“Here’s the analysis. For February the unemployment rate in the U.S. was reported as 3.5%, or 5.8 million people. If you add another 3 million unemployed to that figure, then, all else equal, you have approximately a 5.3% unemployment rate. That’s a 1.8% increase in the unemployment rate one last week’s data alone.”
USAGOLD note: Long before the coronavirus came along, economists feared the United States was on the verge of falling into a recession. The unemployment claims number last week, though, took even the most pessimistic by surprise. The worry is that it may be just the tip of the iceberg.
“I’ve always viewed Bernanke as a decent man. But as a central banker – as the mastermind for the terminal phase of a runaway global monetary experiment – he’s been a disaster. His analytical framework is so flawed it’s difficult to comprehend the amount of power and discretion placed in his hands. It was Bernanke that invoked the government printing press to resolve whatever might ail the markets or economy. His crackpot theories that the Fed’s failure to print sufficient money supply after the ’29 stock market crash caused the Great Depression should have been sternly rebuked years ago. Worst of all, Dr. Bernanke specifically used the risk markets (stocks, corporate Credit, derivatives and such) as the primary mechanism for post-Bubble system reflation. The former Fed chief is the father of ‘QE,’ ‘helicopter money,’ and the ETF complex that took the world by storm.”
USAGOLD note: This is the same Ben Bernanke who once told Congress “No one really understands gold prices” while adding that he doesn’t get it either and calling it an “unusual” asset. Given the curriculum vitae Noland issues in his behalf, it is not difficult to understand why he would relegate gold to the status of financial second class citizen.
While stocks dominated headlines, gold quietly performed
Gold has produced positive returns in 16 of the last 19 years. Gold’s average annual return compounded since 2001 is 9.47%. (2001-2019) Gold’s appreciation over the last twelve months (from 3/20/2019) is 14.2% – even with the recent correction taken into account. Gold has been a portfolio stalwart. A $100,000 investment in gold in January 2001 would be worth about $550,000 today. At gold’s peak in 2011, it would have been worth over $700,000. While stocks dominated headlines, gold quietly performed.
The question becomes whether or not an investment that has performed so well in the past is likely to perform equally well in the future. Though nothing in the world of finance and economics is certain, we rest the bullish case for gold on the understanding that none of the economic and financial system problems that created a positive price environment for gold over the last nearly nineteen years have been removed from consideration. In fact, a case could be made that they have only intensified – and dangerously so.
“Gold dealers in Switzerland are rushing to keep up with a surge in demand as worried investors seek out lower risk investments in precious metals with financial markets roiled by the coronavirus pandemic. Some sellers are seeing a ten-fold increase in sales of gold bars, coins and other pieces as existing buyers increase their holdings and newcomers enter the market.”
USAGOLD note: As mentioned previously, we at USAGOLD are experiencing a similar rush for the yellow metal. We recently sold out of our historic Swiss 20 franc gold coin inventory.
Repost from 3-24-2020
Image: A pile of pre-1933 Swiss 20 franc gold coins (Helvetia)
“But these deficit-financed interventions must be fully monetized. If they are financed through standard government debt, interest rates would rise sharply, and the recovery would be smothered in its cradle. Given the circumstances, interventions long proposed by leftists of the Modern Monetary Theory school, including helicopter drops, have become mainstream.”
USAGOLD note: Doctor Doom outdoes himself in this one. He warns at one point that even if the coronavirus is contained his year, it could potentially return next flu season and cause markets to crash again. The engame? …… a “persistent depression and a runaway financial-market meltdown,” he says.
Repost from 3-24-2020
Successful investors have a philosophy, usually carefully cultivated, that they rely upon in their investment decisions no matter what happens in the markets in the short-run. Successful investors are rarely shaken by short-term events and, rarer still, guilty of short-term thinking. USAGOLD has always nurtured the belief that gold should not be purchased principally as a speculative investment, but more as an asset accumulated for long-term asset preservation in the form of coins and bullion. That, in fact, is a viewpoint it shares with the bulk of its clientele.
