Project Syndicate/Otmar Issing/11-30-2021

“The argument that today’s inflation is only temporary assumes that global unemployment remains substantial, and that trade unions are weak. In that case, there would be no reason to expect that wages will increase significantly, leading to a sustained rise in prices. But that may not be the case, because the global economy is at a turning point: conditions may be shifting from deflationary to more inflationary overall.”

USAGOLD note: Issing is the former chief economist for the European Central Bank. His argument gets us back to the theory making the rounds earlier in the year that we are in the early stages of an important paradigm change –  from a global disinflationary environment to a new age of inflation. Of course, such considerations make a compelling argument for diversification in precious metals.

MarketWatch/William Watts/11-29-2021

“OPEC+ – the combo of the Organization of the Petroleum Exporting Countries and other major producers, including Russia – ‘has returned to a position of positive leverage, which it will defend by keeping inventories low, the market in balance and taking action to support optimal reservoir management through paced volume growth,’ the analysts said in a Monday note.”

USAGOLD note: If $150 oil becomes a reality, expect inflation to kick into high gear. Energy is a component of pricing for just about everything – and on a global basis.

Chart courtesy of TradingEconomics.com

The Gold Observer/Jan Niewenhuijs/11-18-2021

“In my opinion it is important to understand the current framework, if only to question its longevity. Since 2006 the price of gold in U.S. dollars is inversely correlated to (expected) real interest rates derived from the 10-year U.S. Treasury Inflation Protected Security (TIPS), as you can see in the chart below. This correlation is what I refer to as the current framework.”

USAGOLD note: Niewenhuijs explores the factors determining the gold price – a solid briefing for the beginner and a refresher course for gold investing veterans. Highly recommended.

Chart courtesy of Merk Investments

MarketWatch/Barbara Kollmeyer/11-18-2021

“People are really underappreciating the degree of risk that they’re taking because now that we have — especially for the really big megacap names — even greater overvaluation than we’ve had before, the downside risk is extremely high.” – Steven Jon Kaplan, Morgan Stanley

USAGOLD note: Kaplan’s opinions, says Kollmeyer, run contrary to the typical message from Wall Street that investors should “keep at it.”

Financial Times/ Gillian Tett/11-18-2021

“The question I am referring to is whether the US Treasuries market is robust enough to handle the shocks that might arise from those first two problems. For while the US government bond market used to be considered to be the world’s most liquid and deep asset class, in March 2020 that cosy assumption was smashed apart.”

USAGOLD note: Those first two problems have to do with exiting quantitative easing and whether or not we will be getting a new Fed chairman at the turn of the year. The latter problem was settled yesterday with the reappointment of Jerome Powell, but not the question of how the markets will receive it. Tett goes to the heart of the matter at the link above – an important read. It is surprising how the bulk of financial media tries to avoid the very fundamental questions she raises.

MarketWatch/Chris Matthews/11-19-2021

“One more area that I hope nation states start paying greater attention to is the rise of cryptocurrency — because what looks like a very interesting and somewhat exotic effort to literally mine new coins in order to trade with them has the potential for undermining currencies, for undermining the role of the dollar as the reserve currency, for destabilizing nations, perhaps starting with small ones, but going much larger.” – Hillary Clinton

USAGOLD note: Bridgewater’s Ray Dalio may have been on to something earlier this year when he said “outlawing bitcoin is a good probability.” He reasoned that “every country treasures its monopoly on controlling the supply and demand. They don’t want other monies to be operating or competing, because things can get out of control.”

The Gold Observer/Jan Nieuwenhuijs/11-29-2021

“The weighted average of seventeen stock market cap to GDP ratios reached 162% at the end of the third quarter of 2021, which is the highest ever since 1870. It’s unlikely it has been higher previous to 1870, because economies were not as intertwined then. Most likely, equity bubbles were more local. In addition, before 1870 countries were commonly on a metallic standard that prevented long periods of excessive speculation.”

USAGOLD note: Nieuwenhuijs joins the list of research-oriented commentators who see the current stock market as the most overvalued in history. The chart below is telling.

Wellington Management/Brian Hughes and Gordy Lawrence/June 2021

“We’ll start with the punchline: An imbalance has developed between the supply of and demand for liquidity, and as a result we’ve seen a significant increase in the potential for the public equity market to jump from a state of calm to one of chaos.”

