Why gold?
Daily Reckoning/James Rickards/10-19-2020
“Now the third great bull market is underway. It began on December 16, 2015 when gold bottomed at $1,050 per ounce at the end of the 2011-2015 bear market. Since then, gold has nearly doubled. That’s a nice gain, but it’s small change compared to 2,200% and 760% gains in the last two bull markets. When it comes to capital and commodity markets, nothing moves in a straight line, especially gold. But this pattern suggests the biggest gains in gold prices are yet to come. And right now, my models are telling me that gold is poised for historic gains as the third great bull market gains steam.”
USAGOLD note: In this analysis, Ricards list three “drivers” for gold that he says “would put it at $14,000 per ounce by 2026.” We are on board for much higher prices (and we have a great deal of respect for Ricards and his writings on the gold market), but predictions of stratospheric numbers prompt us to wave the caution flag. We hope that Ricards turns out to be right, but we wouldn’t buy gold based on the metal going to a five-figure number within the next five years.
Turkey’s central bank fails to raise rates, lira sinks to all-time low
Financial Times/Laura Pitel/10-22-2020
“Turkey’s central bank has dented hopes for a return to economic orthodoxy, ignoring calls from many investors to raise its main interest rate and sending the lira to a new record low. The currency fell more than 2 per cent immediately following the decision …”
USAGOLD note: It is no mystery why the citizens of Turkey import so much gold. It is also no mystery why they are reluctant to give it up in one of the many schemes the government and central bank have offered in order to recycle those savings into the economy. The time to buy gold is well before a debasement is in full swing. Gold is up almost 350% in Turkish lira over the past 12 months. Please see the chart below.
Chart courtesy of TradingView.com • • • Click to enlarge
Thinking about buying gold and silver?
Gold in six easy lessons
1. Don’t buy it because you need to make money; buy it to protect the money you already have.
2. Don’t look at price as a barrier; look at it as an incentive.
3. Don’t buy the paper pretenders; buy the real thing in the form of coins and bullion.
4. Don’t fall prey to glitzy TV ads; do your due diligence instead.
5. Don’t allow naysayers to divert your interest; allow yourself the right to protect your interests as you see fit.
6. Don’t forget the golden rule: Those who own the gold make the rules!
A new Bretton Woods moment
The International Monetary Fund/Kristalina Georgieva-IMF Managing Director
“We face what I have called a Long Ascent for the global economy: a climb that will be difficult, uneven, uncertain—and prone to setbacks. But it is a climb up. And we will have a chance to address some persistent problems — low productivity, slow growth, high inequalities, a looming climate crisis. We can do better than build back the pre-pandemic world – we can build forward to a world that is more resilient, sustainable, and inclusive. We must seize this new Bretton Woods moment.”
USAGOLD note: Georgieva summons the ghost of John Maynard Keynes as the IMF puts its blessing on the movement to replace austerity programs with full-out fiscal and monetary stimulus – in general, the progressive economic agenda including presumably full engagement of the money printing press on a global basis.
Image: John Maynard Keynes before 1913
Repost from 10-16-2020
Massive stimulus takes budget deficit to record $3.1 trillion
“The US federal budget deficit spiked to a record $3.1 trillion in the fiscal year that ended in September, according to data released Friday by the Treasury Department. The monthly budget statement caps a year rife with economic catastrophe and unprecedented relief measures. The coronavirus pandemic first slammed businesses, corporations, and households in February and continues to wreak havoc on US economic growth as case counts swing higher.”
USAGOLD note: Tax revenues cover half U.S. government spending. The other half is covered by debt. The chart below reflects the dramatic gap between expenditures and revenue. In times past, the Fed would at least make an attempt to discourage excessive government debt, but now it has taken the lead in encouraging even more spending.
Repost from 10-16-2020
Fear is a viral monster
American Institute for Economic Research/Donald J. Boudreauz
“More generally, the newly demonstrated willingness of state officials to destroy, with just a few executive diktats, hundreds of billions of dollars of capital value cannot but push some entrepreneurs and investors into inactivity. Why build, or build grandly, when some pompous governor or mayor – someone whose only ‘skill’ and most intense itch is to exercise power over fellow human beings – can, with a mere signature, smash down a sledgehammer and turn to mush the fruits of years of hard work and sacrifice?”
USAGOLD note: A good question …… perhaps the ultimate economic question in the strange, some would even say alien times in which we live. Donald J. Boudreaux is a professor of economics and a former economics department chair at George Mason University.
Repost from 8-23-2020
Why is gold valuable?
