Gold macros are beyond powerful; price to see $3000 to $5000 says billionaire investor, Thomas Kaplan
“Let’s put it this way, gold still remains on Wall Street and in the west probably the most under-owned, least crowded trade in the global financial markets. … The era in which gold was the asset which people loved to hate and hated to love is starting to come to an end. We’re still in the very early innings. It’s still a smart money trade as opposed to a big passive money trade but that’s about to happen.”
USAGOLD note: Daniella Carbone, who is now with Stansberry Research, interviews Thomas Kaplan, who offers some interesting views on the impact of what he calls “bold-faced” names now involved in the gold business – like Buffett, El Erian, Mobius, Dalio, Gundlach, Rogoff. This interview is highly recommended. As always, Kaplan has profound things to say and Carbone does a good job of drawing him out on the important subject introduced above. (We referenced this interview in this morning’s DMR and repost it here for those who may have missed it.)
“Commercial properties hit by the economic effects of coronavirus could have lost as much as one-quarter of their value or more, laying bare the scale of the damage being wrought across American malls, hotels and other commercial buildings.”
USAGOLD note: The implosion in commercial real estate values is well-known to those of us who remember the 1980s. What began in the real estate market, though, quickly flowed through to the banks (Wall Street) and ultimately the overall economy (Main Street). It was the 1980s and one could see the destruction first-hand, i.e., in the number of buildings boarded up in downtown America.
“After the upheaval caused by the COVID-19 pandemic, uncertainty has become the norm for investors and fund managers. As the UK property market – both residential, commercial – came to a standstill earlier this year, the absence of activity led to challenges in valuing property investments with the certainty required. As a result, property funds suspended withdrawals by investors. And until more normal levels of property market activity are seen, investors may continue to struggle to access their capital.”
USAGOLD note: One wonders if the same logic might not apply to any number of funds in the event of another economic emergency. Gopaul makes an important point. He sees the potential for such liquidity breakdowns as an opportunity for gold. Gold, he says, acts as “ballast” in the portfolio in good times and bad. He points to its inverse correlation to other assets as one of its strongest selling points. The $2.7 trillion global market for gold, he says, makes it very liquid “even at times of acute financial stress.”
Repost from 9-23-2020
Bloomberg Magazine/Craig Torres
“[Federal Reserve Division of Financial Stability head Andreas] Lehnert’s home bookshelf betrays his professional obsession with ‘what could go wrong.’ He’s read about why planes crash, why nuclear plant accidents run out of control, and why the space shuttle Challenger blew up. There’s Why Buildings Fall Down and Plagues and Peoples, perhaps especially pertinent for 2020. Lying for Money seems another useful read for someone in Lehnert’s line of work.”
USAGOLD note: An interesting read … Lehnert plays the role of Smoky the Bear at the Fed – sniffing out potential wildfires before they start to burn.
Repost from 9-23-2020
“[DoubleLine Capital’s Jeffrey] Gundlach said, and buyers should be aware that holding shares doesn’t amount to having gold bars. ‘What happens if physical gold is in short supply and everyone wants to take delivery of their paper gold?’ Gundlach said. ‘They can’t squeeze blood out of a stone.'”
USAGOLD note: Gundlach hoists the same red flag we have raised often on this page. Gold ETF’s are a price bet. Gold coins and bars are a safe-haven store of value. And never the twain shall meet.
Repost from 4-4-2020
“‘If you don’t have a tail hedge, I suggest not being in the market [as] we’re facing a huge amount of uncertainty.’ That’s “Black Swan: The Impact of the Highly Improbable” author Nassim Nicholas Taleb offering his view on the risks swirling in the market and a growing lack of clarity about the future in the era of a deadly pandemic that has created a public health and economic crisis.”
USAGOLD note: Taleb goes on to say “we are printing money like there’s no tomorrow.”
Repost from 7-2-2020
“Less than half the gold processed by major refiners in 2018 came from large industrial mines, the London Bullion Market Association said on Tuesday, publishing data revealing for the first time the origin of bullion moving through its system.”
