5-2019
Short and Sweet
Part 1 of 5. . . . . .
What makes this gold market rally
different from all others
It is led by institutions and funds, not private investors
Global quantitative easing created a huge and mobile pool of capital in constant need of a place to call home. As the need for a safe haven became apparent among the stewards of that capital, the demand for gold flourished. The consistent presence of funds and institutions as buyers in this rally, as represented by the growth in ETF stockpiles, is one of its hallmarks and represents one of the major differences between this gold rally and rallies of the past. Though private investors have been late to the game, the rapid development of the physical market for gold coins and bullion in the United Kingdom is testament to the fact that sentiment can change quickly.
Chart courtesy of the World Gold Council
Part 1 • Part 2 • Part 3 • Part 4 • Part 5
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Buying stocks at record highs works until it doesn’t
BloombergOpinion/Robert Burgess
“The thing is, despite the recent surge in markets, it appears that plenty of investors are afraid. Rather than going all-in on stocks for fear of missing out, investors are showing almost unprecedented restraint. Money continues to pour into money-market funds, with assets standing at $3.51 trillion as of last Wednesday, up from $3.05 trillion at the start of the year, according to the Investment Company Institute.”
USAGOLD note: Some say that the growth in money-market funds is fuel for further increases. Others, like Burgess, say its a sign that investors are backing off. The chart below illustrates a point we have made on several occasions here in the recent past: The Dow Jones did not revisit the highs of 1929 until 1955, 26-years later.
Repost from 11-11-2019
Why are premiums on sovereign bullion higher than on generic bullion?
“[I]t is important to understand why one pays a premium for 1 oz silver coins like the American Silver Eagle, Canadian Silver Maple Leaf, South African Silver Krugerrand, and many more sovereign silver coins. The premiums for these pieces can be in excess of $2 per ounce for silver when compared to a generic 1 oz silver round. The premiums for sovereign gold bullion can be in excess of $50 per ounce. Let’s dive into why.”
USAGOLD note: Our clientele almost always buys bullion in the form of gold and silver coins. This article provides an excellent overview if you are in the process of making a decision on what kind of gold and silver will best serve your needs.
Repost from 7-25-2019
Where is that confounded recession?
“Ah, excuse me. Oh, will ya excuse me. I’m just trying to find the recession. Has anybody seen the recession?”
USAGOLD note: Good question. Nary a sign in the numbers over the past few weeks.
Repost from 11-11-2019
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