“In light of the deep recession caused by the coronavirus pandemic, the world’s most powerful central banks have responded in two ways: with a combination of quantitative easing – essentially money printing – and lowering interest rates (to sometimes even negative rates). The combination of these two monetary actions could possibly lead to inflation. As a result, many people seek gold as a more reliable store of value than normally stable paper currencies.”
USAGOLD note: Solid overview for first-time investors. This article lays out the reasons why gold is a valuable alternative to currency-based savings.
Repost from 8-27-2020
Gold, the simple math
“Whatever the electoral outcome, the path towards monetary debasement is bipartisan. It is crucial for investors to focus on the long-term trend and to avoid the distractions of short-term timing considerations. We believe that now is the time to start layering in gold exposure, not when the rest of the world tries to do so.”
USAGOLD note 1: A very long time ago, before gold was a word uttered with regularity in the mainstream financial media, I was playing golf with a friend and client many years my senior – and a very successful investor. While we waited for the group ahead of us to clear the green, he walked across the fairway from some distance away, grabbed my arm, looked me in the eye, and said: “The time to buy gold is when everything is quiet.” He then turned, walked back across the fairway, addressed his lie, and hit his shot without another word.
USAGOLD note 2: We mentioned this article in this morning’s DMR and repost it now for those who may have missed it. The ‘simple math’ referenced has to do with gold’s availability versus the potential utilization among institutional money managers.
Repost from 10-22-2020
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Book Review
“We sometimes forget that inflation is a process rather than an event. One of the better-known examples of that axiom is the nearly two centuries-long debasement of Rome’s silver denarius – an inflationary episode Jack Whyte, a writer of historical fiction, skillfully addresses in his latest novel, The Burning Stone ……
Over the long run, gold in the modern era has maintained its purchasing power as it did in Roman times, while the dollar, like the denarius, has been steadily debased. So it is by the circuitous route just taken, you now know how Jack Whyte’s depiction of the Roman inflation in The Burning Stone reinforces the argument for gold ownership today. It also explains why we went to the trouble of presenting a review of this intriguing book in our monthly newsletter.”
March 2020 edition of our monthly newsletter
We think you will appreciate this News & Views Special Report given recent events!
If you think you could benefit from a concise review of the latest news, analysis and opinion on the gold market from a variety of expert sources, then News & Views is the newsletter for you. Since the early 1990s, we have offered it free-of-charge as a monthly service to our regular clientele and as an incentive to prospective clients at no obligation. By subscribing, you will automatically receive future editions and occasional in-depth Special Reports by e-mail.
‘Bubble elements’ thanks to ‘free money’ – Lloyd Blankenfein
“Money is close to a free commodity,” Blankfein said. “And when something is free, you tend not to husband it, you tend to overuse it like it’s a free good.”
USAGOLD note: Blankenfein goes on to say that “people” are lending money to the U.S. Treasury “as if there would never be inflation again.” Do those “people” by any chance occupy offices at the Marriner Eccles Building? The former CEO for Goldman Sachs, we remind ourselves, was once a gold trader who most likely understands all too well the dangers of the printing press and with it the ancillary creation of both moral hazard and market bubbles.
Repost from 10-16-2020
Gold continues to seesaw around the $1900 mark; Citibank analysts see silver at $40 over the next 12-months
(USAGOLD – 10/22/2020) – Gold continues to seesaw around the $1900 mark in the run-up to the U.S. election with safe-haven demand acting as a positive influence and ongoing gridlock over the stimulus package acting as a deterrent. Overarching all, pandemic infections have begun to climb again in both the United States and Europe. The metal has been stuck in a $50 range on either side of $1900 for the past 30 days. This morning it is trading at $1914 – up $8 on the day. Silver is up 7¢ at $24.87.
Citibank is out with a fresh report on the precious metals market saying investor interest will “remain high during 2021 as pressure on governments to devalue currencies, concerns about vaccine efficacy and take-up rates and questions over equity and bond valuations and rising global debt remain in most scenarios.” The investment bank’s view on silver is notably “very bullish,” according to a review of the analysis posted at the Forbes web site. It sees silver’s price rising to $40 over the next 12-monhts with “$50/oz a very realistic target and $100/oz possible,” according to the report.
Chart of the Day
Chart courtesy of MacroTrends.net • • • Click to enlarge
Chart note: We have had quite a few new visitors over the past several 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 the dollar, 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.
Goldman says commodities headed for bull market in 2021 on inflation fears
“The bank forecast a return of 28% over a 12-month period on the S&P/Goldman Sachs Commodity Index (GSCI), with a 17.9% return for precious metals, 42.6% for energy, 5.5% for industrial metals and a negative return of 0.8% for agriculture.”
USAGOLD note: Goldman sticks with its bullish commodities forecast – continues to see a strong market for gold and silver.
