China pledges to release metal reserves to tackle price and shortage fears
Financial Times/Thomas Hale, Neil Hume and Henry Sanderson/6-16-2021
“Industrial metals are in the spotlight after Chinese authorities made a pledge to release government reserves to tackle concerns over shortages and high prices. The National Food and Strategic Reserves Administration said in a statement on Wednesday that it would release batches of metals, including copper, aluminium and zinc, making them available to manufacturers.”
USAGOLD note: As FT points out in this article, China has about 500,000 tonnes of copper stockpiled which seems a considerable amount on the surface. That said, it consumes about 15 million tonnes of copper a year. We note, though, that gold and silver are not included in the list of stockpile releases.
Visualization by VisualCapitalist .com
“Oil is a natural resource formed by the decay of organic matter over millions of years, and like many other natural resources, it can only be extracted from reserves where it already exists. The only difference between oil and every other natural resource is that oil is well and truly the lifeblood of the global economy. The world derives over a third of its total energy production from oil, more than any other source by far. As a result, the countries that control the world’s oil reserves often have disproportionate geopolitical and economic power.”
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Central and Eastern European banks rush to increase gold reserves
Repost from 6-14-2021
“The Hungarian central bank explained the dramatic purchase of gold bars, highlighting that gold has no credit risk and no counterparty risk, and so reinforces sovereign trust in all economic environments. Another country set on increasing its gold reserves is Poland. Governor Adam Glapinski, also close to the governing party, said that gold should reach 20% of the centrad l bank’s reserves during his next term, as he launched his reelection bid. Glapinski said that the institution he runs will buy at least 100 tones of gold in the coming years to demonstrate the country’s economic strength.”
USAGOLD note: Taking a step back, it is interesting to note that as countries – like Hungary, Poland, India, and China – gain wealth, they choose to shore up their national reserves with gold bullion. It is an age-old practice that cements economic stature and gives the country an aura externally of durable financial strength.
It gets ugly: Dollar’s purchasing power plunged at fastest pace since 1982.
It’s ‘permanent’ not ‘temporary’, won’t bounce back
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Repost from 6-12-2021
“Yup, the current plunge in purchasing power is permanent. And the plunge in purchasing power in the future is also permanent. The only thing that might make a small portion of it ‘temporary’ is if there is a period of consumer price deflation, which has happened for only a few quarters in my entire life, for example in the last few months of 2008, which is indicated in the chart below. So I’m not getting my hopes up. The rest of the time, we’ve had lots of decline in purchasing power. And that has proven to be rock-solid ‘permanent,’ and we never got that lost purchasing power back.”
USAGOLD note: We included the price of gold in the chart referenced by Richter in order to emphasize gold’s functionality as a hedge against currency deterioration and a long term store of value.
Gold and the purchasing power of the dollar
(monthly, 2007 to present)
Sources: St. Louis Federal Reserve [FRED], Bureau of Labor Statistics, ICE Benchmark Administration
China gold consumption almost doubles year over year on robust demand
NASDAQ/Reuters-Min Zhang and Shivani Singh
Repost from 5-1-2021
“China’s gold consumption soared 93.9% in the first three months from the same quarter a year earlier, recovering to pre-pandemic levels fuelled by strong demand for gold jewelleries and rising investment, the China Gold Association said on Friday.”
USAGOLD note: Barbarous relic shines in China post-lockdowns helped along by rangebound pricing. The East buys gold on weakness, the West on strength.
A record 34% of all household income now comes from the government
Repost from 5-1-2021
“We are referring, of course, to Personal Current Transfer payments which are essentially government sourced income such as unemployment benefits, welfare checks, and so on. In March, this number exploded to a mind-blowing $8.1 trillion annualized, which was not only double the $4.1 trillion from February, but was also $5 trillion above the pre-Covid trend where transfer receipts were approximately $3.2 trillion.”
USAGOLD note: To put that 34% in perspective, Durden points out that in the 1950s and 1960s only 7% received government checks. He goes on to say that it is the middle class that is footing the bill. A good many will ask, after seeing the chart below, whether or not we have reached a new permanent plateau.