USAGOLD note: More than half came from recycled gold – jewelry, bars and coins. Of course, not all the gold changing hands in the marketplace runs through refiners.
Repost from 9-24-2020
“The mistake of ignoring the economic impact of lockdowns creates a social crisis that may last many years. If the European economy was ill-prepared for a series of lockdowns in February, it is even weaker now. What created a recession of unexpected proportions may generate a depression that will likely last for a few years.
USAGOLD note: Lacalle speaks to the issue as the United Kingdom regrettably goes into heightened restrictions that could be in place for up to six months.
Repost from 9-23-2020
Gold joins rest of financial markets in negative initial reaction to last night’s debate, billionaire investor Kaplan calls gold ‘the generational trade’
(USAGOLD –10/2/2020) – Gold and silver joined the rest of the financial markets in posting a negative reaction to last night’s rather bizarre presidential debate. The much-anticipated event came off to this observer as a singular reflection of the times – a metaphor for the chaos and confusion that inhabits everyday life for the bulk of Americans. The yellow metal is down $15 at $1886 as we start the day. Silver is down 50¢ at $23.76. It could turn out to be an interesting day as investors globally digest the ramifications of last night’s gloves-off, political brawl.
Stansbury Research recently posted a powerful Daniella Carbone interview of investor Thomas Kaplan. Though Kaplan made his fortune in the mining business, he is also an Oxford-trained historian who puts gold’s bull market in the context of a longer-term cycle that has yet to reach maturity. He reiterates his prediction made some time ago that gold will reach $3000 to $5000 in the years ahead. “The difference is this,” says Kaplan. “The market is now ready for the next leg of the gold bull market. The first leg was the one that took us up 12 consecutive years in a row regardless of whether there were inflation fears, deflation fears, whether there was a glut of oil or a shortage of oil, political stability or political instability, dollar weakness, dollar strength. It didn’t matter. Every year for 12 years gold went up … The next move is going to be a third wave, a long wave that lasts for a decade or fifteen years, maybe more … I think that you really are looking at a complete paradigm shift that will make gold the generational trade.”
Chart of the Day
Chart note: As we have mentioned in previous post notes, the problem with monetary stimulus – the kind of help the Fed is capable of delivering – is that it requires takers, i.e., people and businesses willing to borrow and spend. Private borrowers, though, are not as prolific and/or aggressive as the Fed or federal government would like. The federal government, on the other hand, is a ready borrower and a big one. The Manhattan Institute’s Brien Riedl recently pointed out in a National Review article, the Fed has already financed roughly half of government spending to combat the economic hit from COVID-19. How does all of this translate to a tailwind for gold? The chart above tells the story at a glance.
USAGOLD note: Mike McGlone, the commodity expert at Bloomberg, reminds the hosts of gold and silver’s strong performance thus far this year, even with the recent correction taken into account and that the foundational elements remain in place for a solid performance over the next five to ten years.
“UBS has warned clients that now is the best time to stock up on gold as a “far from certain” presidential election outcome looms for the nation. ‘A contested outcome is still a possibility, which could add to further volatility and result in safe-haven flows,’ UBS chief investment officer of global wealth management Mark Haefele told clients, CNBC reported.”
USAGOLD note: Reading this article brought to mind the old maxim among veteran gold investors, i.e., “the best time to buy gold is when everything is quiet.” It has not been exactly “quiet” in the financial markets over the past few weeks, but the volume is definitely turned down – comparatively speaking.
“During my 20 years at the top of the chess world, from 1985 to 2005, chess-playing machines went from laughably weak to the level of the world champion. It was a startling transformation to experience firsthand, and it was impossible not to feel unsettled, even threatened, by their rapid progress. These are the same sensations that many are feeling today, as intelligent machines advance in field after field. Few people will experience the dramatic, head-to-head competition against a machine that I experienced, of course, but the sensation of being challenged, surpassed and possibly replaced by an automaton, or an invisible algorithm, is becoming a standard part of our society.”
