World Gold Council/Ray Jiu/7-9-2020

“Gold demand in China, in particular, investment demand, has benefited from rising concerns for the economy as well as the lowered opportunity cost amid the COVID-19 outbreak and the central bank’s response to it. But with signs of a potential economic recovery emerging, can we expect gold’s attractiveness as a safe haven in China to fade? We believe that the answer is ‘No’.”

USAGOLD note:  Seems like there are a number of demand sources merging at this juncture and it will be interesting to see how it affects availability, premiums and prices as move through the second half of the year – Asian demand (including China), global investment demand for bars and coins, ETF bullion demand, central bank demand, just to name a few.

Reuters/Lisa Shumaker/7-9-2020

“As the number of new coronavirus cases in the United States rose to a single-day record, fresh government data on Thursday showed another 1.3 million Americans filed for jobless benefits, highlighting the pandemic’s devastating impact on the economy.”

USAGOLD note:  Some signs of moderation in the overall numbers but a cloud of uncertainty still hangs over the employment picture.

Sources:  U.S. Bureau of Labor Statistics, St. Louis Federal Reserve [FRED]

Bloomberg/Noah Smith/7-9-2020

“The U.S. is in a very odd situation. Even as the official unemployment rate falls, the health of the underlying labor market is deteriorating as the coronavirus pandemic drags on. The country is in the middle of two simultaneous downturns – a short-term seizure caused by fear of coronavirus and a longer-term slump that will look more like a traditional recession. Unfortunately, the latter is just beginning.”

USAGOLD note:  In other words, it would be foolhardy for investors to believe that addressing “the seizure” would put an end to the “longer-term slump”, i.e., that a vaccine or a treatment, as some have suggested, would be a magic pill that put all our worries to rest.

Seeking Alpha/Austrolib/7-9-2020

“Silver is in backwardation. Physical deliveries of silver this month, July 2020, are at all time records, and July isn’t even half over yet. Something big is happening in silver, and it’s best if gold bugs don’t miss it by paying too much attention to gold. Us precious metals guys, we know the gold numbers very well, but silver gets lost in the mix. The silver rallies tend to be so fast, furious and short-lived that we tend to forget what actually happened, making it difficult to prepare for the next one. How long has silver been in a bull market, using that hackneyed 20% off lows definition for bull markets? How long was the bear market?”

USAGOLD note:  Austrolib goes on the list recent bull markets in silver and what they produced.  A good review for those new to the precious metals market and want to catch up with some quick history.  Since May 1, silver is up over 20%.

Goldmoney/Alasdair Macleod/7-7-2020

“Bullion banks are between a rock and a hard place. For years they’ve been playing the hedge funds as an angler hooks and plays a fish. That game has ceased and there is no easy way for them to get level. For the moment they are trying to put a lid on the price, but the cost has been rising open interest, and therefore rising mark-to-market positions. The August active contract runs off the board at the end of this month and bullion banks are likely to be forced into large delivery volumes again. Furthermore, the exchange for delivery arbitrage facility between Comex and the LBMA is broken, allowing Comex premiums to London spot to go unchallenged.”

USGOLD note:  Conclusion similar to what we posted yesterday with the Bloomberg article on increased delivery commitments in silver and platinum as well ……… Macleod fills in the blanks in this short piece.

Reuters/Video Interview/7-6-2020

“Gold prices are near an 8-year high but investors should keep adding exposure to the precious metal, that’s the advice of Clear Harbor Asset Management CEO Aaron Kennon.”

USAGOLD note:  We once estimated that the price of gold reached over 100 billion marks per ounce during the 1920s nightmare German inflation having started in 1918 at 119 marks per ounce. Caveat venditor – Let the seller beware!  It’s all a matter of currency value.  As pictured, currency denominations went from 20 marks to 20 million marks on roughly the same piece of paper – same intrinsic value – in a few short years.  A 20 mark gold coin, on the other hand, bought roughly the same amount of groceries at the height of the hyperinflation in 1923 that it did in 1918.