Sources: St. Louis Federal Reserve, U.S. Bureau of Economic Analysis
Paul Tudor Jones says ‘go all in on the inflation trades’ if Fed keeps ignoring higher prices
Repost from 6-14-2021
“If they treat these numbers — which were material events, they were very material — if they treat them with nonchalance, I think it’s just a green light to bet heavily on every inflation trade,” Jones said on ‘Squawk Box.’ If they say, ‘We’re on path, things are good,’ then I would just go all-in on the inflation trades. I’d probably buy commodities, buy crypto, buy gold.”
USAGOLD note: Some thoughts from the legendary hedge fund manager ahead of the Fed………
Short and Sweet
– One for the history buffs –
730 years of a strong British pound ends in 1931 with gold standard exit
Sources: Bank of England, ICE Benchmark Administration,
St. Louis Federal Reserve [FRED] • • • Click to enlarge
This telling chart from the St. Louis Federal Reserve chronicles the history of consumer prices in the United Kingdom from 1209 to present. We added the price of gold to show the direct relationship between declining purchasing power in the British pound and the sterling price of gold after 1931, the year Britain departed the gold standard. Prior to 1931, there was an occasional minor bump higher in the price of gold, but for the most part, it followed along the same flat line as consumer prices. It was only after Britain separated the pound from gold in 1931 that the price began to move radically higher in terms of the currency. It gained significant momentum after 1971 when the Bretton Woods agreement was abolished. Currencies and gold were then allowed to move freely in international markets. Though interesting from a historical perspective, the real lesson in this chart is that when a nation-state goes from gold-backed to fiat money, gold coins and bullion become a logical and worthwhile alternative for citizen-investors – even after 730 years of relative price stability.
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Money as the greater depression deepens
Repost from 6-12-2021
“It’s not an accident that we usually make good investment calls; the selections arise from a constant awareness of the basics. So I want to briefly review those fundamentals. Let’s start with gold. We’re very gold-oriented around here. You undoubtedly have a good position in gold. Many of your friends are aware that you’re a gold bug, and more than a few of them question your wisdom. Are you able to give them a succinct and cogent explanation not just for why gold is cyclically a good speculation, but why it’s money? I’ll wager the answer in many cases is, ‘No.'”
USAGOLD note: Casey goes on to cover the five characteristics of good money based on Aristotle’s recommendations 2500 years ago and explains why they are important. He ends with a straightforward course of action: “Forget those ridiculous nostrums about having 5% of your portfolio in physical gold, for insurance. I’d say, have a very significant portion of your net worth in gold.”
Gold gets some relief in early Friday trading
‘Short term gyrations do not affect the long-term fundamental picture,’ says EMA
(USAGOLD – 6/18/2021) – Gold is getting some, albeit unconvincing, relief this morning from the sell-off of the past two days. It is up $6 at $1780. Silver is up 19¢ at $26.17. Gold is bucking headwinds beyond the Fed turning suddenly more cautious at its meeting on Wednesday. The annual summer slowdown is in full swing, and next Thursday, we have options expiration. (Gold often, but not always, experiences a sell-off on and around options expiration dates.) With today’s upside taken into account, gold is down about 3% over the past two days, and silver is down a little over 4%. One of the more reasonable assessments we have seen of late on gold’s future prospects comes from Equity Management Academy in an analysis posted at Seeking Alpha posted before the sell-off of the past two days.
“It is a perfect example of buy the rumor, sell the fact,” says EMA. “The bus in the gold market is overcrowded. Every article on the Internet is about this short squeeze mentality and that the US dollar is weakening and doomed. They all scream that gold and silver will rocket up. Even so, gold and silver are down. The market is telling us that the recent rally was in anticipation of all of this inflation news. Now the markets are taking a breather since the news is now out.……Most conservative traders avoid trading around the average price. Wait for the market to reach an extreme above or below the market to trade, when the probabilities are far higher that the trade will revert back to the mean. It is not 100%, but the odds greatly favor such reversions to the mean. We still recommend staying long with your core positions. These short-term gyrations do not affect our long-term fundamental picture that the economic and monetary policy, the debt, interest rates, shortages, and other factors all favor gold and silver increasing in price.”
Chart of the Day
Silver and Copper Prices
(in percent, one year)
Silver/Grey–Copper/Orange
Chart courtesy of TradingView.com • • • Click to enlarge
Chart note: Copper seems to have garnered its fair share of attention in the fully empowered green technology revolution, but silver – another major beneficiary – is rarely mentioned, even though it has kept pace with copper over the past 12 months and, at times, outperformed it. Copper is up about 57% over the past year, and silver is up about 51%.
