Gold and silver rocket higher in an extension of yesterday’s surprise rally
Gold up almost 4% on the week, silver over 6%
(USAGOLD – 5/7/2021) – Precious metals rocketed higher in an extension of yesterday’s surprise technical rally as an equally surprising April payrolls report fell radically short of estimates. Gold is up $24 at $1841. Silver is up 22¢ at $27.60. Bond yields and the dollar dropped sharply in response to the payrolls report. On the week, gold is up almost 4% and silver over 6% – their best week in six months. Like a good many gold market experts, Gold Newsletter‘s Brien Lundin was surprised by yesterday’s sharp rally past the $1800 barrier.
“Digging a bit deeper,” he writes in an e-mail client note, “the move in the metals was coincidental with legs down in the Dollar Index and the 10-Year Treasury yield, but the question remains as to what sparked those declines. Regardless, the moves in the metals outpaced the corresponding moves in the dollar and yields. As others have commented, gold was helped by its rocket shot through the $1,800 ceiling, a move that undoubtedly sparked some buy-stops and throttled up the engine. As I’ve been noting, gold has been helped by a notable lack of bullish sentiment, even by the die-hard gold bugs. In this kind of environment in which sellers have been exhausted, new rallies are often born.”
Chart of the Day
Gold price performance in top global currencies
(Since May 2015)
Chart courtesy of TradingView.com • • • Click to enlarge
Chart note: The collapse of fiat currencies’ purchasing power, writes market commentator Alasdair Macleod in a detailed analysis posted at Gold Eagle, “is unlikely to echo the great European inflations of the 1920s, because to a large degree commerce subsisted on the alternative of gold-backed dollars, instead of local currencies. Today, the collapse of the dollar will mean there is unlikely to be any alternative currency available, because they are all tied to the dollar.” Gold’s strong, synchronous performance in the world’s top currencies over the past five years supports Macleod’s point. It is up 52.84% in U.S. dollars, 76.4% in India rupee, 70.1% in British pounds, 58.8% in Chinese yuan, 41.9% in European euros, and 39% in Japanese yen. In the event of a global breakdown in fiat currencies, concludes Macleod, “anyone who does not plan to get hold of some physical gold and silver with a high degree of urgency could end up sinking with nothing but valueless fiat currencies.”
“German private households hold more than 6 percent of the world’s gold reserves, the equivalent of 616 billion euros at last count. The share of gold bars and gold coins in this gold ownership is estimated at 41.7 percent. Total: 5,194 tons. In the 2019 study, it was still 55 percent or 4,925 tons.”
USAGOLD note: The German peoples’ interest in gold is not a new story. The fact that they own over 9000 tonnes of the metal – and over 40% is in the form of coins and bullion – will catch a good many by surprise.
USAGOLD note: We see Lyn Alden as a bright light among young market commentators and post this interview as an example of her insight and analytical skills. Our readers are likely to appreciate her no-nonsense, down-to-earth approach. She thinks that real yields are the strongest indicator of where gold is headed and tells why in this interview.
“The decline of Rome was the natural and inevitable effect of immoderate greatness. Prosperity ripened the principle of decay; the causes of destruction multiplied with the extent of conquest; and as soon as time or accident removed the artificial supports, the stupendous fabric yielded to the pressure of its own weight.”
The Decline and Fall of the Roman Empire
“The hedge-fund selling was most concentrated in the communications-services and information-technology sectors, according to the BofA data — i.e., the tech winners that have thrived during the COVID-19 pandemic. Who’s buying? Retail clients were the only group to buy U.S. equities for the third week in a row and have been net buyers for 10 straight weeks, per Bank of America.”
USAGOLD note: So, which is the smart money?
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“The Mint increased its revenue by 74% in 2020 as a result of exceptionally strong global market demand for bullion…Consolidated revenue increased to $2,527.6 million in 2020 (2019 – $1,453.4 million). Gold bullion volumes increased more than 100% year over year and were 982.8 thousand ounces (2019 – 483.0 thousand ounces) while silver bullion volumes were 29.5 million ounces (2019 – 22.8 million ounces).”
USAGOLD note: Even we were surprised a the strength of Royal Canadian Mint bullion sales for last year. It is not often that we see volume increases of that magnitude in the gold market. RCM silver bullion sales were up almost 30% – a notable increase in its own right.