USAGOLD note: This is the full report Wigglesworth cites in the post below. Wellington raises concerns likely to resonate among our clientele. The “punchline” above serves as warning how quickly things can change – from calm to chaos. Under such circumstances, one would do well to be the lemming with the golden parachute. A must read ……

Financial Times/Robin Wigglesworth/11-28-2021

“Investors have been blithely skating into the Christmas period, basking in another remarkable rally across financial markets. But the ice underneath may be thinner and brittler than many realise, as Friday’s violent sell-off showed.”

USAGOLD note: I think most get a sense that something might be lurking under the financial markets’ bed and that when it shows itself, things could get ugly in a hurry. Wigglesworth goes on to cite an analysis from Wellington Management that emphasizes the mismatch between demand and supply liquidity. In short, all’s well when the markets are calm, but the moment the selling begins, it can get overwhelming in a hurry – the fragile market hypothesis.

Project Syndicate/Raghuram G. Rayan/11-23-2021

“Notwithstanding the growing (but often unspoken) worries at the Fed, central bankers nowadays are reticent to see inflation as a problem. In the past, the current levels of inflation would have prompted them to square their shoulders, look determinedly into the TV cameras, and say, ‘We hate inflation, and we will kill it’ – or words to that effect. But now they are more likely to make excuses for inflation, assuring the public that it will simply go away.”

USAGOLD note: Rajan runs through a litany of reasons why the Federal Reserve is likely to tread lightly when it comes to taming inflation. “The current impediments to central-bank action,” he says, “will mean more and sustained inflation, and a more prolonged fight to control it.” Needless to say, if Rajan is right, that reluctance to act forcefully will fuel demand for the precious metals for some time to come. Rajan is the former governor of the Bank of India and currently a professor of finance at the University of Chicago.

Incrementum/Ronald Stoferle/11-29-2021

“A 25% price rise in 2020 and its role as a hedge in the Covid Crash speaks for itself. And now gold is down 3.5. But what is this 3.5 % against the 25 %, is this really so bad? No, and many other events speak in favour of gold. One of these is the gold purchases by central banks around the world. As Palantir’s interest shows, this is not limited to central banks. Comex gold delivery is also higher than it has been for a long time. And what do we see in technical analysis? The mother of all “cup and handle” formations. A breakout from this formation could mean a price of $2800.”

USAGOLD note: Stoferle offers some much-needed perspective on gold’s rangebound performance so far in 2021.

Bloomberg/Enda Curran/11-17-2021

“We shouldn’t dismiss what a failure to do so might mean for the world. Great powers rarely desire to go to war. But history is replete with horrifying examples of how they stumbled into it, nonetheless. We can’t just count on cool heads and better angels.” – Hank Paulson, former Treasury Secretary

USAGOLD note: With everything that is going on the monetary front we tend to overlook the geopolitical particularly with respect how it might play in financial markets. Paulson says deteriorating relations between the United States and China “is likely to make the United States, China and the world more susceptible to financial crises.” Shaking that tree a little harder, would it be fair to say that the deterioration deepened long ago – at about the time China stopped buying U.S. Treasuries? In short, we might already be in a financial crisis the result of tensions between the two countries.

ScienceAlert/Mike McRae/11-12-2021

“Filling a germ’s pockets with gold could be a handy way to end an infection. Frustratingly, scientists have struggled to turn this nugget of knowledge into a practical antimicrobial therapy. Researchers from the Southern University of Science and Technology and Fudan University in China, and the University of Leeds in the UK, recently joined forces to repackage gold nanoclusters to make them more appealing to bacteria and less damaging to our own bodies.”

USAGOLD note: Though this is not the sort of news likely to put even a minor dent in the supply-demand picture, we do keep finding these very important technological uses for the yellow metal – all beneficial.

Axios/Felix Salmon and Hans Nichols/11-14-2021

“The big question facing the White House between now and next year’s elections is whether it will be able to use America’s real-world economic health to boost President Biden’s economic approval ratings.”

USAGOLD note: Economic good health, like beauty, is in the eye of the beholder. A recent Harris Poll reports 36% of Americans believe the country is on the right track and 56% believe it is on the wrong track.