Investors grip wheel with two hands amid rising anxiety
Investopedia/Caleb Silver/6-8-2021
“Recent market volatility has investors gripping the wheel with both hands, but staying the course as most acknowledge that we are in an asset bubble. We recently surveyed our daily newsletter readers, which showed that 44% are leaning bullish, compared to 48% last month, which was a pandemic high. Meanwhile, 63% say we are still ‘in a bubble’, and 59% say the stock market is ‘overvalued’. “
USAGOLD note: This Investopedia study reinforces the notion that a mad dash for the exits could develop if and when the stock market starts to turn……
El Salvador’s ‘stupid’ decision to adopt bitcoin as legal tender could collapse the economy, economist Steve Hanke predicts
Business Insider/Shalini Nagarajan/6-16-2021
“Hanke predicted bitcoin holders in Russia or China would exploit El Salvador’s citizens to cash out their holdings, ultimately draining the country of US dollars.”
USAGOLD note: Hanke also accused El Salvador of setting the stage for the global criminal element to switch bitcoin for “real legal greenbacks.” He summed up the whole affair with two words: “It’s ridiculous.”
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Biden’s reckless budget has potential to crush America’s economy, trigger massive recession
FoxBusinessNews/Justin Haskins/6-12-2021
“Undoubtedly, some Americans will find these programs appealing, but what most of the country will not want to hear is that Biden has absolutely no way to pay for his incredibly expensive plan, and that its costly provisions could result in a large-scale economic crash.”
USAGOLD note: Haskins runs through some of the potentially catastrophic consequences associated with the print and spend policies of the Biden administration.
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The greatest failure of American macroeconomic policy
Repost from 6-14-2021
“We ended yesterday’s Diary with a question: Who will tame inflation this time? You already know the answer, don’t you, Dear Reader? No one. It’s too late for that. Too many businesses… households… and the government itself depend on “printing press money.” Too many economists, investors, politicians, and policymakers have forgotten how inflation works. They think it stimulates the economy. And today, the costs of tapering off the Federal Reserve’s crackpot policies are far too high.”
USAGOLD note: Bonner says we aren’t going to see any Reagans or Volckers, but we will see Connallys “aplenty.” That is just another way of saying we have a long way to go on the inflation track without much in the way of a deterrent. As Secretary of the Treasury under Richard Nixon, John B. Connally presided over the devaluation of the dollar, severing the link between the dollar and gold thus launching the fiat money system, and price controls as a means to fighting inflation. He famously told European finance ministers in 1971 that the dollar is “our currency, but your problem.”
Real interest rates suggest it’s a good time to buy and hold gold
Repost from 6-14-2021
“Let’s investigate the relationship between real interest rates and the price of gold.”
USAGOLD note: An interesting chart study and quick read with positive results for current and would be gold owners from Mish Shedlock……
Nobody saw inflation coming in the 1960s, but it could be back
Repost from 3-18-2021
“Everything old is new again, and that includes investor complacency when it comes to inflation. Ian Shepherdson, chief U.S. economist for the forecasting firm Pantheon, thinks that complacency is due to the anemic pace of price increases in recent years. The same thing happened in the early 1960s – just before the double-digit inflation that spilled into the 1970s, he wrote in a report Monday.”
USAGOLD note: Inflation snuck up on the country in the 1960s, then exploded in the 1970s. Gold, after two U.S. dollar devaluations and a decade of runaway inflation, went from $35 to $650 using the London Fix as a reference.
Gold Price
(1965-1980, LBMA)
Sources: St. Louis Federal Reserve, ICE Benchmark Administration
Fed ‘guessing’ on inflation being transitory – Gundlach
Repost from 4-29-2021
“I’m not sure why they think they know that it’s transitory. How do they know that when there’s plenty of money printing that’s been going on and we’ve seen commodity prices going up really massively?” – Jeff Gundlach, DoubleLine Capital LP
USAGOLD note: It is nearly a maxim in economics that once inflation is unleashed it is very difficult, if not impossible to control. Now we are being told the Fed has some sort of magic tools it can deploy to keep it in check. Gundlach is right to raise the question posed above, in our view.