50% of Europe small business faces bankruptcy according to McKinsey report
ZeroHedge/Tyler Durden/10-22-2020
“McKinsey found 20% of SMEs in Italy and France could file for bankruptcy within the next six months. Like the US, European SMEs account for two-thirds of the workforce and at least half of economic value-added. A further collapse of SMEs is a warning sign of an economic recovery that doesn’t resemble a ‘V-shaped’ recovery.”
USAGOLD note: A disturbing trend that will find its way to every nook and cranny of Europe’s economy. Rabobank’s Piotr Matys is quoted as saying that the pandemic storm never left: “We were in the eye of the storm, I think.” Meanwhile, back in Washington DC the politicians have their own idea of how to go about addressing America’s most pressing problems, as suitably illustrated in the Ramirez cartoon above.
Cartoon courtesy of MichaelPRamirez.com
Food price inflation hits emerging markets hard
Bloomberg/Max DeHaldevang/10-21-2020
“Rising food costs are hitting emerging markets with a double whammy: driving millions into hunger, and thwarting central banks as they try to end the worst slump in decades.”
USAGOLD note: The canary in the inflation coal mine? Needless to say, developing countries, needless to say, will not be immune to the problem. In a separate article, Bloomberg tells the story of a hunger crisis in Latin America under the ominous headline: No meat, no milk, no bread: Hunger Crisis rocks Latin America.
Notable Quotable
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“A lot of people come to me asking how they can get rich quick…It’s the most disturbing question I get. Why? It’s the wrong question. It tells me that they don’t have the foundation of financial intelligence required to use their money well if they do – somehow – become wealthy. This is because most people don’t understand that, when it comes to being rich, it’s not about how much money you make. It’s about how much money you keep.”
Robert Kiyosaki
Daily Reckoning
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Standard Chartered sees dollar as vulnerable to ‘significant depreciation’
CNBC/Eustance Huang/10-21-2020
“The [Standard Chartered] analyst said a victory for former Vice President Joe Biden would mean any dollar depreciation is set to be ‘very clear and very pronounced.’ If President Donald Trump is reelected, Robertsen said it will be ‘a little bit more messy in the short term.'”
USAGOLD note: Standard Chartered is not alone when it registers concern about the dollar. This article ends with a reminder that Stephen Roach, the highly respected Yale economist, forecasts a 35% decline for the dollar in 2021. If so, gold is likely to experience heavy demand. As the chart below shows, gold and the dollar index rose together in the first stages of the pandemic when both were seen as safe havens within the investment community. Beginning in June, they parted company (gold higher, the dollar lower) as worries about the dollar began to surface at the launch of the Fed’s stimulus program.
Click to enlarge
The case against Modern Monetary Theory
Financial Times/Stephen King/10-21-2020
“Giving elected representatives the keys to the printing press is the equivalent of giving a gambling addict the keys to the casino.”
USAGOLD note: HSBC’s Senior Economic Advisor addresses the consequences of running the money printing at full tilt. “Governments without access to tax revenues,” he says, “can instead debase the coinage.” How likely is it that the United States will be faced with such a choice? A chart we ran here a few days ago offers a clue as to where we might be headed.
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Investment appetite for gold will rise post-election
“Investment appetite for gold will continue to rise, particularly in the period that follows the U.S. election. In fact, we reiterate that the long gold trade is likely agnostic to the election outcome — and gold bugs need not look too far on the horizon to expect a large-scale fiscal deal that could de-bottleneck the ongoing real rate suppression,” – TD Securities, Canadian investment bank
USAGOLD note: As gold remains in a pre-election muddle, some are predicting a strong post-election rally. TD Securities vocalizes what a good many are thinking when it says: “A blue wave would lead to global reflation, which would be the most positive outcome for gold.” At the same time, a Trump victory coupled with gains in the Congress could produce an equally large dose of Republican-style stimulus. Bottom line? Own gold. Sit back. Watch the show.
Repost from 10-16-2020
Wildfires across U.S. could ignite a financial crisis
“Wildfires across the U.S. West are among the sparks from climate change that could ignite a U.S. financial crisis by damaging home values, state tourism and local government budgets, an advisory panel to a U.S. markets regulator found.”
USAGOLD note: Something else to add to the financial worry list …… One of the developments over the last few weeks that has caught our attention is the layering effect of piling one problem atop another. We were struck by reports over the weekend, for example, that the coronavirus had complicated wildfire evacuation efforts in Oregon and California. That advisory panel, by the way, is not some patched together political group but representatives of major oil companies, banks and asset managers who have a direct financial stake in what is occurring in the American west.
Repost from 9-14-2020
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