“Political failure could well become a mounting crisis for markets in coming years – especially if weak governments come alongside the kind of short, sharp shock of inflation which many strategists and economists now expect. Inflation could fuel union demands for wage rises at a time when corporates remain weakened in wake of pandemic – fuelling the kind of industrial wage militancy we last saw in the 1970s.”
USAGOLD note: What political and economic authorities hope to ignite is one thing. The unintended consequences are another. Blain, as he so often does, raises issues here well before anyone else and often in a unique context. “More than a few market commentators,” he says, “have been drawing allusions between the current fracturing political situation in the West, and the last days of Rome. All the usual themes are there; from the threat of monetary weakness from inflation (which will no doubt fuel cryptocurrencies), rising inequality, a rising sense of everyone in it for themselves, and the masses being ignored.”
How to choose a gold firm
It may be the most important choice you make as a gold owner
It is surprising how many prospective investors simply dive into gold and silver investing without much in the way of a consumer inquiry. That lack of simple due diligence has ended up costing a good many investors thousands of dollars, and sometimes even hundreds of thousands before the damage is detected.
Here you will find some brief but useful guidelines
to help you choose the right gold and silver company.
Reliably serving physical gold and silver investors since 1973
Repost from 4-29-2021
“And goodness, he [Niall Ferguson] really does have an enormous canvas. Doom seeks to understand why humanity, time and again through the ages, has failed to prepare for catastrophes, whether natural or man-made.'”
USAGOLD note: It seems nigh impossible to prepare as a society for the worst outcome simply because so many parts must fit together in order to get such a plan to work, let alone determining what kind of catastrophe we should expect. That said, the individual has it well within his or her power to prepare for disastrous events, particularly those originating in financial markets and/or the general economy. This piece reviews Niall Ferguson’s latest historical work – Doom: The Politics of Catastrophe.”
Repost from 5-3-2021
“Consider the scenario of widespread price increases for just one year. For each subsequent year, even if prices don’t increase much, there still exists a compounding effect of the initial price inflation, which would be anything but temporary. To illustrate, if the price of lumber increases by 300% in year one, then only increases at a rate of 1% a year the following five years, lumber is still 300% higher than it was at the start of the first year, even if we call the inflation transient.”
USAGOLD note: A common-sense insight on “transitory inflation” …… Once the inflation cat’s out of the bag – well, it’s out of the bag, and the consequences can quickly compound.
Repost from 3-21-2021
“Recency bias is a funny thing. It’s human nature to expect the near future to look like the recent past. But we all know that’s not how things always play out. And that can be costly, even dangerous, for investors.”
USAGOLD note: Krauth explains why 2021 might be different from 2009 on the matter of inflation ………
Chart courtesy of TradingEconomics.com
Repost from 12/8/2020
“Many years since I had knowledge, by relation, of that mighty, rich, and beautiful empire of Guiana, and of that great and golden city, which the Spaniards call El Dorado, and the naturals Manoa…” – Sir Water Ralegh
USAGOLD note: Rostron brings to life the ancient quest. El Dorado has never been found.
poem by Edgar Allen Poe, song by Donovan
‘If you seek for Eldorado!’
Repost from 4-30-2021
“Forty years ago, President Ronald Reagan and Federal Reserve Chairman Paul Volcker oversaw a root-and-branch restructuring of the U.S. economy.”
USAGOLD note: Don’t get the impression that the two duos are anything but polar opposites……The one came to power when inflation was at its height, the other came to power when disinflation – verging on deflation – was at its height.
Short and Sweet
How much gold is enough?
Investors often ask about the percentage commitment one should make to precious metals in a well-balanced investment portfolio. Analyst Michael Fitzsimmons offered an interesting take on that subject in a recent Seeking Alpha editorial, “Assuming a well-diversified portfolio (which does include cash for emergencies),” he says, “my belief is that middle-class investors (net worth under $1 million), should own at least 5-10% in gold. I also believe that as an American investor’s net worth climbs, the higher that percentage should be because, in my opinion, he or she simply has more to lose by a falling US$. For instance, an investor with a net worth of $2-5 million might have a 15-20% exposure to gold; $10 million, perhaps a 30-40% exposure.” USAGOLD recommends, as it has for many years, a diversification of between 10% and 30% depending on your view of the risks at large in the economy and financial markets.