In A Layman’s Guide to Golden Guidelines for Wise Money Management [Link], R.E McMaster the long-time commodity market analyst and editor of the famed newsletter, The Reaper, offers this advice on “The Law of Long-Term Time Preference”:
“Those who plan, invest and execute long-term win. Win-win decisions, looking to the long term with short-term work and sacrifice, are historically the tickets to success in all areas of life – short-term sacrifice for long-term benefits, deferred gratification rather than instant gratification. This is the difference between wealth and poverty, between class and trash. Those who make primarily fear-based, ego-based, selfish, win-lose, lose-lose, emotional and/or short-term decisions as their primary mode of operation in life nearly always end up miserable, often as losers in a comprehensive sense in life. Such people are walking tornadoes to be avoided.”
“First it was Japan. Then Europe. Now investors are scanning the world for the next outbreak of stagnant inflation and tumbling yields.”
USAGOLD note: We have been beating this drum about the Japanification of the global economy – including the United States – for a long time on this page. More and more, the evidence mounts that we are in a structural rut from which there may be no escape. Japan has certainly had a rough time with it and now the government is poised to launch another round of infrastructure projects.
Repost from 12-9-2019
Financial Times/Martin Sandbu
“Some economists now call openly for explicit helicopter money in the sense that central banks should directly fund government deficits. ‘I do think the time is right for monetary finance,’ says Lord [Adair] Turner. [the former head of the UK’s Financial Services Authority]. ‘There would be a clarity of assuring people that there is no limit on the money available.'”
USAGOLD note: Not to throw cold water on the increasingly popular idea of helicopter money, but nowhere in this article are the potential consequences of its implementation addressed. Not even a passing mention …… Funny how crisis always brings out the apologists for running the money printing presses. Helicopter money is quantitative easing on amphetamines.
Repost from 3-23-2020
Part 4 of 5 . . . . .
What makes this gold market rally
different from all others
Bullion banks are covering their shorts on price retreats, not piling-on
Declining global interest rates have put a damper on another traditional source of physical gold supply – bullion bank leasing programs. “We can conclude,” writes gold market analyst, Alasdair Macleod, in an insightful paper published at the GoldMoney website, “that the basis for highly geared interest rate arbitrage by borrowing gold is running into a brick wall. Not only is there no incentive for lessors but also there is also a diminishing appetite for lessees because the opportunities are vanishing. Synthetic gold liabilities are being gradually reduced, not only by ceasing the creation of new obligations, but by buying bullion to cover existing ones. This will have been particularly the case when the USD yield curve began to invert in recent months (itself a backwardation of time preference), and was the surface reason, therefore, that the gold price moved rapidly from under $1200 to over $1500.” This change in direction for bullion banks represents another fundamental difference between this rally in the gold price and rallies of the past. What’s more, given the entrenched low-rate environment, it looks like it might remain a factor for some time to come.
“Gold continued to push higher on Tuesday as a recent wave of selling dried up and Goldman Sachs told its clients the time had come to buy the “currency of last resort.”
USAGOLD note: This article goes beyond the Goldman prediction of $1800 within the next 12 months to harvest opinion from a number of top analysts in London and New York.
Repost from 3-25-2020
(USAGOLD –3/30/2020) – Gold dropped modestly in the wake of last week’s big $140 runup – its best weekly performance since 2008. It is off $8 at $1618 as we begin a new week. Silver is down 43¢ at $14 – a reminder of investors lingering concerns about deflation. Overall financial markets continue to react skittishly to the advancing coronavirus and the severe economic damage it has wrought. Financial Times reports this morning that the already strong demand for physical gold is likely to remain in place with weakening currencies globally and negative real rates of return continuing to dominate investor thinking.
Credit Suisse summons memories of the 2008-2009 financial crisis (See our Chart of the Day below) in a recent update to its gold forecast. “We remain major long term Gold bulls,” says the Swiss bank in an advisory relayed by FX Street, “with the market encouragingly back above its 200-day average having held above key support at $1452/1446. It’s important to note that Real Yields have stopped rising and we still believe a similar dynamic will play out to 2009 when after a sharp initial correction in 2008, gold eventually went on to make new all-time record highs. Resistances above $1700/05 are eventually seen at $1734, the 78.6% retracement of the 2011/15 down move, then the $1796/1803 corrective highs from 2011/12. We still look for new record highs above $1921.”