Russian chess master
“What will be the long-term consequences of the pandemic? Few if any answers are clear. In the financial realm, markets have automatic checks, balances and stabilizers. Tracing the impact of the last few months into the future soon becomes like plotting out an attack in chess.”
USAGOLD note: Authers goes on to offer a brief look at how the life insurance industry was impacted by the Spanish flu, but significant detail on the political and financial outcomes of the Irish potato blight.
“Warren Buffett always mocked people who invested in gold, calling it a useless metal that ‘gets dug out of the ground in Africa, or someplace’ and a way of ‘going long on fear’. This year, however, the ‘sage of Omaha’ joined investors including the world’s largest hedge fund Bridgewater Associates in buying into the latest gold rush, which helped push prices to a record high this summer.”
USAGOLD note: Buffett’s interest in gold did not occur in a vacuum, but comes, in our view, from a realization that demand for investment purposes could ramp up considerably in the years to come for reasons covered in detail at the link above – this morning’s featured FT Big Read. We found this quote of particular interest: “Gold ETFs now make up 35% of global demand compared with just 8% just last year …” As we have mentioned previously on this page, one wonders what will happen with the supply-demand equation when India and China come back online in full force.
Two thousand years of monetary history and what it tells us about fiat currencies
“Chancellors of the past would be turning in their graves – envious of Rishi Sunak’s ability to conjure money from thin air. In the past, there were three ways to increase money supply: Trade for precious metals, capture the wealth in battle and mine the metals. Over two millennia, the people of Britain have done all three. Rishi Sunak doesn’t have to do any of that – so much easier to wave a magic wand like Harry Potter.”
USAGOLD note: So true, but the process does not read to a healthy conclusion and points up the need to own gold and silver as part of one’s personal defenses against the excesses of the money printers. This point is well made in the ultra-long term chart reproduced below. Note the stability in Britain’s consumer price index for more than 700 years – until it went off the gold standard in early 20th century and launched a fiat money economy. Also, the acceleration in the price of gold from the date of that decision.
Sources: Bank of England, ICE Benchmark Administration Limited, St. Louis Federal Reserve [FRED]
Gold coins, hoofs found in 2,000 year old Chinese tomb
“Chinese archaeologists. . . discovered 75 gold coins and hoof-shaped ingots in an aristocrat’s tomb that dates back to the Western Han Dynasty (206 BC – 24 AD). The gold objects — 25 gold hoofs and 50 very large gold coins — are the largest single batch of gold items ever found in a Han Dynasty tomb. They were unearthed from the tomb of the first ‘Haihunhou’ (Marquis of Haihun) in east China’s Jiangxi Province. The coins weigh about 250 grams each, while the hoofs’ weights vary from 40 to 250 grams, said Yang Jun, who leads the excavation team.” – Xinhuanet/11-17-2015
USAGOLD note: These gold artifacts were found along with a portrait of Confucius, perhaps the oldest known. Wisdom and gold make easy company. Confucius once said something that has current applicability: “In a country well governed, poverty is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of.” Or at the very least, well-hedged ………
Cartoon courtesy of MichaelPRamirez.com
“We are focused on the next tweet. We are not focused on long term policy making. I think that this is part of the system failure that we have seen in Washington in recent years – that there is no long-termism. And that is clearly evidenced by its lack of focus on a fiscal package that would help us emerge from this crisis.”
USAGOLD note: A well-reasoned look at where we are headed on the fiscal side. Boltanky’s views will come as a disappointment for those who see a fiscal rescue package as a means to an end, i.e., a way to push money into an otherwise moribund credit market and boost recovery on Main Street. He sees the upcoming fight over a Supreme Court nominee as taking precedence over the economic crisis in the weeks ahead. Assuming Boltansky is correct, how all of this will play in financial markets is anyone’s guess at this juncture.
Repost from 9-24-2020
“U.S. President Donald Trump on Monday said he was rebuffed when he asked officials to adjust the exchange rate of the dollar to counteract what he described as repeated currency manipulation by China of its yuan.”
USAGOLD note: From the start, there has been no doubt where this president stands on the strong dollar policy.
Repost from 9-22-2020