Coins & bullion since 1973
Repost from 4-29-2021
“Jewellery demand of 477.4t was 52% higher y-o-y . The value of jewellery spending – US$27.5 billion (bn) – was the highest for a first quarter since Q1 2013. Bar and coin investment of 339.5t (+36% y-o-y) was buoyed by bargain-hunting, as well as by expectations of building inflationary pressures. Growth in consumer demand was offset by strong outflows from gold-backed ETFs (gold ETFs), which lost 177.9 in Q1 as higher interest rates and a downward price trend weighed on investor sentiment.”
USAGOLD note: We cited this report in yesterday’s DMR and repost the link here for those who may have missed it. Central banks were also a positive force in the market purchasing 95.5 tonnes of gold in the first quarter. All in all, WGC reports some pretty good numbers coming out of global lockdowns and a general remission in business activity in that demand during first quarters is typically “muted.” Outflows from ETFs were a drag on the price as professional investors cut back their positions.
Gold advances toward the $1800 mark
As 2021 progresses, ‘headwinds will turn into tailwinds’ says Commerzbank’s Fritsch
(USAGOLD – 5/6/2021) – Gold advanced toward the $1800 mark yet again in early trading on a familiar mix – steady yields and a declining dollar. It is up $8.50 at $1797. Silver is up 30¢ at $26.87. Commerzbank’s Carsten Fritsch offers a hopeful assessment of gold’s prospects for the rest of 2021. “We expect ETF inflows and a rising gold price again in the second half of the year,” he says in a recent client note quoted by Bloomberg. “After all, the environment for gold should brighten noticeably. As the Fed will stick to its ultra-loose monetary policy for a long time, bond yields and the US dollar should ease from midyear. Thus, headwinds will turn into tailwinds.” Fritsch forecasts gold going to $2,000 an ounce by the end of the year based on gold ETF flows returning to positive territory.
Chart of the Day
Assets of the top 1% versus the bottom 50%
Sources: St. Louis Federal Reserve, Board of Governors Federal Reserve System
Chart note: “The amount of liquidity pumped into the markets and the economy in the last year dwarfs anything we’ve seen in history,” writes The Northman’s Sven Henrich. “Markets certainly have reacted to it with exuberance and the bounce currently seen in the economy is highly encouraging. Enjoy it while it lasts for markets and the economy will soon have to contend with a new concept and that is: Relative tightening.’ Henrich explains “relative tightening” means simply that the amount of liquidity won’t be repeated. He posts the chart reproduced above with a compelling headline: “The most dangerous phrase in economics: We are from the Federal Reserve and we are here to help.”
“Billionaire Sam Zell says concerns over U.S. inflation and the dollar have led to his purchase of gold as a hedge for the first time last year. ‘When you see the debasement of the currency, you say, what am I going to hold on to?’ Zell says in an interview on ‘Balance of Power.'”
USAGOLD note: Billionaires own gold for the same reasons the rest of us do: It is the portfolio’s go-to guy when the chips are down.
Image courtesy of VisualCapitalist.com
“Economist Judy Shelton has a crackerjack column in tomorrow’s Wall Street Journal on the lack of intellectual and policy diversity at the Federal Reserve. She points out that during the entire term of Chairman Jerome Powell and his predecessor, Janet Yellen, not a single dissenting vote was recorded among the governors. It reminds us of the central bank of the Soviet Union.”
USAGOLD note: The point of this editorial is not that the Fed needs diversity in terms of social norms but in terms of viewpoint. As it is, the Fed is headed down a one-way street with little to divert its direction.
“Gold-silver alloys are useful catalysts for degrading environmental pollutants, facilitating the production of plastics and chemicals, and killing bacteria on surfaces, among other applications. In nanoparticle form, these alloys could be useful as optical sensors or to catalyze hydrogen evolution reactions. But there’s an issue: the silver doesn’t always stay put.”
USAGOLD note: Though most of the world has difficulty working together on technologies, gold and silver have proven themselves to be agreeable partners, according to this study conducted by Rice University chemists.