Chart of the Day
Chart note: The red line represents an older version of the St. Louis Fed’s Stress Index, the blue line the latest rendition. As you can see, financial stress has not been this high since the 2008 financial crisis. Keep in mind the high reading is without the impetus of any financial institution or fund of consequence reporting as of this morning serious difficulties and/or requesting a bailout. Note the acceleration in the index after the Bear Stearns and Lehman failures in 2008.
Streetwise Reports/Robert Moriarity (321 Gold)/3-27-2020
“The message was clear. Just moments before a bank closes the president of the bank says, ‘Your money is perfectly safe in our bank.’ And then slams the door forever. Banks are going to close. The financial system may well shut down for a period. Lots of investors will go to bed rich and wake up poor.”
USAGOLD note: One thing that has not been addressed directly with everything that’s gone on over the past few weeks is the danger of bank failures. Moriarity’s warning will provide those who read it with a back-to-earth moment ……
“The economy is a tricky thing, and it’s vulnerable to all sorts of external threats, as the recent decline of the U.S. Stock Market has proven with the outbreak of COVID-19. Looking back through history, we can prepare and survive so long as we learn the lessons of the past.”
USAGOLD note: A lot of this “to-do list” amounts to common sense, but it doesn’t hurt to be reminded about what really matters in times like these. Don’t forget to add some precious metals to your storage stockpile – the peace of mind inclusion.
“Call it Helicopter Credit. … ‘The Fed has effectively shifted from lender of last resort for banks to a commercial banker of last resort for the broader economy,’ said JPMorgan Chase & Co. chief U.S. economist Michael Feroli.”
USAGOLD note: For most Americans, the Fed’s extraordinary policies seem just what the doctor ordered – some much-needed medicine for a dangerously ill economy. Not much though has been advanced on the longer term consequences of this massive economic bailout. When we consider the Fed as ‘commercial bank of last resort,’ we must keep in mind that the central bank still remains the ‘lender of last resort’ as well.
“I’m fully aware that the provocation is that of, seemingly, an act of God or at least a viral mutation or something so we ought not to begrudge the Fed its humane impulses. But how do you not mobilize every single possible tool in your kit or bomb in your arsenal next time there’s a downturn in anything? I think this introduces the possibility of everything that gold bugs have been praying for. Are we going to talk about gold? I can’t wait.”
USAGOLD note: Grantian wisdom at its best ……With his sense of humor (as you can tell from the above) well in place.
“But the virus, and the global economic collapse that it’s sparking, have created such extreme price distortions that those easy-exit options disappeared on them. Which means that they suddenly faced the threat of having to deliver actual gold bars to the buyers of the contract upon maturity.”
USAGOLD note: Brother, can you spare a 100-ounce gold bar?
“Gold bullion is staying firm, close to a multiyear absolute high. This dynamic has caused bullion to register a relative all-time high compared with the CRB Index. What happened to gold bullion after it registered its previous all-time high relative to the CRB in 2008? It doubled in absolute terms to peak above $1,900 in 2011.”
USAGOLD note: Also …… Is this not a disinflation-deflation signal? If so, the demand for gold will come from investors seeking refuge from a possible systemic meltdown – ala 2008-2009.
“The move would be aimed at reducing the risk of disruption if metal cannot reach London, the world’s most important physical gold trading hub, where trades are underpinned by metal held in high-security vaults.”
USAGOLD note: It was only a few days ago that we were told there is plenty of gold in London just in the wrong bar size. This article tells us the physical availability problem goes beyond bar size to one of getting gold in and out of the world’s central physical gold hub because of coronavirus-related problems.
Cartoon courtesy of MichaelPRamirez.com
Gold Trading Hours
Whenever the gold market gets active, we have a large increase in visitors at our Gold Trading Hours page. Investors want to see which markets – Asian, European or American – are the focal point for price movement. They also want to know when a particular market is going to open or close in areas where gold might experience an influx of buyer or seller interest. That is why we designed this popular page with market hours and a live clock showing the local time in that particular market and all the other major gold markets. Gold Trading Hours is one 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 Trading Hours
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