BloombergOpinion/Niall Ferguson

“Yet that view attaches too much importance to the change in U.S. foreign policy since 2016, and not enough to the change in Chinese foreign policy that came four years earlier, when Xi Jinping became general secretary of the Chinese Communist Party. Future historians will discern that the decline and fall of Chimerica began in the wake of the global financial crisis, as a new Chinese leader drew the conclusion that there was no longer any need to hide the light of China’s ambition under the bushel that Deng Xiaoping had famously recommended.”

USAGOLD note:  Insights from historian Niall Ferguson on what happened to U.S.-China relations and what we might expect in the future.  A lengthy, important read on the developing new Cold War with China that Ferguson sees as “inevitable and desirable.”

Repost from 7-5-2020

StreetWise/Clive Maund

“Although silver has picked up significantly since its March low it has greatly underperformed gold over the past two years. But this is normal during the earliest stages of a major sector bull market, when gold is favored over silver. On its 20-year chart we can see that silver remains stuck within a giant base pattern that started to form as far back as 2013. This chart makes clear that once gold breaks out to new highs against the dollar, then silver should break out of this base to enter a dynamic advancing phase.”

USAGOLD note:  Maund says silver can go either way – and that its plight is dependent on exogenous factors like the direction of the stock market, gold, and Fed policy.

Repost from 7-5-2020

Project Syndicate/Noriel Roubini

“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

CNBC/Keris Lahiff/7-2-2020

“’As real yields continue to move lower, it makes gold more attractive,” said [MKM Partners’ JC] O’Hara. “We plotted gold along with real yields and that’s the spread between the U.S. 10-year yield less the 10-year breakeven rate. … Yields have been negative and declining for the majority of 2020, and we see no end to that trend for the foreseeable future.’ That tailwind could lift gold as high as $1,900, says O’Hara, implying nearly 7% upside.”

USAGOLD note:  The Fed has said it will keep rates near zero to “at least 2022” [CNBC – 6/10/20].  If that be the case, gold has a long way to go with the wind in its sails.

Repost from 7-5-2020

Financial Sense/Jim Puplava

“I have found throughout my long investment career that an investor needs to make very few investment decisions in their lifetime. The key is to identify a long-term trend as it begins to emerge, invest in that trend, ride it until it ends and another trend replaces it. As an example, U.S. stocks in the 50s and 60s, commodities in the 70s, Japanese stocks in the 80s, tech stocks in the 90s, commodities in 2000s, and tech and paper assets in the 2010s. The next trend that is emerging will favor things or hard assets. This is what the gold markets are telegraphing now. This trend will be inflationary driven by resource shortages and a tsunami of money printing.”

USAGOLD note:  A very well thought out piece from Jim Pulava – well worth the visit at the link above.  Everything cycles and he believes we are moving into a part of the investment cycle that will favor “things” over “paper”.

Repost from 7-5-2020

Reuters/Saqib Iqbal Ahmed/7-8-2020

“A resurgent coronavirus pandemic in the United States and the prospect of improving growth abroad are souring some investors on the dollar, threatening a years-long rally in the currency. … A decline in the dollar earlier this week set off a technical formation known as a ‘Death Cross,’ which occurs when the 50-day moving average crosses below the 200-day moving average, according to analysts at BofA Global Research.”

USAGOLD note:   A heads-up is in order as death crosses are something that garner considerable attention in trading circles. “The death cross indicator,” says Investopedia (with reference to the stock market), “has proven to be a reliable predictor of some of the most severe bear markets of the past century: 1929, 1938, 1974, and 2008. Investors who got out of the stock market at the start of these bear markets avoided large losses that were as high as 90% in the 1930s.”  Could be good for gold and silver.

The Atlantic/Frank Partnoy/July-August 2020

“After months of living with the coronavirus pandemic, American citizens are well aware of the toll it has taken on the economy: broken supply chains, record unemployment, failing small businesses. All of these factors are serious and could mire the United States in a deep, prolonged recession. But there’s another threat to the economy, too. It lurks on the balance sheets of the big banks, and it could be cataclysmic. Imagine if, in addition to all the uncertainty surrounding the pandemic, you woke up one morning to find that the financial sector had collapsed.”

USAGOLD note:  With that, Partnoy, a law professor at UC Berkeley who once structured securities at Morgan Stanley, launches into a lengthy dissertation on how a financial sector collapse could happen centering around a breakdown in the CLO market (collateralized loan obligations).